Friday, December 6, 2013
New meat regulations could spark a trade war with Canada and Mexico.
Wall Street Journal, Dec. 5, 2013 6:42 p.m. ET
Right before Thanksgiving, while Congress was on break, federal meat labeling regulations took effect that could result in Americans paying higher prices on everything from beef and pork to apples and maple syrup. While legislators, as part of the continuing farm bill negotiations, are considering a fix to the Country of Origin Labeling (Cool) statute, the regulations implementing it went into effect Nov. 23.
The new Cool rules require more detailed labels on meat derived from animals born outside the United States. Labels must now list the country in which livestock were born, raised and slaughtered. For example, a package of rib-eye steak might be labeled: "Born in Canada, Raised and Slaughtered in the United States."
The previous Cool rules required less detailed labeling, such as "Product of Canada and the United States." Ironically, the U.S. Department of Agriculture issued the new rules in May in an effort to improve the previous Cool rules, which the World Trade Organization last year ruled discriminated against Canada, Mexico and other U.S. trading partners.
Not surprisingly, Canada and Mexico are also fighting the new, more stringent rules at the WTO. Should the trade organization rule in their favor, our North American neighbors will likely retaliate against U.S. products through tariffs that will limit U.S. exports and kill American jobs. Canada, the second-largest export market for U.S. agricultural products, valued in 2012 at $20.6 billion, already has a preliminary retaliation list that includes fresh pork and beef, bakery goods, rice, apples, wine, maple syrup and furniture.
U.S. cattle ranchers and hog farmers who purchase livestock from Canada or Mexico will be affected by those retaliatory tariffs in a number of ways. Most crucially to those of us in the industry, the duties will prompt U.S. beef and pork exports to fall while American farmers and ranchers who import animals will see significant cost increases.
Alpha 3 Cattle Company in Amarillo, Texas, for example, imports roughly 38,000 feeder cattle a year from Mexico. When the original Cool law took effect in 2009, meat packers, fearing consumers would be less inclined to buy meat labeled "Product of Mexico and the United States" and incurring added costs to label mixed-origin meat, discounted Alpha 3's Mexican-origin animals by $35 a head. That alone cost Alpha 3 more than $1 million.
Under the new Cool regulations, the company expects the discount to be even higher, or for packing plants to stop processing Mexican-born cattle altogether. Why? Because under the new regulations those animals—and the meat from them—now need to be tracked, verified and segregated from U.S.-born cattle. (The 2009 law allowed co-mingling of animals.)
A Michigan hog farmer who gets most of his feeder pigs from Canada, and who took a financial hit when the labeling law took effect in 2009, has been told by the packing plant to which he sends his animals that he'll have a 10-hour window each week to get his Canadian-born hogs to market. That will be nearly impossible to accomplish—it's 32 truckloads—and it will be extremely costly.
That's because the new regulations will force the packing plant to shut down the lines processing U.S.-born hogs and switch to processing Canadian-born ones—which spend five of their six months in the U.S.—so that pork cuts can be tracked, labeled and kept separate. That's a logistical headache and a huge expense for the plant, which will likely pay the hog farmer less for his Canadian-born hogs and charge consumers more for the meat from those animals.
So why is the U.S. risking trade retaliation and prohibitive cost increases on American producers and consumers of meat? Groups that support Cool, such as the U.S. Cattlemen's Association and the Consumer Federation of America, think U.S. consumers will buy American if they see a "Product of the United States" label. But since the 2009 law went into effect, the USDA says there's been little effect on demand for U.S. meat, and that consumers buy primarily based on taste and price. Most Americans know, even if their legislators don't, that all meat products, regardless of their country of origin, must pass the same USDA safety regulations.
When the Cool proposal was first debated in Congress, the U.S. meat industry said it would be a costly program with little if any benefit to consumers. The USDA estimated it would cost $2.5 billion to implement and nearly $212 million annually over 10 years to maintain.
With our North American neighbors set to impose tariffs on dozens of U.S. products, livestock producers and meat packers facing greater costs and American consumers ultimately bearing higher prices, it appears that assessment was an understatement.
Mr. George is a cattleman from Cody, Wyo., and president of the National Cattlemen's Beef Association. Mr. Spronk is a hog farmer from Edgerton, Minn., and president of the National Pork Producers Council.
Monday, December 24, 2012
A case study in the dangers of the Law of the Sea Treaty.
The Wall Street Journal, December 24, 2012, on page A12
The curious case of the U.S. hedge fund, the Argentine ship and Ghana is getting curiouser, and now it has taken a turn against national sovereignty. That's the only reasonable conclusion after a bizarre ruling this month from the International Tribunal for the Law of the Sea in Hamburg.
The tribunal—who knew it existed?—ordered the Republic of Ghana to overrule a decision of its own judiciary that had enforced a U.S. court judgment. The Hamburg court is the misbegotten child of the 1982 United Nations Convention on the Law of the Sea. Sold as a treaty to ensure the free movement of people and goods on the high seas, it was rejected by Ronald Reagan as an effort to control and redistribute the resources of the world's oceans.
The U.S. never has ratified the treaty, despite a push by President Obama, and now the solons of Hamburg have demonstrated the wisdom of that decision. While debates on the treaty have centered around the powers a country might enjoy hundreds of miles off its coast, many analysts have simply assumed that nations would still exercise control over the waters just offshore.
Now the Hamburg court has trampled local law in a case involving a ship sitting in port, and every country is now on notice that a Hamburg court is claiming authority over its internal waters.
Specifically, Hamburg ordered Ghana to release a sailing ship owned by the Argentine navy. On October 2, a subsidiary of U.S. investment fund Elliott Management persuaded a Ghanaian judge to order the seizure of the vessel. The old-fashioned schooner, used to train cadets, was on a tour of West Africa.
U.S. hedge funds don't normally seize naval ships, but in this case Elliott and the Ghanaian court are on solid ground. Elliott owns Argentine bonds on which Buenos Aires has been refusing to pay since its 2001 default. Elliott argues that a contract is a contract, and a federal court in New York agrees. Argentina had freely decided to issue its debt in U.S. capital markets and had agreed in its bond contracts to waive the sovereign immunity that would normally prevent lenders from seizing things like three-masted frigates.
To his credit, Judge Richard Adjei-Frimpong of Ghana's commercial court noted that Argentina had specifically waived its immunity when borrowing the money and that under Ghanaian law the ship could therefore be attached by creditors with a valid U.S. judgment registered in Ghana. He ordered the ship held at port until Buenos Aires starts following the orders of the U.S. court.
But in its recent ruling, which ordered Ghana to release the ship by December 22, the Hamburg court claimed that international law requires immunity for the Argentine "warship," as if Argentina never waived immunity and as if this is an actual warship. On Wednesday, Ghana released the vessel, and the ship set sail from the port of Tema for its trans-Atlantic voyage.
So here we have a case in which a small African nation admirably tried to adhere to the rule of law. Yet it was bullied by a global tribunal serving the ends of Argentina, which has brazenly violated the law in refusing to pay its debts and defying Ghana's court order. The next time the Senate moves to ratify the Law of the Sea Treaty, Ghana should be exhibit A for opponents.
Monday, May 14, 2012
Do Dynamic Provisions Enhance Bank Solvency and Reduce Credit Procyclicality? A Study of the Chilean Banking System
IMF Working Paper No. 12/124
Summary: Dynamic provisions could help to enhance the solvency of individual banks and reduce procyclicality. Accomplishing these objectives depends on country-specific features of the banking system, business practices, and the calibration of the dynamic provisions scheme. In the case of Chile, a simulation analysis suggests Spanish dynamic provisions would improve banks' resilience to adverse shocks but would not reduce procyclicality. To address the latter, other countercyclical measures should be considered.
It has long been acknowledged that procyclicality could pose risks to financial stability as noted by the academic and policy discussion centered on Basel II, accounting practices, and financial globalization. Recently, much attention has been focused on regulatory dynamic provisions (or statistical provisions). Under dynamic provisions, as banks build up their loan portfolio during an economic expansion, they should set aside provisions against future losses.
The use of dynamic provisions raises two questions bearing on financial stability. First, do dynamic provisions reduce insolvency risk? Second, do dynamic provisions reduce procyclicality? In theory the answer is yes to both questions. Provided loss estimates are roughly accurate, bank solvency is enhanced since buffers are built in advance ahead of the realization of large losses. Regulatory dynamic provisions could also discourage too rapid credit growth during the expansionary phase of the cycle, as it helps preventing a relaxation of provisioning practices.
However, when real data is brought to bear on the questions above the answers could diverge from what theory implies. This paper attempts to answer these questions in the specific case of Chile. It finds that the adoption of dynamic provisions could help to enhance bank solvency but it would not help to reduce procyclicality. The successful implementation of dynamic provisions, however, requires a careful calibration to match or exceed current provisioning practices, and it is worth noting that reliance on past data could lead to a false sense of security as loan losses are fat-tail events. Finally, since dynamic provisions may not be sufficient to counter procyclicality alternative measures should be considered, such as the proposed countercyclical capital buffers in Basel III and the countercyclical provision rule Peru implemented in 2008.
At the policy level, the case for regulatory dynamic provisions have been advanced on the grounds that they help reducing the risk of bank insolvency and dampening credit procyclicality. In the case of the Chile the data appears to partly validate these claims.
A simulation analysis suggests that under the Spanish dynamic provisions rule provision buffers against losses would be higher compared to those accumulated under current practices. The analysis also suggests that calibration based on historical data may not be adequate to deal with the presence of fat-tails in realized loan losses. Implementing dynamic provisions, therefore, requires a careful calibration of the regulatory model and stress testing loan-loss internal models.
Dynamic provision rules appear not to dampen procyclicality in Chile. Results from a VECM analysis indicate that the credit cycle does not respond to the level of or changes in aggregate provisions. In light of this result, it may be worth exploring other measures to address procyclicality. Two examples of these measures include countercyclical capital requirements, as proposed by the Basel Committee on Banking Supervision (2010a and b), or the countercyclical provision rule introduced in Peru in 2008. The Basel countercyclical capital requirements suggest that the build up and release of additional capital buffers should be conditioned on deviations of credit to GDP ratio from its long-run trend. The Peruvian rule, contrary to standard dynamic provision rules, requires banks to accumulate countercyclical provisions when GDP growth exceeds potential. Both measures, by tying up capital or provision accumulations to cyclical indicators, could be more effective for reducing procyclicality.
Tuesday, November 1, 2011
IMF Working Paper No. 11/251
Summary: This paper studies the determinants of foreign land acquisition for large-scale agriculture. To do so, gravity models are estimated using data on bilateral investment relationships, together with newly constructed indicators of agro-ecological suitability in areas with low population density as well as indicators of land rights security. Results confirm the central role of agro-ecological potential as a pull factor. In contrast to the literature on foreign investment in general, the quality of the business climate is insignificant whereas weak land governance and tenure security for current users make countries more attractive for investors. Implications for policy are discussed.
After decades of stagnant or declining commodity prices when agriculture was considered a ‘sunset industry’, recent increases in the level and volatility of commodity prices and the resulting demand for land have taken many observers by surprise. This phenomenon has been accompanied by a rising interest in acquiring agricultural land by investors, including sovereign wealth and private equity funds, agricultural producers, and key players from the food and agri-business industry. Investors’ motivations include economic considerations, mistrust in markets and concern about political stability, or speculation on future demand for food and fiber, or future payment for environmental services including for carbon sequestration. Some stakeholders, including many host-country governments, welcome such investment as an opportunity to overcome decades of under-investment in the sector, create employment, and leapfrog and take advantage of recent technological development. Others denounce it as a ”land grab” (Zoomers 2010). They point to the irony of envisaging large exports of food from countries which in some cases depend on regular food aid. It is noted that specific projects’ speculative nature, questionable economic basis, or lack of consultation and compensation of local people calls for a global response (De Schutter 2011). In a context of diametrically opposite perceptions, the objective of the present paper is to provide greater clarity on the numbers involved and the factors driving such investment. This is done by quantifying demand for land deals, and exploring the determinants of foreign land acquisition for large-scale agriculture using data on bilateral investment relationships. This work is an important first step to assess potential long-term impacts and discuss policy implications.
The analysis of large-scale land deals is relevant for a number of key development issues. One such issue is the debate on the most appropriate structure of agricultural production. The exceptionally large poverty elasticity of growth in smallholder agriculture (de Janvry and Sadoulet 2010, Loayza and Raddatz 2010) that is reflected in rapid recent poverty reduction in Asian economies such as China, and the fact that the majority of poor are still located in rural areas led observers to highlight the importance of a smallholder structure for poverty reduction (Lipton 2009, World Bank 2007). At the same time, disillusion with the limited success of smallholder-based efforts to improve productivity in sub-Saharan Africa (Collier 2008) and apparent export competitiveness of “mega-farms” in Latin America or Eastern Europe during the 2007/8 global food crisis have led to renewed questions about whether, despite a mixed record, large scale agriculture can be a path out of poverty and to development.
Whatever the envisaged scenario, renewed pressure on land raises the issue of whether there is sufficient competition and transparency to ensure that land owners or users are able to either transfer their land at a fair price or hold on to it as opposed to having it taken away without their consent and in what may be perceived an unfair deal. This resonates with recent contributions to the literature that suggest that resource abundance can contribute to more broad-based development only if well-governed institutions to manage these resources exist (Oechslin 2010). This is borne out by empirical evidence both across countries (Cabrales and Hauk 2011) and within more specific country contexts where resource booms may have fuelled widespread rent-seeking and corruption (Bhattacharyya and Hodler 2010) or even violence (Angrist and Kugler 2008) rather than economic development.
To better understand this phenomenon and its potential impact, an empirical analysis of the factors driving transnational land acquisition is needed. To this end, we constructed a global database with country-level information on both foreign demand for land and implemented projects as documented in international and local press reports. We complement it with country-specific assessments of the amount of potentially suitable land and other relevant variables. We then use bilateral investment relationships from the database to estimate gravity models that can help identify determinants of foreign land acquisition. Results confirm the central role of agro-ecological potential as a pull factor but suggest that, in contrast to what is found for foreign investment more generally, rule of law and good governance have no effect on the number of land-related investment. Moreover, and counterintuitively, we find that countries where governance of the land sector and tenure security are weak have been most attractive for investors. This finding, which resonates with concerns articulated by parts of civil society, suggests that, to minimize the risk that such investments fail to produce benefits for local populations , the micro-level and project-based approach that has dominated the global debate so far will need to be complemented with an emphasis and determined action to improve land governance, transparency and global monitoring. The paper is organized as follows. Section 2 puts recent land demand into broader context, highlighting the importance of governance in attracting investments. It draws on an analysis of how foreign direct investment (FDI) is treated in the macro-literature to suggest a methodological approach, and outlines how we address specific data needs. Section 3 presents our cross-sectional data on land demand, outlines the econometric approach, and briefly discusses relevant descriptive statistics. Key econometric results in section 4 support the importance of food import demand as motivations for countries to seek out land abroad (‘push factors’) and of agro-ecological suitability as key determinants for the choice of destination (‘pull factors’). They also highlight the extent to which weak land governance seems to encourage rather than discourage transnational demand for land. Section 5 concludes by highlighting a number of implications for policy.
Buy the paper here: http://www.imfbookstore.org/ProdDetails.asp?ID=WPIEA2011251
Thursday, May 20, 2010
The feds want U.S. taxpayers to subsidize Brazilian farmers
WSJ, May 21, 2010
U.S. cotton farmers took in almost $2.3 billion dollars in government subsidies in 2009, and the top 10% of the recipients got 70% of the cash. Now Uncle Sam is getting ready to ask taxpayers to foot the bill for another $147.3 million a year for a new round of cotton payments, this time to Brazilian growers.
We realize that in today's Washington this is a rounding error. But the reason for the new payments to foreign farmers deserves attention. If it becomes a habit, it is unlikely to end with cotton.
Here's the problem: The World Trade Organization has ruled that subsidies to American cotton growers under the 2008 farm bill are a violation of U.S. trading commitments. The U.S. lost its final appeal in the case in August 2009 and the WTO gave Brazil the right to retaliate.
Brazil responded by drafting a retaliation list threatening tariffs on more than 100 U.S. exports, including autos, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruits, nuts and cotton. The exports are valued at about $1 billion a year, and the tariffs would go as high as 100%. Brazil is also considering sanctions against U.S. intellectual property, including compulsory licensing in pharmaceuticals, music and software.
The Obama Administration appreciates the damage this retaliation would cause, so in April it sent Deputy U.S. Trade Representative Miriam Sapiro to negotiate. She came back with a promise from Brazil to postpone the sanctions for 60 days while it considers a U.S. offer to—get this—let American taxpayers subsidize Brazilian cotton growers.
That's right. Rather than reduce the U.S. subsidies to American cotton farmers that are the cause of the trade fight, the Administration is proposing that U.S. taxpayers also compensate Brazilian cotton farmers for the harm done by the U.S. subsidies. Thus the absurd U.S. cotton program would dip into the Commodity Credit Corporation to pay what is a bribe to Brazil so it won't retaliate.
Talk about taxpayer double jeopardy. As Senator Richard Lugar (R., Ind.) said recently, the commodity credit program was established to assist U.S. agriculture, "not to pay restitution to foreign farmers who won a trade complaint against a U.S. farm subsidy program."
Mr. Lugar wants the subsidies to U.S. farmers cut by the amount that will have to be sent to Brazil. He adds that a better option would be to take on the trade-distortions of the cotton program. "I am prepared to introduce legislation to achieve these immediate reforms," he wrote in an April 30 letter to President Obama.
This is probably tilting at political windmills, since Mr. Obama has shown no appetite for trade promotion, much less confronting a cotton lobby supported by such Democrats as Arkansas Senator Blanche Lincoln. But we're glad to see that at least Mr. Lugar is willing to call out the absurdity of U.S. taxpayers subsidizing foreign farmers to satisfy the greed of a few American cotton growers.
Monday, January 18, 2010
For Haitians, just about every conceivable aid scheme beyond immediate humanitarian relief will lead to more poverty, more corruption and less institutional capacity.
WSJ, Jan 19, 2010
Saturday, January 16, 2010
A humane decision for temporary refuge in America.
WSJ, Jan 16, 2010
The Obama Administration acted properly, and humanely, late yesterday in extending temporary amnesty to Haitians who were illegally inside the U.S. before this week's catastrophic earthquake. Some 30,000 Haitians had been awaiting deportation but will now be allowed to stay in the U.S. and work for another 18 months.
You might even call this amnesty of a sort, if we can use that politically taboo word. But we hope even the most restrictionist voices on the right and in the labor movement will understand the humanitarian imperative. The suffering and chaos since the earthquake should make it obvious that Haiti is no place to return people whose only crime was coming to America to escape the island's poverty and ill-governance.
For that matter, we don't mind if they stay here permanently. Haitian immigrants as a group are among America's most successful, which demonstrates that Haiti's woes owe more to corruption, disdain for property rights and lack of public safety than to any flaw in its people. Their remittances to Haiti also help to sustain the impoverished population. Haitians received some $1.65 billion from overseas in 2006, according to the Inter-American Development Bank.
We can argue later about whether to make this temporary amnesty permanent, but for now the U.S. decision to let the Haitians stay is evidence of the generosity that Americans typically show in a crisis.
Thursday, December 10, 2009
"We are committed to working with you to keep our people safe and secure, to protect and harness our natural resources and to widen opportunity and prosperity. To achieve the shared prosperity we seek, we must integrate our commitment to democracy and open markets with an equal commitment to social justice."
— Secretary of State Hillary Rodham Clinton
President Obama and Secretary of State Clinton have met every democratically elected leader in the Western Hemisphere, part of a forward-looking U.S. approach to the region that emphasizes shared responsibility for challenges and relationships. Our engagement with our hemispheric neighbors includes pragmatic and concrete partnerships addressing common challenges and advances a shared regional agenda of inclusive prosperity, democratic governance and citizen safety.
Commitment to Social and Economic Justice
The United States supports policies that broaden social opportunity and mobility, create a wider foundation for growth and ensure the benefits of growth and trade are more widely distributed, particularly among traditionally marginalized groups.
- The U.S.-Brazil Joint Action Plan to Eliminate Racism breaks new ground in cooperation on racial issues and opens the way to similar dialogues with other countries.
New Partnerships Benefiting the Region’s Poorest and Most Vulnerable Citizens
- The Pathways to Prosperity in the Americas Initiative fosters shared prosperity by expanding economic opportunities.
- Microfinance Growth Fund for the Americas puts money in the hands of small and micro businesses that affect people’s daily lives.
- The Inter-American Social Protection Network facilitates country-to-country partnerships to design or improve social protection programs, starting with conditional cash transfer programs.
- The Energy and Climate Partnership of the Americas is a demand-driven, flexible approach to enhance energy efficiency and infrastructure, by promoting technology sharing and clean energy use.
Commitment to Citizen Safety
The United States and the nations of the Western Hemisphere have developed a series of partnerships to increase public safety and strengthen our ability to address a wide range of traditional and transnational threats, including health and natural disasters. These programs address local, transnational and white collar crime including corruption, as well as the links between these threats and the region’s social and economic challenges.
- The Merida Initiative broadens and deepens our cooperation with our partners in Mexico and Central America to strengthen the rule of law institutions necessary to ensure citizen safety.
- The Caribbean Security Basin Initiative reflects our commitment to greater shared security throughout the Caribbean and will address a broad spectrum of issues affecting the safety of citizens across a 15-nation region.
- Emergency Management Agreements with Mexico and Canada have strengthened emergency communication capabilities and allowed our countries to develop effective responses to pandemic outbreaks.
- The Colombia Strategic Development Initiative is a comprehensive approach to sustain stabilization gains made in Colombia by increasing the presence and impact of economic and social development institutions.
Bicentennials: 2010 is an important year of bicentennial celebrations in the Americas. Argentina, Chile, Colombia and Mexico will all commemorate 200 years of independence. During this "Year of the Bicentennial," we will showcase a history of deepening integration in the hemisphere and a series of new partnerships with our neighbors to strengthen the ability of democracies to deliver safety and prosperity to all their citizens.
Friday, July 31, 2009
Will there be any consequence for Venezuela's material support for Colombian insurgents?
WaPo, Friday, July 31, 2009
WHEN THE Colombian government last year unveiled extensive evidence that the government of Venezuela had collaborated with a Colombian rebel movement known for terrorism and drug trafficking, other Latin American governments and the United States mostly chose to look the other way. The evidence was contained on laptops captured in a controversial raid by the Colombian army on a guerrilla base in Ecuador. Venezuelan President Hugo Chávez denounced the e-mails and documents as forgeries, and the potential consequences of concluding that Venezuela was supporting a terrorist organization against a democratic government -- which could include mandatory U.S. sanctions and referral to the U.N. Security Council -- were more than the Bush administration was prepared to contemplate.
Now Colombia has made public evidence that will be even more difficult to ignore. In a raid on a camp of the Revolutionary Armed Forces of Columbia (FARC), a group officially designated a terrorist organization by the United States and the European Union, Colombian forces captured sophisticated, Swedish-produced antitank rockets. A Swedish investigation confirmed that they were originally sold to the Venezuelan army by the arms manufacturer Saab. What's more, FARC e-mails from the laptops captured in Ecuador appear to refer to the weapons; in one, a FARC operative in Caracas reports discussing delivery of the arms in a 2007 meeting with two top Venezuelan generals, including the director of military intelligence, Hugo Armando Carvajal Barrios.
Colombia privately asked Mr. Chávez's government for an explanation of the rockets several months ago; Sweden is now asking as well. But the only response has been public bluster by the Venezuelan caudillo, who on Tuesday withdrew his ambassador from Colombia and threatened to close the border to trade. If he follows through, U.S. drug authorities may well be pleased: A report released last week by the U.S. Government Accountability Office said Venezuela had created a "permissive environment" for FARC that had allowed the group to massively increase its cocaine smuggling across that border. "By allowing illegal armed groups to elude capture and by providing material support, Venezuela has extended a lifeline to Colombian illegal armed groups, and their continued existence endangers Colombian security gains achieved with U.S. assistance," the GAO reported.
This all sounds an awful lot like material support for terrorism -- which raises the question of whether the State Department will look again at whether Mr. Chávez's government or its top officials belong on its list of state sponsors of terrorism. The Bush administration's Treasury Department last year imposed sanctions on Gen. Carvajal and several other officials for supporting the FARC's drug trafficking. But that hardly covers the supply of antitank rockets to a designated terrorist organization. At the moment, the State Department is busy applying sanctions to members of Honduras's de facto government, which is guilty of deposing one of Mr. Chávez's clients and would-be emulators. Perhaps soon it can turn its attention to those in the hemisphere who have been caught trying to overturn a democratic government by supplying terrorists with advanced weapons.
Sunday, July 26, 2009
Zelaya’s removal from office was a triumph for the rule of law.
WSJ, Jul 27, 2009
One of America’s most loyal Latin American allies—Honduras—has been in the midst of a constitutional crisis that threatens its democracy. Sadly, key undisputed facts regarding the crisis have often been ignored by America’s leaders, at least during the earliest days of the crisis.
In recent days, the rhetoric from allies of former President Manuel Zelaya has also dominated media reporting in the U.S. The worst distortion is the repetition of the false statement that Mr. Zelaya was removed from office by the military and for being a “reformer.” The truth is that he was removed by a democratically elected civilian government because the independent judicial and legislative branches of our government found that he had violated our laws and constitution.
Let’s review some fundamental facts that cannot be disputed:
• The Supreme Court, by a 15-0 vote, found that Mr. Zelaya had acted illegally by proceeding with an unconstitutional “referendum,” and it ordered the Armed Forces to arrest him. The military executed the arrest order of the Supreme Court because it was the appropriate agency to do so under Honduran law.
• Eight of the 15 votes on the Supreme Court were cast by members of Mr. Zelaya’s own Liberal Party. Strange that the pro-Zelaya propagandists who talk about the rule of law forget to mention the unanimous Supreme Court decision with a majority from Mr. Zelaya’s own party. Thus, Mr. Zelaya’s arrest was at the instigation of Honduran’s constitutional and civilian authorities—not the military.
• The Honduran Congress voted overwhelmingly in support of removing Mr. Zelaya. The vote included a majority of members of Mr. Zelaya’s Liberal Party.
• Independent government and religious leaders and institutions—including the Supreme Electoral Tribunal, the Administrative Law Tribunal, the independent Human Rights Ombudsman, four-out-of-five political parties, the two major presidential candidates of the Liberal and National Parties, and Honduras’s Catholic Cardinal—all agreed that Mr. Zelaya had acted illegally.
• The constitution expressly states in Article 239 that any president who seeks to amend the constitution and extend his term is automatically disqualified and is no longer president. There is no express provision for an impeachment process in the Honduran constitution. But the Supreme Court’s unanimous decision affirmed that Mr. Zelaya was attempting to extend his term with his illegal referendum. Thus, at the time of his arrest he was no longer—as a matter of law, as far as the Supreme Court was concerned—president of Honduras.
• Days before his arrest, Mr. Zelaya had his chief of staff illegally withdraw millions of dollars in cash from the Central Bank of Honduras.
• A day or so before his arrest, Mr. Zelaya led a violent mob to overrun an Air Force base to seize referendum ballots that had been shipped into Honduras by Hugo Chávez’s Venezuelan government.
• I succeeded Mr. Zelaya under the Honduran constitution’s order of succession (our vice president had resigned before all of this began so that he could run for president). This is and has always been an entirely civilian government. The military was ordered by an entirely civilian Supreme Court to arrest Mr. Zelaya. His removal was ordered by an entirely civilian and elected Congress. To suggest that Mr. Zelaya was ousted by means of a military coup is demonstrably false.
Regarding the decision to expel Mr. Zelaya from the country the evening of June 28 without a trial, reasonable people can believe the situation could have been handled differently. But it is also necessary to understand the decision in the context of genuine fear of Mr. Zelaya’s proven willingness to violate the law and to engage in mob-led violence.
The way forward is to work with Costa Rican President Oscar Arias. He is proposing ways to ensure that Mr. Zelaya complies with Honduras’s laws and its constitution and allows the people of Honduras to elect a new president in the regularly scheduled Nov. 29 elections (or perhaps earlier, if the date is moved up as President Arias has suggested and as Honduran law allows).
If all parties reach agreement to allow Mr. Zelaya to return to Honduras—a big “if”—we believe that he cannot be trusted to comply with the law and therefore it is our position that he must be prosecuted with full due process.
President Arias’s proposal for a moratorium on prosecution of all parties may be considered, but our Supreme Court has indicated that such a proposal presents serious legal problems under our constitution.
Like America, our constitutional democracy has three co-equal and independent branches of government—a fact that Mr. Zelaya ignored when he openly defied the positions of both the Supreme Court and Congress. But we are ready to continue discussions once the Supreme Court, the attorney general and Congress analyze President Arias’s proposal. That proposal has been turned over to them so that they can review provisions that impact their legal authority. Once we know their legal positions we will proceed accordingly.
The Honduran people must have confidence that their Congress is a co-equal branch of government. They must be assured that the rule of law in Honduras applies to everyone, even their president, and that their Supreme Court’s orders will not be dismissed and swept aside by other nations as inconvenient obstacles.
Meanwhile, the other elements of the Arias proposal, especially the establishment of a Truth Commission to make findings of fact and international enforcement mechanisms to ensure Mr. Zelaya complies with the agreement, are worthy of serious consideration.
Mr. Zelaya’s irresponsible attempt on Friday afternoon to cross the border into Honduras before President Arias has obtained agreement from all parties—an attempt that U.S. Secretary of State Hillary Clinton appropriately described as “reckless”—was just another example of why Mr. Zelaya cannot be trusted to keep his word.
Regardless of what happens, the worst thing the U.S. can do is to impose economic sanctions that would primarily hurt the poorest people in Honduras. Rather than impose sanctions, the U.S. should continue the wise policies of Mrs. Clinton. She is supporting President Arias’s efforts to mediate the issues. The goal is a peaceful solution that is consistent with Honduran law in a civil society where even the president is not above the law.
Mr. Micheletti, previously the president of the Honduran Congress, became president of Honduras upon the departure of Manuel Zelaya. He is a member of the Liberal Party, the same party as Mr. Zelaya.
Friday, July 24, 2009
Why defend the rule of law in Honduras but not in Venezuela?
WaPo, Friday, July 24, 2009
LATIN AMERICAN diplomats remain preoccupied with the political crisis in Honduras, which has been teetering between a negotiated solution that would conditionally restore ousted President Manuel Zelaya to office and an escalation of conflict that would play into the hands of anti-democratic forces around the region. While the drama drags on, those forces continue to advance in other countries, unremarked on by some of the same governments that rushed to condemn Mr. Zelaya's ouster. So it's worth reporting on a meeting that took place Tuesday at the Organization of American States headquarters in Washington between OAS Secretary General José Miguel Insulza and three elected Venezuelan leaders who, like Mr. Zelaya, have been deprived of their powers and threatened with criminal prosecution.
The three are Caracas Mayor Antonio Ledezma and the governors of two states, Pablo Pérez of Zulia and César Pérez Vivas of Tachira. All three won election in November, along with several other opposition leaders. But since then, Venezuelan President Hugo Chávez has used decrees, a rubber-stamp parliament and a politically compromised legal system to strip the officials of control over key services and infrastructure.
Mr. Insulza, a Chilean socialist who has been flamboyant in his defense of Mr. Zelaya, listened to the Venezuelans' account. But the OAS leader insisted that there was nothing he could do about Mr. Chávez's actions, even under the Inter-American Democratic Charter, which was adopted by all 34 active OAS members in 2001. This month, Mr. Insulza helped spur the OAS to suspend Honduras on the grounds that it had violated the charter. But in the case of Mr. Chávez's stripping power from the governors and mayors, Mr. Insulza said, "I can't say whether it is bad or good." His authority, he said, is limited to "trying to establish bridges between the parties."
That is not how Mr. Insulza handled the case of Honduras, of course. Far from promoting dialogue, the secretary general refused to negotiate or even speak with the president elected by the Honduran National Congress to replace Mr. Zelaya. Instead he joined in a Venezuelan-orchestrated attempt to force Mr. Zelaya's return that, predictably, led to violence. Now, with an attempted mediation by Costa Rican President Oscar Arias stalled, Mr. Zelaya is again threatening to enter the country without an agreement. Don't expect the OAS chief to dissuade him.
Still, Mr. Insulza has a point. The weakness of the Democratic Charter is that it protects presidents from undemocratic assault but does not readily allow OAS intervention in cases where the executive himself is responsible for violating the constitutional order -- as Mr. Zelaya did before his ouster. The Honduras crisis provides an opportunity for the Obama administration to seek changes in those rules. If the administration is to depend on organizations such as the OAS to advance its policies in Latin America, it must push it to counter attacks on democracy whenever and wherever they occur.
Monday, July 13, 2009
WSJ, Jul 13, 2009
"Two incidents earlier this year make the case. The first occurred in January when the country was preparing to name a new 15-seat Supreme Court, as it does every seven years. An independent board made up of members of civil society had nominated 45 candidates. From that list, Congress was to choose the new judges.
Mr. Zelaya had his own nominees in mind, including the wife of a minister, and their names were not on the list. So he set about to pressure the legislature. On the day of the vote he militarized the area around the Congress and press reports say a group of the president's men, including the minister of defense, went to the Congress uninvited to turn up the heat. The head of the legislature had to call security to have the defense minister removed."
Wednesday, July 1, 2009
The Honduran coup is a reaction to Chávez's rule by the mob.
WSJ, Jul 01, 2009
"As military 'coups' go, the one this weekend in Honduras was strangely, well, democratic. The military didn't oust President Manuel Zelaya on its own but instead followed an order of the Supreme Court. It also quickly turned power over to the president of the Honduran Congress, a man from the same party as Mr. Zelaya. The legislature and legal authorities all remain intact.
We mention these not so small details because they are being overlooked as the world, including the U.S. President, denounces tiny Honduras in a way that it never has, say, Iran."
Sunday, June 28, 2009
Fidel Castro and Hillary Clinton object.
The Wall Street Journal, Jun 29, 2009, p A11
Hugo Chávez's coalition-building efforts suffered a setback yesterday when the Honduran military sent its president packing for abusing the nation's constitution.
It seems that President Mel Zelaya miscalculated when he tried to emulate the success of his good friend Hugo in reshaping the Honduran Constitution to his liking.
But Honduras is not out of the Venezuelan woods yet. Yesterday the Central American country was being pressured to restore the authoritarian Mr. Zelaya by the likes of Fidel Castro, Daniel Ortega, Hillary Clinton and, of course, Hugo himself. The Organization of American States, having ignored Mr. Zelaya's abuses, also wants him back in power. It will be a miracle if Honduran patriots can hold their ground.
That Mr. Zelaya acted as if he were above the law, there is no doubt. While Honduran law allows for a constitutional rewrite, the power to open that door does not lie with the president. A constituent assembly can only be called through a national referendum approved by its Congress.
But Mr. Zelaya declared the vote on his own and had Mr. Chávez ship him the necessary ballots from Venezuela. The Supreme Court ruled his referendum unconstitutional, and it instructed the military not to carry out the logistics of the vote as it normally would do.
The top military commander, Gen. Romeo Vásquez Velásquez, told the president that he would have to comply. Mr. Zelaya promptly fired him. The Supreme Court ordered him reinstated. Mr. Zelaya refused.
Calculating that some critical mass of Hondurans would take his side, the president decided he would run the referendum himself. So on Thursday he led a mob that broke into the military installation where the ballots from Venezuela were being stored and then had his supporters distribute them in defiance of the Supreme Court's order.
The attorney general had already made clear that the referendum was illegal, and he further announced that he would prosecute anyone involved in carrying it out. Yesterday, Mr. Zelaya was arrested by the military and is now in exile in Costa Rica.
It remains to be seen what Mr. Zelaya's next move will be. It's not surprising that chavistas throughout the region are claiming that he was victim of a military coup. They want to hide the fact that the military was acting on a court order to defend the rule of law and the constitution, and that the Congress asserted itself for that purpose, too.
Mrs. Clinton has piled on as well. Yesterday she accused Honduras of violating "the precepts of the Interamerican Democratic Charter" and said it "should be condemned by all." Fidel Castro did just that. Mr. Chávez pledged to overthrow the new government.
Honduras is fighting back by strictly following the constitution. The Honduran Congress met in emergency session yesterday and designated its president as the interim executive as stipulated in Honduran law. It also said that presidential elections set for November will go forward. The Supreme Court later said that the military acted on its orders. It also said that when Mr. Zelaya realized that he was going to be prosecuted for his illegal behavior, he agreed to an offer to resign in exchange for safe passage out of the country. Mr. Zelaya denies it.
Many Hondurans are going to be celebrating Mr. Zelaya's foreign excursion. Street protests against his heavy-handed tactics had already begun last week. On Friday a large number of military reservists took their turn. "We won't go backwards," one sign said. "We want to live in peace, freedom and development."
Besides opposition from the Congress, the Supreme Court, the electoral tribunal and the attorney general, the president had also become persona non grata with the Catholic Church and numerous evangelical church leaders. On Thursday evening his own party in Congress sponsored a resolution to investigate whether he is mentally unfit to remain in office.
For Hondurans who still remember military dictatorship, Mr. Zelaya also has another strike against him: He keeps rotten company. Earlier this month he hosted an OAS general assembly and led the effort, along side OAS Secretary General José Miguel Insulza, to bring Cuba back into the supposedly democratic organization.
The OAS response is no surprise. Former Argentine Ambassador to the U.N. Emilio Cárdenas told me on Saturday that he was concerned that "the OAS under Insulza has not taken seriously the so-called 'democratic charter.' It seems to believe that only military 'coups' can challenge democracy. The truth is that democracy can be challenged from within, as the experiences of Venezuela, Bolivia, Ecuador, Nicaragua, and now Honduras, prove." A less-kind interpretation of Mr. Insulza's judgment is that he doesn't mind the Chávez-style coup.
The struggle against chavismo has never been about left-right politics. It is about defending the independence of institutions that keep presidents from becoming dictators. This crisis clearly delineates the problem. In failing to come to the aid of checks and balances, Mrs. Clinton and Mr. Insulza expose their true colors.
Sunday, May 24, 2009
The Obama administration's 'engagement' policy is convenient for Hugo Chávez's latest crackdown.
WaPo, Sunday, May 24, 2009
WHILE THE United States and Venezuela's neighbors silently stand by, Hugo Chávez's campaign to destroy his remaining domestic opposition continues. On Thursday night state intelligence police raided the Caracas offices of Guillermo Zuloaga, the president of the country's last independent broadcast network, Globovision. They claimed to be looking for evidence of irregularities in the car dealership that Mr. Zuloaga also runs. In fact this was a thinly disguised escalation of an attack that Mr. Chávez launched this month against Globovision. The channel has been officially accused of "inciting panic," based on its accurate reporting of a mild May 4 earthquake in Caracas; under the regime's draconian media control law it could be shut down. Few doubt that that is Mr. Chávez's intent: Two years ago he revoked the license of the country's most popular television network after a similarly trumped-up campaign.
To recap: In February Mr. Chávez eliminated the limit on his tenure as president after a one-sided referendum campaign that included ugly attacks on Venezuela's Jewish community. Since then he has imprisoned or orchestrated investigations against most of the country's leading opposition figures, including three of the five opposition governors elected last year. The elected mayor of Maracaibo, who was the leading opposition candidate when Mr. Chávez last ran for president, was granted asylum in Peru last month after authorities sought his arrest on dubious tax charges. The National Assembly, controlled by Mr. Chávez, is considering legislation that would eliminate collective bargaining and replace independent trade unions with "worker's councils" controlled by the ruling party. Another new law would eliminate foreign financing for independent non-government groups.
This is hardly the first time that a Latin American caudillo has tried to eliminate peaceful opponents: Mr. Chávez is following a path well worn by the likes of Juan Perón and Alberto Fujimori -- not to mention his mentor, Fidel Castro. But this may be the first time that the United States has watched the systematic destruction of a Latin American democracy in silence. As Mr. Chávez has implemented the "third phase" of his self-styled revolution, the Obama administration has persisted with the policy of quiet engagement that the president promised before taking office.
"We need to find a space in which we can actually have a conversation, and we need to find ways to enhance our levels of confidence," Assistant Secretary of State Thomas A. Shannon Jr. said two weeks ago, echoing earlier remarks by Secretary of State Hillary Rodham Clinton. We have no objection to dialogue with Mr. Chávez. But isn't it time to start talking about preserving independent television stations, opposition political leaders, trade unions and human rights groups -- before it is too late?
Thursday, May 7, 2009
Obama appears to be moving in the right direction on free trade with Latin America.
The Weekly Standard, May 07, 2009 12:00:00 AM
Our neighbors to the north keep government out of lending decisions.
WSJ, May 07, 2009
Canada's five largest banks would pass the U.S. government stress test brilliantly. They were profitable in the last quarter of 2008, are well capitalized now, and have had no problems raising additional private capital. On average only 7% of their mortgage portfolios consisted of subprime loans (versus 20% in the U.S.). And no major Canadian bank has required direct government infusions of capital.
Advocates of increased regulation of U.S. financial markets have concluded that more stringent rules governing leverage and capital ratios account for Canada's impressive performance. They champion such measures here. In a Toronto speech earlier this year about reforming the U.S. banking system, former Fed chairman and Obama administration adviser Paul Volcker said the model he is considering "looks more like the Canadian system than it does the American system."
Nevertheless, Canadian banks operate in a very different context. Copying the Canadian banking system in this country, without understanding how its banking and housing sectors operate, would be a mistake.
Start with the housing sector. Canadian banks are not compelled by laws such as our Community Reinvestment Act to lend to less creditworthy borrowers. Nor does Canada have agencies like Fannie Mae and Freddie Mac promoting "affordable housing" through guarantees or purchases of high-risk and securitized loans. With fewer incentives to sell off their mortgage loans, Canadian banks held a larger share of them on their balance sheets. Bank-held mortgages tend to perform more soundly than securitized ones.
In the U.S., Federal Housing Administration programs allowed mortgages with only a 3% down payment, while the Federal Home Loan Bank provided multiple subsidies to finance borrowing. In Canada, if a down payment is less than 20% of the value of a home, the mortgage holder must purchase mortgage insurance. Mortgage interest is not tax deductible.
The differences do not end there. A homeowner in the U.S. can simply walk away from his loan if the balance on his mortgage exceeds the value of his house. The lender has no recourse except to take the house in satisfaction of the debt. Canadian mortgage holders are held strictly responsible for their home loans and banks can launch claims against their other assets.
And yet Canada's homeownership rate equals that in the U.S. (Both fluctuate, in the mid to high 60% range.)
For obvious political reasons, debate in Washington spotlights the need for future financial regulation while glossing over the role of government housing and other regulatory policies in the current crisis. This is dangerous: Without a thorough review of relevant government housing policies, laws and regulations, layering new reforms on top of our current system may only set the stage for another housing crisis in the future.
In response to the current crisis the Canadian government has thus far bought about $55 billion (Canadian) of insured loans from financial institutions (a substantial sum, given that Canada's economy is one-tenth the size of the U.S. economy). It has also played a central role supporting the availability of credit and removing potentially distressed assets from bank balance sheets. Still, these interventions have not arrested a substantial slump in Canadian GDP. Last week the Bank of Canada announced that first quarter 2009 GDP had fallen 7.3%. Bank of Canada Governor Mark Carney (Canada's Ben Bernanke) explained the sharp slowdown in growth: "[I]f we had to boil it down to one issue, it is the slowness with which other G-7 countries have dealt with the problems in their banks."
When it comes to comparing the track record of the U.S. and Canadian banking systems, it is worth noting that Canada's regulations did not prohibit the sale or purchase of asset-backed securities. Early in this decade, Canada's Toronto-Dominion bank was among the world's top 10 holders of securitized assets. The decision to exit these products four to five years ago, Toronto-Dominion's CEO Ed Clarke told me, was simple: "They became too complex. If I cannot hold them for my mother-in-law, I cannot hold them for my clients." No regulator can compete with this standard.
Tighter leverage limits in Canada may have dimmed the incentives for its banks to pursue securitization as brashly as their American counterparts. But regulations cannot take all the credit. Even with leverage ratios held on average at 18 to 1 (versus 26 to 1 for U.S. commercial banks and up to 40 to 1 for U.S. investment banks), Canadian banks would not be as healthy as they are had they not disposed of their more problematic securitized assets four to five years ago. Nothing in Canada's regulations banned risk-taking. Good, prudent management prevented excess.
Those who blame financial deregulation for the breakdown of U.S. markets should note that Canada shed its version of Glass-Steagall more than 20 years ago. Major banks thereafter rapidly bought and absorbed investment banks.
At that time, Canada established the Office of the Superintendent of Financial Institutions (OSFI) to provide common, consistent and more centralized regulation for federally regulated banks, insurance companies and pension funds. To this day OSFI is almost obsessively concerned with risk management, leaving social and economic objectives, such as access to affordable housing and diversity, to institutions better-suited to attain those goals.
Those desirous of importing Canadian banking regulations to the U.S. should first delve more deeply into the actual practices of our northern neighbor's housing and financial system. Choosing selectively often leads to choosing poorly.
Ms. Kravis is a fellow at the Hudson institute.
Tuesday, April 28, 2009
USAID, April 28, 2009
WASHINGTON, D.C. - As concerns over the spread of swine flu grow, the U.S. Agency for International Development (USAID) announced today that it is providing an additional $5 million to the World Health Organization (WHO) and the Pan American Health Organization (PAHO) in emergency support for efforts to detect and contain the disease in Mexico.
"Since 2005, USAID has committed $543 million to support pandemic prevention and preparedness across the globe," said Alonzo Fulgham, Acting USAID Administrator. "This additional $5 million is specifically aimed at helping to control the transmission of swine flu in Mexico, through advanced disease surveillance and control measures."
USAID is also working closely with U.N. and civil society partners to adapt and disseminate important public health messages for communities and healthcare facilities about swine flu and how to limit risks for disease transmission.
"Containing the spread of certain animal diseases, like swine flu and avian influenza, is critical to limiting the threat of a pandemic," Fulgham continued. "As demonstrated in recent days," he added, "such diseases can spread quickly, so informing the public about how to reduce risks is critical."
Swine flu is of particular concern because it is both a novel virus and spreads efficiently among humans, meeting two of three criteria for a pandemic.
On April 25, WHO declared the ongoing spread of swine flu a public health emergency of international concern. On April 27, WHO raised the level of influenza pandemic alert to Phase 4, indicating an increased likelihood of a pandemic. The increased alert level does not necessarily mean that a pandemic is inevitable. WHO sent a team of responders, including two experts from the U.S. Centers for Disease Control and Prevention, to work with authorities in Mexico. The team will further investigate and characterize the virulence and transmission dynamics of the disease.
USAID is responding to the international outbreak in coordination with the Centers for Disease Control and Prevention (CDC). To help track transmission of H1N1 in the swine population, USAID is also supporting FAO efforts to conduct animal surveillance in Mexico and other parts of Central America. USAID has also offered to provide 900,000 sets of personal protective equipment from its avian and pandemic influenza stockpile to support ongoing response efforts by the Department of Health and Human Services, WHO, and PAHO. The use of this protective equipment helps to protect first responders from contracting or spreading disease from suspected outbreak sites.
USAID has committed $543 million to support pandemic its Avian and Pandemic Influenza prevention and preparedness activities across the globe since 2005. In addition, the USAID is positioned to provide humanitarian aid to help countries requiring additional support in the event of a pandemic.
For further information on USAID's avian and pandemic influenza program, visit http://www.usaid.gov/our_work/global_health/home/News/news_items/avian_influenza.html.
For information on USAID's disaster assistance program, please see http://www.usaid.gov/our_work/humanitarian_assistance/disaster_assistance/.
Panama's Promise - Amid a massive canal expansion, a pro-American supermarket tycoon is poised to be elected president
Amid a massive canal expansion, a pro-American supermarket tycoon is poised to be elected president.
The Weekly Standard, Apr 28, 2009
In a 2006 national referendum, Panamanian voters approved a $5.2 billion project to expand the Panama Canal. As the Panama Star reports, "Percentage wise, the canal expansion dwarfs any stimulus project the United States is planning. The project represents nearly a quarter of Panama's $23 billion gross domestic product."
President Martín Torrijos, a member of the center-left Democratic Revolutionary Party (PRD), eagerly championed the canal expansion, but it won't be completed on his watch. This coming Sunday (May 3), Panamanians will elect his successor. PRD presidential candidate Balbina Herrera is trailing opposition candidate Ricardo Martinelli by double digits. It is hard to see how Herrera can make up so much ground in so little time. All signs point to a Martinelli victory.
Compared to a Herrera regime, a Martinelli administration "would be a much more pro-American government." At least that's what Martinelli told a Miami Herald columnist last month, saying he would push aggressively for the U.S. Congress to approve a bilateral free trade pact with Panama, which was signed in June 2007. Founder of the center-right Democratic Change party, the 57-year-old Martinelli is representing a multiparty coalition in the May 3 election. He is a supermarket tycoon with a range of other business interests and a record of government service. Martinelli has worked in two different Panamanian presidential administrations. When the government officially assumed control of the Panama Canal at the end of 1999, Martinelli was serving as both board chairman of the Panama Canal Authority and minister of canal affairs.
The scandal-plagued Herrera, meanwhile, has a background in radical left-wing politics. A former National Assembly deputy and mayor of San Miguelito, she was a close confidant of Manuel Noriega, the drug-trafficking Panamanian dictator who was toppled by U.S. military forces in December 1989. In fact, Herrera was a leader of the thuggish Dignity Battalions, Noriega's paramilitary units, and Noriega hid in her home during the American invasion. Under the Torrijos administration, Herrera served as housing minister.
In a global economic environment characterized by recession and financial upheaval, Panama stands out as a relative bright spot. The United Nations Economic Commission for Latin America and the Caribbean projects that Panama's economy will expand by 4 percent in 2009 while the regional economy as a whole will contract by 0.3 percent. But 4 percent annual GDP growth represents a major drop from 9.2 percent growth in 2008 and 11.5 percent growth in 2007. In those years, Panama benefited from robust global trade and a massive housing boom. Its unemployment rate plummeted. Now international trade is shrinking rapidly and, as Jeremy Schwartz notes in the Austin-American Statesman, the Panamanian real-estate sector "might be heading for a sharp downturn."
Panama's economic slowdown has been deep and abrupt, and Panamanians seem increasingly unhappy with the incumbent Torrijos government, which has been in power since 2004. Torrijos, the son of former Panamanian military ruler Omar Torrijos, has pursued a range social programs but only managed to achieve a small drop in the national poverty rate, which fell from 32 percent in 2003 to 28 percent in 2008. Given Panama's strong economic growth over that period, the public expected more progress on poverty reduction. Living costs have increased sharply due to inflation, and Panamanians remain widely dissatisfied with their public services (namely health care and education). The country has also been dealing with a spike in crime.
For all these reasons and more, the Panamanian electorate is restless, and many voters appear to be taking out their frustrations on the PRD. However, the party currently holds a majority of seats in Panama's National Assembly, so even if Martinelli wins the presidential election, his agenda may be constrained by legislative opposition.
Twenty years after the U.S. operation that overthrew Noriega, Americans don't pay much attention to Panama. But it is a strategically important country that is playing a growing role in global trade. Indeed, it is estimated that 5 percent of all international trade-and a much higher percentage of U.S. trade-goes through the Panama Canal. Torrijos has successfully promoted Panama as a tourist hotspot and commercial hub. It is an increasingly popular retirement destination for Americans; indeed, U.S. expatriates helped fuel the recent Panamanian housing boom.
Now more than ever, responsible management of the Panama Canal is deeply important to the global economy in general and the U.S. economy in particular. Efficient canal management depends on political stability and sound governance. Torrijos has provided such governance. Let's hope his successor does too.
Jaime Daremblum, who served as Costa Rica's ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.
Thursday, April 23, 2009
US State Dept, Bureau of Public Affairs, Office of the Spokesman
Washington, DC, April 23, 2009
On Friday April 24, 2009, the first class of twenty-four federal correctional instructors from Mexico will graduate from the New Mexico Corrections Department’s (NMCD) Training Academy in Santa Fe, New Mexico. The officers will return home and serve as the initial cadre of instructors at Mexico’s first-ever corrections academy in Xalapa, Veracruz. There, the instructors will begin teaching the first basic academy class of 200 new cadets.
As part of the Merida Initiative, the Department of State’s Bureau for International Narcotics and Law Enforcement Affairs is assisting the Government of Mexico with establishing the corrections academy which is scheduled to be officially opened in late June 2009.
The Mexican correctional cadets began their six-week training class at the NMCD Training Academy on March 16. The cadets received basic instruction for four weeks, defensive tactics instructor course for one week, and during the final week, they received train-the-trainer instruction. Graduation is scheduled for 10:00 a.m. at the NMCD Training Academy gymnasium, located at 4337 State Road 14. Dignitaries from Mexico and the U.S. Department of State will be present.
The U.S. Department of State’s Bureau of International Narcotics and Law Enforcement Affairs and the New Mexico Corrections Department have a Memorandum of Understanding that allows the Corrections Department to train and mentor prison staff from Mexico and Central America.
Note: For security reasons, neither photography nor videotaping of the graduating officers’ faces is allowed. Reporters planning to attend the ceremony must contact the New Mexico Corrections Department Public Information Office in advance.