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Wednesday, May 9

Revenge of the Banana Republics: Hugo Chavez's Southern Strategy gathers steam

It's becoming clear that it is misleading to apply the term "leftist" to the movement led by Hugo Chavez. The multinational strategy is a backlash against foreign control of key industries, but that doesn't make it leftist in the traditional sense. Consider the planned ALBA bond issue, which copies the capitalist approach of the World Bank to obtaining loan money:
Mr. Chavez ... raised the idea of issuing a regional bond to raise money for social spending as he hosted a summit of "the Bolivarian Alternative for the Americas" (ALBA), a leftist bloc and trade group that includes Venezuela, Cuba, Bolivia and Nicaragua.

"I proposed that we issue an ALBA bond. I hope that we can do it. ... And that we issue it here in Venezuela, as we did with Argentina, and bring in $1 billion," said Mr. Chavez, addressing leaders April 29 on final day of their talks. The Venezuelan president said the money acquired would be put in a fund to provide credit for ALBA nations.


Mr. Chavez and other leaders signed accords for Venezuela to supply fuel under preferential terms and join other countries in cooperative projects on education, telecommunications, mining and other areas.

He said Venezuela will guarantee to supply 100 percent of the energy needs of ALBA members plus Haiti. ALBA was created in 2004 by Cuba and Venezuela as a counterproposal to U.S. backed free-trade plans.
And in a move that can only be envied by US and European energy companies
Mr. Chavez said Venezuela eventually plans to help build a network of refineries in Nicaragua, Haiti, Ecuador, Bolivia and Dominica, and to refurbish Cuba's Cienfuegos refinery, to provide a stable supply of oil -- and the earnings it generates -- to Latin American countries. [...]

Under special oil arrangements offered by Venezuela, ALBA member nations will be able to finance 50 percent of the bill for fuel through low-interest loans, and 25 percent of the total bill will go into a special "ALBA Fund" to support local projects using loans, he said.
You know what he's talking about? How to put this in a few words -- he's talking about an intelligent development strategy that is specifically targeted to helping the poorest nations in the Western Hemisphere. This is what large development banks such as the World Bank were supposed to be doing all these decades.

Can it work? Sure it can work in the globalized era of employment opportunities. The traditional threat of the biggest commanding-heights companies that invest in developing countries is that they'll pull out all their technical assistance if their company is forced to leave. Be sure to shut the door behind you; today, technical assistance is readily available from the global employment pool.

Of course, getting control of the foreign-owned companies is never pretty.
Mr. Chavez began a nationalization drive in January to impose state control over "strategic" companies. His government took over multibillion-dollar oil operations from major foreign-oil companies last week and announced on Thursday that it would not be paying them cash compensation.

"We do not expect to pay out money in order to arrive at some arrangement with the companies," said Oil Minister Rafael Ramirez, according to the transcript of an interview with state television.

Mr. Ramirez did not elaborate on how else the government might compensate BP PLC, ConocoPhillips, Exxon Mobil Corp., Chevron Corp., France's Total SA and Norway's Statoil ASA, which have invested more than $17 billion in the projects.

Mr. Ramirez also said that one of the companies, Houston-based ConocoPhillips, would be expelled from the country and barred from staying on as a minority partner in a state-run joint venture if it continues to resist the state takeover. ConocoPhillips is the only oil company that has not signed an agreement in principle recognizing state control.
Isn't this a leftist ploy? In this context I'd call it hardball. What can you call a country where a huge majority of the citizens live in an abject poverty while a small elite dances with captains of foreign-owed strategic industries? "Right" and "Left" labels don't quite apply. "Fighting abject poverty entrenched in a nation for generations" applies.

Where is the U.S. Department of State Department in all this? On the moon. The failure of the US approach to Latin America, which since the 1980s has emphasized the IMF interpretation of the Trickle Down economic remedy for the world's poorest countries, is the starkest example of the foolishness of the US Euro-centric foreign policy.

In more news about Hugo Chavez's strategy, last week he announced that he plans to sell the seven oil refineries in the United States held by Venezuela's Citgo Petroleum Corporation. He's also going after the banks.
"Private banks have to give priority to financing the industrial sectors of Venezuela at low cost," Mr. Chavez said. "If banks don't agree with this, it's better that they go, that they turn over the banks to me, that we nationalize them and get all the banks to work for the development of the country and not to speculate and produce huge profits."

It was not clear if Mr. Chavez was referring only to Venezuelan banks like Mercantil Servicios Financieros CA and Banco Provincial SA, or also major foreign banks with subsidiaries in the country, like New York-based Citigroup Inc. and Spain's Banco Bilbao Vizcaya Argentaria SA and Banco Santander Central Hispano SA.

Mr. Chavez also warned that his government could take over steel producer Sidor, which is majority controlled by Luxembourg-based Ternium SA.[...]

Sidor "has created a monopoly" and sold most of its output overseas, forcing Venezuelan producers to import pipes from elsewhere, Mr. Chavez said.

The company should be giving priority to supplying national industries, he said, ordering Mining Minister Jose Khan to come back from Sidor's headquarters with a recommendation in 24 hours.

Sidor and banks in Venezuela did not respond to requests for comment.

"I don't think it'll happen immediately. They're just threats," said Franklin Rojas, director of Caracas-based economic institute CIECA.

Mr. Rojas noted that Mr. Chavez would likely run up against his close ally, Argentine President Nestor Kirchner, if he tried to nationalize Sidor, whose parent company, Ternium, is controlled by a major Argentine conglomerate, Techint Group.
Chavez is not making empty threats. He's taking the same approach as Russia's under Vladimir Putin. He's saying to put your own country first, then hop around the world. I wouldn't exactly call that an anti-globalist position. I'd call it a refutation of the Trickle Down theory when applied to very poor countries with a very small middle class.

Although Chavez says his revolution aims to create a classless society, he's actually taking actions to rapidly create a large middle class.

The real bottom line is that a nation's government can't be effective if it's hostage to foreign concerns that don't plow a substantial amount of their profits back into the nation.

All quotes in this post are from two May 8 Associated Press reports featured in The Washington Times Americas Briefing:

Chavez to sell refineries

Banks, top steel maker latest targets for nationalization

The Americas Briefing is published every Tuesday. Stay tuned.
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