Obama's first mistake on dealing with Chavez?

Last year we were all caught up with Venezuela's presidential campaign now it is the U.S. turn. As a result I will try to highlight how the US candidates both Democrats and Republicans will approach Latin America if they were president. Last night were the CNN/YouTube debates and we may have seen the first difference between the two leading Democratic candidates, Hillary Clinton and Barack Obama. One of the questions proposed to the candidates was:

“Would you be willing to meet separately during the first year of your administration, with leaders of Syria, Iran, Venezuela and others to bridge the gap between our countries?”

B. Obama response:

I would. And the reason is this, that the notion that somehow not talking to countries is punishment to them -- which has been the guiding diplomatic principle of this administration -- is ridiculous.

Now, Ronald Reagan and Democratic presidents like JFK constantly spoke to Soviet Union at a time when Ronald Reagan called them an evil empire. And the reason is because they understood that we may not trust them and they may pose an extraordinary danger to this country, but we had the obligation to find areas where we can potentially move forward.

And I think that it is a disgrace that we have not spoken to them. We've been talking about Iraq -- one of the first things that I would do in terms of moving a diplomatic effort in the region forward is to send a signal that we need to talk to Iran and Syria because they're going to have responsibilities if Iraq collapses.

They have been acting irresponsibly up until this point. But if we tell them that we are not going to be a permanent occupying force, we are in a position to say that they are going to have to carry some weight, in terms of stabilizing the region.

H. Clinton response:

Well, I will not promise to meet with the leaders of these countries during my first year. I will promise a very vigorous diplomatic effort because I think it is not that you promise a meeting at that high a level before you know what the intentions are.

I don't want to be used for propaganda purposes. I don't want to make a situation even worse. But I certainly agree that we need to get back to diplomacy, which has been turned into a bad word by this administration.

And I will purse very vigorous diplomacy.

And I will use a lot of high-level presidential envoys to test the waters, to feel the way. But certainly, we're not going to just have our president meet with Fidel Castro and Hugo Chavez and, you know, the president of North Korea, Iran and Syria until we know better what the way forward would be.

Honestly I don't think there is much of a difference between the two candidates, but it is obvious that Clinton answered the question directly and her answer probably will set better with moderate voters than Obama's. In the end it probably won't affect Obama but it is fun to see how the candidates differ, at least in answering questions.

Foreigners to get a taste of Venezuelan "democracy" and other news

Any foreigner planning to travel to Venezuela must leave their first amendment, right of freedom of speech, behind. Today "Yo el Supremo" (Chavez) said that any foreigner that is in Venezuela and criticizes him or his government will be expelled from Venezuela. Apparently this was due to Manuel Espino, president of Mexico's conservative ruling party, having criticized Chavez during a recent pro-democracy forum in Caracas.

Meanwhile, Chavez is still planning on a constitutional reform allowing for his indefinite reelection. Since Venezuela is the "most democratic country in the world" the new reform will only permit Chavez to be elected indefinitely, all other public servants (ie. national assemblymen, governors, mayors) will have term limits.

Chavez announced that top public servants should not be earning $7,000 a month (min. wage is ~$250/mo). Don't worry I'm sure they will make up the difference caused by any pay cut.

PDVSA.... wow where to begin.... last week we learned they PDVSA is expending into making shoes, ships, growing beans, etc... all while production is down, the rojo rojito employees are talking of going on strike while making claims of corruption within PDVSA. With falling production in Venezuela, the United States is going to have to rely more on Russia, Africa, and Russia.

"The best Mexico and Venezuela can hope for right now is to keep their production flat, but the more likely scenario is that we will see a decline," said Fadel Gheit, an analyst with Oppenheimer and Co. "Someone has to fill that gap, whether it is Russia, the Middle East or West Africa."

RCTV is now back on the air, the only thing is you have to own cable, which most Venezuelans do not. Of course the government, not realizing what they had done, are now trying to force RCTV to broadcast all government "Cadenas". Of course this probably won't happen, but I'm sure the government will create some new law to force RCTV off the air again, such is Venezuelan democracy under Chavez.

Students in Venezuela continue their peaceful protests against the increasingly authoritarian behavior of Chavez. My question is do the students plan on trying to connect with the rest of the population, if so how? or do they plan on keeping their movement centered on their demands?

There has been a lot of other news this past week including the now ex-minister of defense Raul Baudel criticizing theChavez administration. Personally, it seems a little fishy to see someone so blatantly criticizing the Chavez administration so publically, is he warning Chavez or is this a plan to give the impression of dissent?

Iranian - Venezuelan alliance bears fruit

Last week it was announced that the first 300 vehicles assembled in Venezuela by Venirauto will ready to hand out. My understanding is that these cars are to be given (subsidized) to government employees. Curiously, not only are the cars subsidized but also the gasoline, although "mission gasolina" is for anyone with a car, the cars are also tax exempt (IVA). Eventually, these cars will be sold to the general public but first they have to use them for PR to show how Chavez made this all possible by giving them away to soldiers. Rather than discussing these trivial aspects I would rather point out this government funded program will likely fail similar to those that were created under Carlos Andres Perez in the 1970's.

Venirauto was set up with Venezuelan and Iranian capital and the assembly plant inaugurated in November of 2006, with it's location in Maracay.

The two models available for purchase are the Trupial and two version of the Centauro.

Venirauto
- Trupial for Bs. 17 million ($7,906) based on the Kia pride
- Centauro for Bs. 23 million (11,069) based on a Peugeot 405

Click here to see the photo gallery

General Moters
- Spark for Bs. 18.6 million ($8,600)
- Aveo for Bs. 21 million ($9,760) *There is a cheaper model

Ford
- Ka for Bs. 18.8 million ($8,700)
- Fiesta for Bs. 21 million ($9,760)

I couldn't find prices for Kia and Daewoo although I'm sure they comparably priced if not cheaper vehicles.

Although the Venezuela-Iranian cars are somewhat cheaper the options for the Ford and GM vehicles appear to be better. As for quality I can't speak first hand but I would assume that Venirauto cars are not of the same quality and will probably require going into the mechanic more often especially when driving on Venezuelan roads.

We should at least give credit to the Chavez government for not failing as miserably as FANATRACTO did in 1980. FANATRACTO was created by Carlos Andres Perez in 1978 as a tractor assembly plant but closed its doors after two years without having produced a single tractor.

The government hopes to produce around 25,000 cars by 2010 (this would be ~6% of the 426,000 cars to be sold in 2007). Currently, the government may find it easy to sell their cars since the demand is so high and people are willing to buy almost anything they can get immediately. However, with time the government will probably find it difficult to sell it cars, one because consumer spending and economic growth will start slowing and two the Venirauto cars will probably not be able to compete in quality or price. If the government is able to make good quality cars, can learn to market them, and take the time and make the investment to create a well run efficient company it could be successful. Since history has a tendency to repeat itself, and loyalty is more important than knowledge and hard work in the Chavez government the assembly plant in the long run will probably fail just like FANTRACTO.

Venezuela Forecast

I hope everyone had a nice 4th or 5th, or both of July. There hasn't been anything to interesting to write about in regards to Venezuela, but that is just as good since it was a holiday weekend.

Below is an updated forecast for Venezuela by The Economist. They continue to predict a devaluation of the Bolivar, I should say "Bolivar fuerte" (the government is changing the name), from the current $2,147 per US$ to 2,700 per $US (25% devaluation) in the beginning of 2008. Also GDP growth is predicted to decrease from 5.2% to 2.8% in 2008 and remain around 3% until 2011.

Forecast

Having won a strong mandate in 2006, the president, Hugo Chavez, has launched his third term with a drive to deepen “21st century socialism”. Complete control of the legislature and significant influence over weak and politicised institutions should facilitate this agenda, but obstacles remain, including the gradual decline of fiscal oil revenue, which, combined with a downturn in private investment, will produce an economic slowdown. The fall in fiscal revenue will raise pressure for devaluation, which we expect in early 2008. Inflation is rising as a result of expansionary fiscal policy and exchange controls. Some relief will come by the end of the forecast period as domestic demand growth slows. Although this will slow import growth, the current-account surplus will narrow as oil export earnings fall.

Key changes from last update

Political outlook
The closure of Venezuela’s most popular television station in May 2007 created a level of public protest that appears to have caught the government by surprise. It will now be concerned about the chances for passage of constitutional reform, which is likely to contain controversial items, such as an end to presidential term limits and a redefinition of strategic sectors reserved for control by the state. A referendum on the reforms remains likely in 2008.

Economic policy outlook
Central government expenditure growth slowed in the first quarter in response to a drop in oil revenue, but the public finances deteriorated nevertheless. Oil revenue will probably recover in line with prices in the rest of the year, but a sharp cut in VAT in an unsuccessful attempt to contain inflation will hit the public finances hard. We continue to project a large fiscal deficit in 2007.

Economic forecast
International reserves have dropped sharply, but as the dollars have flowed to the National Treasury and to the national development fund instead of the Central Bank, public-sector external assets have deteriorated little. We are forecasting a drop in Central Bank reserves in 2007, but the balance of payments position will be better than it appears according to this data. Transparency of the data, however, is a growing problem.

Pew Research Survey - How does Latin America view the United States?

Last week the Pew Research Center released a 47 nation survey looking at public opinion on America and other world powers. If you would like to read the summary or the full report click here. It defiantly makes for an interesting read.

For the purpose of this blog I have posted information on Latin America but I encourage to those interested to read the full report.

China and Iran

In general, Africans are more positive than Latin Americans about the growing influence of both China and the U.S. on their countries. But in both regions, somewhat greater percentages say China’s influence is a good thing than say that about U.S. influence.

The Pew survey did note that with China's growing influence it's image is decreasing around the world.

Venezuela has the most favorable view of Iran with 33% and 60% unfavorable, Argentina has the lowest with 11% and 53% unfavorable. Although 81% of Venezuelans opposed Iran acquiring nuclear weapons with 12% favoring it (this was the highest among the Latin American countries surveyed), Mexico was second with 11% favoring Iran acquiring nuclear weapons.

Latin American view of Bush and the U.S.



Peru has the most favorable view of the U.S. with 61% favorable vs. 31% unfavorable, second is Venezuela 56% vs. 40%, third is Mexico 56% vs. 41% , fourth is Chile with 55% viewing the U.S. favorably vs. 35% unfavorably. Bush on the other hand is widely unpopular with 87% of Argentineans having little confidence in Bush, followed by Brazil. Curiously, Putin scores worse when asked if they have confidence in him doing what is right. Although, Putin has fewer people saying the have not much/no confidence in him doing what is right.

The Pew survey show that Brazil and Argentina rank within the top 8 countries out of the 47 that dislike American Ideals about democracy and way of doing business. African nations had the highest "like" in these categories.

Venezuela and the U.S

America’s image in Venezuela has eroded considerably. Favorable opinions have declined by nearly 30 percentage points since 2002, though a majority (56%) still has a positive impression of the U.S.

The image of the United States has eroded since 2002 in all six Latin American countries for which trends are available. The decline has been especially steep in Venezuela (26 points), Argentina (18 points), and Bolivia (15 points).

... almost two-thirds [63% vs. 34%] of Venezuelans say American foreign policy does incorporate their concerns.

This was followed by Peru with 53% feeling that the US foreign policy does incorporate their concerns vs. 40% who say it doesn't. Most countries saw a sharp decline in the support for the U.S. led war on terror Venezuela saw a drop from 79% to 45% support.

Venezuela had the greatest decline in their support for American ideas about democracy, declining from 67% in 2002 to 40% in 2007.

International view of Chavez

There is little evidence that discontent with the major nations of the world and their leaders is resulting in greater confidence in those who have challenged the global status quo. Venezuelan President Hugo Chavez inspires little public confidence, even in Latin America, and huge majorities in most countries also say they have little or no confidence in Iranian President Mahmoud Ahmadinejad to do the right thing regarding world affairs.

While Venezuelan President Hugo Chavez is not nearly as visible on the world stage as Bush and Putin, he is widely recognized – and widely mistrusted – throughout Latin America. While most respondents in Venezuela (54%) express at least some confidence in Chavez to do the right thing in world affairs, 45% say they have little or no confidence in him. Elsewhere in the region, views of Chavez are far more negative. In Chile and Brazil, about three-quarters express doubts about Chavez (75% and 74%, respectively), and nearly as many in Peru (70%) say the same. In fact, majorities in both Brazil (56%) and Peru (53%) say they have “no confidence at all” in Chavez to do the right thing regarding world affairs. Smaller majorities in Mexico (66%) and Bolivia (59%) say they have little or no confidence in Chavez, while in Argentina, views on Chavez are mixed: 40% say they have a lot or some confidence in the Venezuelan president, while 43% disagree. Chavez is viewed a bit less negatively, though he is less widely known, in Africa. More than half (53%) of those in the Ivory Coast express confidence in Chavez as a world leader while 45% disagree. And in Mali, the proportion with a positive view of Chavez’s ability to handle foreign affairs (50%) outnumber those who had little or no confidence in him (32%).

In the United States, a 55% majority expresses little (17%) or no confidence (38%) in Chavez’s leadership, while just 18% say they have some or a lot of confidence in him. This is comparable with opinion in other Western nations, though in many countries Chavez is not widely known. Skepticism is greatest in Spain, where 70% say they have little or no trust in Chavez and just 16% have at least some. In Great Britain, by comparison, opinion is less onesided, with 32% expressing little or no confidence in Chavez, 21% a lot or some, and fully 47% unable to say one way or the other.

Conclusion
It goes without saying that the United States is not very popular around the world, however most of this unpopularity seems to be directed towards our elected officials (ie. Bush). But then again the American public have very little confidence/approval of our elected officials too.

Based on this survey it seems that much of the rhetoric about Venezuela being an enemy of the U.S. and the U.S. being an enemy of Venezuela seems to be overblown. Most of the rhetoric is between Washington and Caracas with little effect on the citizens of each country.

I did find curious that the number one concern of Venezuelans was AIDS/Disease but of lowest concern was the gap between rich and poor, also the lowest of the Latin American countries surveyed. Venezuela also had the most positive view of U.S. movies/tv, the second highest view of U.S. science and technology and the greatest percentage with a positive view on the spread of US ideas.

The strangest thing I noticed was how Argentines seemed to have the greatest rejection and disapproval of almost every thing on the survey. Is it that they are culturally narcissistic?

In short it seems the Chavez has been rather unsuccessful in creating a dislike and hatred for the United States, it also appears that most of the increased disapproval is created not due to Chavez but due to U.S. foreign policy.