Brookings: Experts - Diana Villiers Negroponte

Vice President Biden’s Visit to Brazil, Colombia and Trinidad and Tobago

Diana Villiers Negroponte — Fri, 24 May 2013 09:40:00 -0400

The Vice President and Dr Jill Biden head to Brazil, Colombia and Trinidad and Tobago the week of May 26th “to see a much deeper engagement within the Western Hemisphere.” After President Obama’s visit to Mexico and Central America in late April, why is the Vice President heading back to this hemisphere? Have not the issues of trade and immigration been addressed sufficiently? No, is the answer. Biden believes that:

[T]his is a moment to look forward to build – build the friendships and partnerships that are going to allow us to deal with the share challenges and shape – jointly shape a global system 10, 20, 50 years from now. It all begins now, it seems to me.
(Speech to the Americas Society/Council of the Americas, Washington, D.C., May 9, 2013)

What is the nature of these partnerships and why are they new? Has the United States not cultivated partnerships in South America since Vice President Nixon visited Venezuela on May 13, 1958. That trip ended with anti-American demonstrators rocking the Vice President’s limousine and unnerving both the VP and Mrs. Nixon. They never went back to South America.

Both the Alliance for Progress and the Cold War are over. Communism is no longer considered a threat. Instead, the growing middle class in the Western Hemisphere is seen as a rising market of 225 million consumers in the Latin America and the Caribbean. Biden is wrong to anticipate that this emerging group of citizens is wealthy enough and “could qualify for a gold card.” According to categories established by the Mexican Association of Market Research & Public Opinion Agencies (AMAI) the middle class is found in the socioeconomic C and D+ categories. They are urban, possess a car, take one vacation a year away from home and own cell phones, but they are not yet middle class in U.S. terms. Nevertheless, Biden is right in recognizing that this group of citizens accounts for approximately 40 percent of citizens in Latin America. They seek quality education and will over time become the professional class that holds that gold credit card.

This changing societal landscape will continue to place great demands on energy, transport and electronic goods. Thus the opportunity for U.S. businesses to invest in infrastructure, participate in the design of urban transportation, establish enterprises to produce the sophisticated electrical goods that consumers need. The Western Hemisphere will continue to provide the opportunity for increased trade and investment. Already, U.S. exports to the hemisphere have risen from $490 billion in 2007 to $650 billion in 2011. In 2013, U.S. trade with Canada and Mexico represents a trillion-dollar trading partnership. This translates into more U.S. jobs; quality jobs that design products, engineer projects, market goods and research means to reduce the carbon footprint. These benefits result, in large part, from trade in goods and services.

U.S. exports to both Brazil and Colombia have grown at a rapid pace, but there is room for further growth. According to the office of the U.S. Trade Representative, in 2012, Brazil was the 8th largest market for U.S. goods and services. In that year, the U.S. exported goods valued at $43.7 billion and in the three months ending March 31 2013, U.S. export of goods totaled $10.4 billion. This accounted for a U.S. trade surplus with Brazil of $11.6 billion, up 3.57 percent from 2011. In relative terms, the value of U.S. exports in private sector goods – not including U.S. military sales and defense expenditures – has increased by 183 percent from 2000 to 2012. More significant than total trade numbers is the nature of our exports. Over this period, the top value of U.S. exports to Brazil was in electrical machinery, plastics, aircraft and aircraft parts. Agricultural exports continued, but the growth is in sophisticated manufactured products. That explains Washington’s determination to build upon the Action Plan on Science and Technology Cooperation, the MOU on Aviation Partnership and Partnership for the Development of Aviation Biofuels with Brazil. Similar trading patterns and partnerships occur with Colombia.

Since the entry into force of the Colombia Free Trade Agreement in May 2012, exports of U.S. aircraft and aircraft parts have increased by 179 percent. Exports of U.S. railway locomotives and track fixtures have increased by 79 percent, and iron and steel articles have increased by 50 percent. Although agricultural exports have increased by 68 percent with soybean meal, rice and pork leading the way, the growth path will be found in electrical machinery and equipment. Colombia seeks U.S. government help in gaining membership to the OECD. Recent initiatives, such as negotiations with the FARC, early start on implementing a hemispheric-wide electrical grid, and significant reforms to Colombia’s education system justify its membership of this 34-member club. Biden should support Colombia’s entry into an association that shares a commitment to market economies backed by democratic institutions and focused on the wellbeing of all its citizens.

In his speech to the Council of the Americas, Biden identified the Western Hemisphere as democratic. He is right in identifying the rejection of military dictators who ruled most South American nations from the 1970s to the early 1980s. Electoral democracy is firmly established. In its Freedom of the World 2013 report, Freedom House categorizes Brazil and Trinidad & Tobago has “free.” Colombia is classified as “partly free” as it awaits a full investigation and prosecution of suspects in the murder of a local community activist and the director of a Colombian radio station. There is also concern regarding the independence of the judiciary in a case involving a newspaper editor charged with criminal libel. Apart from these three Colombian cases which occurred in 2012, Freedom House recognizes that the great majority of nations in the Western Hemisphere respect the rule of law, freedom of expression and the right of assembly.

However, Biden has also noted that Venezuela is not free and that its citizens, while given electoral democracy, do not currently enjoy “freedoms of expression and assembly” and protection from violence. A second reason for visiting the hemisphere at this time is to recognize that liberal democracy can better ensure the security of citizens, opportunity for economic growth and political stability through non-violent discourse. Three nations in South America are in danger of rejecting these values, preferring controlled economies and centralized power to benefit populist leaders. Biden is expected to address this divide and call for increased dialogue among neighboring countries.

Energy is an important theme for Biden in all of the host nations. Trinidad and Tobago is the leading Caribbean producer of oil and gas and its economy is heavily dependent upon these resources. Forty percent of GDP and 80 percent of exports come from oil and gas, but that industry only provides employment for 5 percent of its citizens, according to the World Bank. Consequently, there is more focus on the production of liquid natural gas (LNG) and renewable energy sources. Trinidad and Tobago claims to be the most advanced and dynamic economy in the English-speaking Caribbean, demonstrated by its high mobile phone penetration of over 120 percent. The potential use of mobile phones for banking, health and education services, as well as its energy potential should encourage Biden to consolidate a strong relationship with this leading CARICOM nation.

Finally, education is a critical theme, which is strengthened by Dr. Jill Biden’s presence on the trip. She is a professional teacher at community colleges where thousands of young Americans acquire the technical skills necessary to move into engineering and scientific jobs. She is also a strong advocate for industry partnerships between community colleges and employers. As President Obama seeks to develop the “100,000 Strong in the Americas,” a State Department program to increase international study in Latin America and the Caribbean through greater international exchange of students, he finds a strong partner in Jill Biden. She knows the advantages of public-private partnerships in education. Her visits to university campuses throughout this visit will focus attention on the importance of education in achieving social inclusion, healthier citizens and environmental sustainability.

The trip should consolidate U.S. partnerships not just with these three nations, but send a message that a new form of engagement with the United States is now possible. The days of U.S. hegemony in the Western Hemisphere are over, and a president and vice president no longer travel with a packet of aid. Indeed it was notable that President Obama offered no financial assistance during his visit to Mexico and Central America despite the recognition of “shared responsibility” for the drug-related violence. Instead, constructive partnerships are sought with offers to develop technology, share scientific practices and encourage our students to seek quality education both at home and in the United States. Biden can rightly conclude that this trip represents “…the most active stretch of high-level engagement on Latin America in a long, longtime.”

Authors

Diana Villiers Negroponte

Obama in Costa Rica: Seeking Consensus Among Central America’s Leaders

Diana Villiers Negroponte — Fri, 03 May 2013 09:20:00 -0400

Editor’s note: In the second of a three-part series on Obama’s trip to Mexico and Costa Rica, Diana Negroponte outlines the challenges President Obama will face in seeking consensus among Central America’s leaders. Negroponte reviewed what is at stake for the U.S.-Mexico trade relationship on May 1. She will preview Obama’s visit with Central American business leaders on May 3.

On May 3 and 4, President Obama has two meetings with Central American political and business leaders in San Jose, Costa Rica. The first meeting is with the seven Central American presidents plus President Danilo Medina of the Dominican Republic (DR). Developing consensus among the eight leaders on both the agenda and the desired goals is difficult and a watered down consensus document is likely to emerge, which will disappoint all participants.

The basis for skepticism regarding this meeting is the disparate objectives of the eight leaders. Although the overt purpose is for the Central American and DR leaders to engage with the U.S. president under the auspices of the Central American Integration System (Sistema de Integración Inter-Americana or SICA), that multilateral organization relies upon the political will of the member states to implement their far reaching plans. Despite its foundation in 1991, SICA faces a continual challenge to harmonize its regional plans. In the absence of a common Central American plan of action to which all nations have committed resources and political will, the individual presidents will seek to pursue their own national goals:

El Salvador will seek faster disbursement of U.S. government funds appropriated under the Central American Regional Security Initiative (CARSI);
Guatemala will ask for additional numbers for permanent non-agricultural EB-3 workers;
Honduras seeks additional funds for addressing extreme poverty;
Belize seeks additional funds with which to combat emerging youth gangs, as well as assistance in monitoring its intricate coastline and dense forests;
Nicaragua will focus on investment in its major infrastructure projects;
The Dominican Republic will focus on immigration issues for its citizens within the 2013 Border Security, Economic Opportunity and Immigration Modernization Act (S744)
Panama seeks further training in counteracting money laundering; and
Host Costa Rica will focus on strategic policies for the region, as well as investment in green energy.

All these countries seek to confirm their commercial and political ties with Washington in the face of growing instability in Venezuela. The task is to harmonize these distinct objectives into a single agenda; a most challenging enterprise.

President Obama does not come to this summit empty handed. His government has a successful track record since CARSI was founded in 2008. To date $496.5 million has been appropriated for security and violence prevention projects in Central America. (The Dominican Republic participates in a separate security program for the Caribbean nations.) In FY 2012, the State Department requested $100 million for CARSI, but succeeded in raising that sum to $135 million thanks to the recognition that Central Americas’ problems were serious and impacted the United States. This year, State requested $107.5 million but, after a full review of projects, expects that amount to rise to between $150 and $160 million. In addition, USAID has received $146 million between FY2008 to FY2013, and in FY2012 alone, USAID implemented projects worth $50 million.

The U.S. Congress has agreed with State that Central America is geographically caught in the transshipment corridor between cocaine producers in South America and the North American market. Until such time as the nations of Central American – in particular the three northern nations of Guatemala, Honduras and El Salvador – strengthen their rule of law and law enforcement institutions, they will remain vulnerable to drug traffickers and international criminal organizations. Belize, a nation of 350,000 people is also affected by smugglers who use the coastal bays and forest tracks to transport drugs, people and wildlife to the U.S and European markets.

Beyond overall dollar figures, President Obama must demonstrate the impact of CARSI, as well as USAID projects. Since 2008, USAID has committed $132 million to support justice sector reform, municipal crime prevention and services for at-risk youth. In FY 2012, USAID implemented $46.5 million in projects to support social prevention and citizen security. These included working with local mayors and stakeholders in Central American municipalities to develop their own crime prevention plans. Also, outreach centers have emerged in high-risk communities to provide vocational training for at-risk youth. Los Angeles Deputy Mayor Guillermo Céspedes is working in El Salvador to adapt Los Angeles’ Youth Services Eligibility Tool (YSET) to the context of this and, in future, other countries of the region. The intent is to show a decrease in the number of youth joining the gangs and an increase in the number who stay in school, or join technical training programs. Measuring success can be subjective, but Vanderbilt University’s three-year impact evaluation study has demonstrated -- at its mid-point -- lower crime rates and improved public perception of security in communities receiving USAID programs.

In addition to sharing the positive news of U.S investments in law enforcement and socio-economic projects, Obama will have to listen to complaints. This is a tiresome exercise, but it fulfills the cultural need of national leaders in Central America to articulate their demands before the U.S. president. We must hope that the chair will limit the time allotted to each Central American leader, but Obama must recognize that each leader is writing the headline in his or her national media. Should the meeting be off the record, we can expect less public pontification, but equal quantity of gripe about unmet needs.

So how does President Obama emerge from the meeting with a constructive way forward? He has listened, he will digest and he will seek ways to accommodate through current legislative debate on immigration and maybe on gun control. He can seek to increase CARSI funds from the requested $107.5 million, but he should ask the recipients to share effectively in implementing the projects and measuring impact. He might also ask them to contribute a larger amount of tax revenue to education, skills training and housing programs. The United States can assist the Central American nations in responding to public security threats, but the prime responsibility for strengthening democratic institutions must lie with the nations themselves. The hegemonic age is over and the people of Central America and the DR have the capacity to strengthen the rule of law through regional and national efforts. SICA is the vehicle through which they constructed regional plans. With the roadmap in place, it is now up to each nation to implement the programs.

Authors

Diana Villiers Negroponte

Image Source: © Juan Carlos Ulate / Reuters

President Obama's Trip to Mexico Emphasizes America's Future Economic Prosperity and Security

Diana Villiers Negroponte and Ted Piccone — Thu, 02 May 2013 00:00:00 -0400

Mexico and the U.S. are mutually dependent on one another for their collective and respective economic and national security interests. President Obama’s meetings with Mexico’s new president Enrique Pena Nieto will certainly cover border security issues, weapons, drug trafficking and immigration, but these two leaders will want to find ways to further cement the economic relationship between the two countries. Earlier this week, Senior Fellows Ted Piccone and Diana Negroponte sat down together to examine the importance of these talks.

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President Obama's Trip to Mexico Emphasizes America's Future Economic Prosperity and Security

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Image Source: © Kevin Lamarque / Reuters

Obama’s Mexico Trip: Putting Trade and Investment at the Top of the Agenda

Diana Villiers Negroponte — Thu, 02 May 2013 09:00:00 -0400

President Obama recognizes that security is a pervasive problem in the bilateral relationship between the U.S. and Mexico. But in his April 30 press conference prior to setting out for Mexico, Obama highlighted the U.S.-Mexico trade relationship:

“A lot of the focus is going to be on economics. We’ve spent so much time on security issues between the United States and Mexico that sometimes I think we forget this is a massive trading partner responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border. We want to see how we can deepen that, how we can improve that and maintain that economic dialogue over a long period of time.”

Beyond the statistics of expanding trade, what more should the presidents discuss?

Total two-way trade reached $494 billion in 2012, which according to Mexican Ambassador Medina-Mora means more than $1.3 billion per day; almost $1 million dollars per minute. In absolute terms, Mexico is America’s third largest trading partner, and in 2012 U.S. exports to Mexico were $216.3 billion. According to Medina-Mora this is more than the combination of U.S. exports to all the countries with which the United States has a trade agreement in place – except for Canada. Surprisingly, it is more than U.S. exports to Japan and China combined, that is $180.6 billion.

We agree that exports to Mexico both maintain and create jobs in the United States. The U.S. government estimates that each additional billion dollars in new exports supports more than 6,000 new jobs. According to the U.S. Chamber of Commerce, almost 6 million U.S. jobs rely on trade with Mexico, the consequence of which is the potential creation of 107,000 new U.S. jobs.

Furthermore, individual states benefit from exports to Mexico such as Arizona, California and Texas which hold Mexico as their main export destination. Mexico is also the second destination for exports from 20 other states and is ranked among the top five export destinations for 34 states.

Investment flows are also mutually beneficial. According to the U.S. Trade Representative’s office, sales of services in Mexico by majority U.S. owned affiliates were $34.4 billion in 2010. Sales of services in the United States by majority Mexico-owned firms were $4.8 billion. According to the U.S. Embassy in Mexico, the United States currently provides 41 percent of all foreign direct investment in Mexico, benefiting more than 21,139 companies.

Beyond the numbers, the reality of trade and investment is that the United States and Mexico compete together in the global economy. Production and supply chains in North America are deeply integrated with the U.S. content of Mexico exports to the United States estimated at 40 cents on the dollar. This compares to 25 cents for Canadian exports to the United States and 4 cents for China and 2 cents for the European Union, according to a Wilson Center report. In short, there exists a growing integrated manufacturing platform that takes advantage of geography, time zones and cultural affinity.

The challenge ahead is how to build on that integration for the forthcoming Trans Atlantic Trade and Investment talks with the European Union. The development of common standards and regulations will impact both Mexican and Canadian industry. Therefore, they need to be either at the table, or close to the negotiations. How close will the consultations with the Mexican trade delegation be? Ideally, the Mexicans would like to be at the negotiating table, but that is improbable. More likely is a commitment from President Obama to consult closely with the Mexican delegation. This could include both pre-talks and post-talk briefings, reinforcing Obama’s call “to maintain the economic dialogue over a long period of time.” On the European side, Turkey wishes to have a close consultative arrangement with the EU negotiators. This creates a balanced need for consultations with immediate trading partners.

Related to the growth in two-way trade is the need to facilitate movement of trucks across the U.S.-Mexico border. Despite an increased use of pre-clearance procedures, Mexican trucks must line up several kilometers from the border while they wait their turn to reach the fast lane that leads up to and through the U.S. border. Public-private partnerships are needed to construct the access roads some 10 kilometers from the border so that pre-cleared vehicles can move rapidly through the border zone. Currently, GPS vehicle trackers are used to link the sending and receiving manufacturers with U.S. Customs and Border Patrol (CBP). Before the truck even reaches the border post, CBP will know the content and value of the merchandise, as well as specifications on the cab and its driver. Only if tampering is detected will CBP stop the truck for secondary inspection, otherwise the truck sails through the border and onto its final destination. The Mexican private sector has demonstrated interest in constructing those access roads, but it needs presidential mandates from both governments to support the projects, as well as Mexican government purchase of necessary land.

Increasingly, the economies of both the U.S. and Mexico depend upon each other. There is much for the presidents to discuss and many challenges lie ahead, including productivity and education in both our countries. As President Obama begins his second term, it is constructive for him to put energy and political will into deepening that economic relationship.

Authors

Diana Villiers Negroponte

Image Source: © Kevin Lamarque / Reuters

A Conversation on President Obama’s Trip to Mexico and Costa Rica

Joshua Meltzer, Diana Villiers Negroponte, Ted Piccone and Neil Ruiz — Wed, 01 May 2013 17:59:00 -0400

In advance of President Obama’s trip to Mexico and Costa Rica later this week, Brookings scholars Ted Piccone, Joshua Meltzer, Neil Ruiz and Diana Negroponte discuss the main priorities on the agenda between the United States, Mexico and Costa Rica. Topics covered include: expanding trade and economic cooperation between the U.S., Mexico and Central America, U.S. immigration reform, border security, drugs, crime and violence in Mexico and Central America, energy cooperation, and local politics in Mexico.

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“I think there has a been a view around for awhile now that the bilateral relationship at least with Mexico has been dominated by drugs and violence. And I think there is going to be a concerted effort here to refocus attention on to the depth and size of the economic relationship.” — Joshua Meltzer

“It’s a second term trip for the president, but its early in his second term and I think he’s got a lot of heavy lifting still to do on issues that are particularly important to Latin America and especially important to Mexico and Central America. These issues [jobs and the economy, immigration, security] are not the typical ones on the foreign policy agenda. These are issues that are bread and butter, hot-button domestic political issues but they are very important to the Latins, particularly in Mexico and Central America.” — Ted Piccone

“Immigration is a hot button issue of course. It’s something that is still alive here in the U.S. There’s no reform yet to report back to Mexican and Central American leaders. But these meetings actually set the stage for building the relationship for working together once immigration reform is implemented into law.” —Neil Ruiz

“This is a time when Enrique Pena Nieto, the newly elected Mexican president, has got a chance to really celebrate the strength of the Mexican economy: 3.5 percent GDP growth this year, 3.9 percent GDP growth last year… [and] a growing middle class, which means more people with a car and an ability to take a vacation, with iPods, with cellular telephones, and more mobile.” —Diana Negroponte

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A Conversation on President Obama’s Trip to Mexico and Costa Rica

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Nicolas Maduro: Venezuela's Next President

Diana Villiers Negroponte — Fri, 19 Apr 2013 00:00:00 -0400

Venezuela’s new president Nicolas Maduro takes office under a cloud of controversy and with significant challenges to address. His razor thin victory over the opposition has spawned questions and protests. Still, Maduro will assume leadership of the country once headed by the late Hugo Chavez. These are challenging times in Venezuela; its economy is weak, its national debt is high and the populace is in doubt. Nonresident Senior Fellow Diana Negroponte says Venezuela is a country in turmoil.

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Nicolas Maduro: Venezuela's Next President

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Diana Villiers Negroponte

Maduro as President of Venezuela: What to Expect

Diana Villiers Negroponte — Tue, 16 Apr 2013 15:27:00 -0400

On April 15, the Comisión Nacional Electoral (CNE) confirmed Nicolás Maduro as the next president of Venezuela, following the death of Hugo Chavez on March 5 and presidential election on April 14. The Organization of American States and the U.S. government have both asked for a 100-percent recount “necessary to ensure than all Venezuelans have confidence in the results” (as White House Press Secretary Jay Carney explained). However, this is unlikely to occur.

What happens next and what should we expect from President Nicolas Maduro? The opposition, led by Governor of Miranda state Henrique Capriles Radonski, called for a recount and gathered his supporters to bang their pots and pans during the night of Monday April 15 in protest the CNE’s definitive result. The cazerolazos (pot bangers) would let Venezuelans and citizens throughout the hemisphere know of their call for a recount through non-violent protest. Thousands responded, reflective of the 49.07% of Venezuelans who voted for the opposition party, Mesa Unidad Democrática (MUD); they lost by only 262,000 out of 14.9 million votes. There are 3,200 formal claims of electoral fraud, as well as countless claims of intimidation, but they are unlikely to change the CNE’s decision because 4 out of the 5 commissioners were appointed by Hugo Chavez and are members of his political party, the PSUV.

Beyond pot banging, it is unlikely that the opposition’s protest will turn violent or endure. Maduro will be sworn into office on April 19 and will have to confront serious problems. Inflation has increased from 20 percent year-on-year in December 2012 to 23 percent in February 2013. Furthermore, the currency is overvalued, despite a recent 32 percent devaluation and stable oil prices. Consequently, slower economic performance is expected in the 2013-2014 period. Nevertheless, Maduro is expected to continue social spending for housing, education and health in order to demonstrate that Chavismo, the philosophy of the late Hugo Chavez, is not dead. Scotiabank has also warned its customers that interventionist public policies will continue. In the last year these policies resulted in shortages of basic foods and medicines for all Venezuelans.

With oil production down from 3.3 million barrels per day (mbd) to 2.4 mbd and a $42.5 billion debt to the China Development Bank (CDB), Maduro will face a shortage of cash. He can persuade Venezuelans that they should tighten their belts and endure a period of austerity, but that could provoke protest from the very constituency who supported his election. He could approach the multilateral banks, but Chavez rejected these institutions as being tools of the U.S. “empire.”

Maduro’s supporters in Cuba are reliant on the continued provision of 90,000 barrels per day of subsidized oil to the island, preventing him from drawing down that account to sell the oil on the open market. Maduro has two options: seek a further loan from CDB, similar to the $12 billion that Chavez obtained in June 2011, or renegotiate the repayment terms on the current Chinese loans. (Currently 21 percent of Venezuela’s debt goes to Chinese institutions.) The Chinese government response is critical.

Discussions with officials from the Chinese Academy of Social Sciences at the Inter-American Dialogue in Washington in late March revealed that continued Venezuelan oil production and political stability are necessary for the Chinese authorities. Since 2007, the Chinese National Petroleum Corporation (CNPC) and the China Petrochemical Corporation (CPC) have gained large stakes in Venezuela’s oil industry after Exxon Mobil and ConocoPhillips abandoned the country under the threat of nationalization. If continued oil supplies and political stability are important to the Chinese government, its institutions may agree to renegotiate the loan terms. However, extended repayment schedules will probably come with the condition that more effective management be put in place at Venezuela’s national oil company (PDVSA) as well as the housing and agricultural projects financed by CDB. That means additional Chinese personnel operating within Venezuelan projects.

Sun Hongbo from the Chinese Academy of Social Sciences saw great benefit to China from a “strategic partnership based on long term complementarity.” The CNPC relies upon 800,000 bpd which Venezuela promised in 2007 as collateral for its $14 billion loan under the China Venezuela Joint Fund. We should therefore anticipate increased Chinese influence within Venezuela, as well as demands for greater efficiency both within PDVSA and the delivery of social services. However, payment on the Chinese loans implies lesser revenues from oil sales on the open market. Therefore, Maduro may seek to reduce the amount of subsidized oil that Venezuela provides the Caribbean nations and Nicaragua. Cuba will be an exception with its reliance on 90,000 bpd.

Given the reliance on China to keep the Venezuelan economy afloat, what else might we expect? Politically, the poor showing of the PSUV in this April election reflects the diminution of the Chavez’ aura. Maduro waged his campaign as “son of Chavez,” but it was not good enough to ensure a clear victory. He is now alone to run the country, but he has competitors. According to the Venezuelan constitution, the president of the National Assembly, Diosdado Cabello, should have assumed office pending elections when Hugo Chavez failed to assume office on the constitutionally determined date of January 10. The Supreme Court decided in favor of continuity backing Vice President Nicolas Maduro, but Diosdado now claims through his Twitter account that he would have been more successful in last Sunday’s presidential election. The rivalry between the two men will become more evident throughout the six-year term that Maduro begins this week.

What does this mean for Venezuela? Maduro’s authority to lead the country will be contested. Based on the 3,200 claims of electoral fraud, his legitimacy as president has already been challenged. Without the compelling charisma that Hugo Chavez exuded and without plentiful resources, Maduro will come to rely on authoritarian means. Opposition political figures and student leaders may find themselves in pre-trial detention for varying lengths sufficient to scare them from open protest. Current criminal inmates of Venezuelan jails are reputed to be violent, using rape and threats of murder to control the penitentiaries. Most political opponents will probably choose to shut up or seek exile rather than face jail terms.

Under these circumstances, what should the U.S. government do? I anticipate that President Obama will recognize Maduro as president in the near future, and cannot prevent growing Chinese influence. However, Washington should not accept the abuse of human rights and the denial of the rule of law. Together with the democratic countries in the hemisphere, it should use the weight of the Inter-American Commission on Human Rights and its effective court system to protect Venezuelan citizens and prevent the consolidation of authoritarian rule in the hemisphere.

Authors

Diana Villiers Negroponte

Image Source: © Carlos Garcia Rawlins / Reuters

In Venezuela, Will 'Chavismo' Last Without Hugo Chavez?

Diana Villiers Negroponte — Fri, 12 Apr 2013 11:54:00 -0400

Editor's note: In a collection of opinions by several experts in a PBS Newshour article on “Chavismo” after President Hugo Chavez’s death, Diana Negroponte looks at the responsibility Vice President Maduro has inherited and the future of U.S. relations with Venezuela.

"Chavismo" is based on the theory that an intrinsic relationship exists between the state and the citizen through the person of Hugo Chavez: he is both state and citizen. The state remains dedicated to advance the interests of its citizens and citizens commit to advancing the interests of the state. With the death of Hugo Chavez, who can provide the means to ensure this interlocking relationship between state and citizen?

Vice President Maduro inherited Chavez's mantle and he understands the philosophy of Chavismo. With plentiful resources, Maduro could continue the intrinsic relationship. But without those resources -- current economic problems will decrease disposable state expenditures -- Maduro will have to borrow money. Who will bankroll him?

The Chinese National Petroleum Corporation (CNPC) seeks to maintain the flow of Venezuelan crude and the stability of the Venezuelan government. Would the CNPC be willing to renegotiate its loans to ensure that both continued oil production and political stability continue? Probably. However, CNPC may impose limitations on Maduro's use of that "borrowed money". Maduro will have to accept a degree of austerity and further Chinese management and manpower in the Chinese housing, agriculture and energy projects. The nature of this "new reality" may be difficult for the Venezuelans to accept.

We should, therefore, expect Maduro to face growing domestic restlessness as he fails to deliver the promises of Chavismo. Maduro will seek to shift the blame onto others, including the United States. I anticipate deteriorating relations with Washington and raucous calls for the Bolivarian Alliance, known by its Spanish acronym ALBA, to intensify its anti-Yankee rhetoric. U.S. companies may find increasing restrictions on their activities, if not court cases such as the Chevron case in Ecuador. In the end, without sufficient resources ALBA will wither and Maduro will be a one-term president.

Read the full article »

Authors

Diana Villiers Negroponte

Publication: PBS Newshour

Image Source: © Carlos Garcia Rawlins / Reuters

The Obama-Peña Nieto Meeting: Critical Issues in the Upcoming U.S.-Mexico Talks

Thu, 11 Apr 2013 16:00:00 -0400

Event Information

April 11, 2013
4:00 PM - 5:30 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Next month, President Barack Obama will meet with Mexico’s newly elected President Enrique Peña Nieto. While the two leaders met briefly last November, this meeting—Obama’s first in Latin America since his own re-election—will address major issues of concern to both nations including trade and investment, energy, border security and infrastructure, illicit drug trafficking and public safety. With significant political and economic consequences at stake, the Obama-Peña Nieto meeting will take place as both leaders face complex and contentious domestic challenges that have a direct impact on the bilateral relationship.

On April 11, the Latin America Initiative at Brookings hosted a discussion on the critical issues that will dominate the Obama- Peña Nieto meeting. Arturo Sarukhan, Brookings distinguished affiliate and former ambassador of Mexico to the United States, provided opening remarks on the larger political context for the bilateral meeting. A panel discussion followed featuring contributors to the forthcoming book, The End of Nostalgia: Mexico Confronts the Challenges of Global Competition (Brookings, May 2013). Brookings Nonresident Senior Fellow Diana Villiers Negroponte moderated the discussion.

The Organization of American States Preserves Democratic Charter–For Now!

Diana Villiers Negroponte — Thu, 28 Mar 2013 16:20:00 -0400

A high wire act played out over a 12-hour session of the General Assembly last week at the Organization of American States (OAS): Ecuador and Venezuela threatened to walk out unless their demands were met. Considerable tensions existed within the Hall of the Americas as the foreign ministers witnessed another threat to the organization’s integrity. This time, the contest was over the Inter-American Commission on Human Rights (IACHR).

Since 1959, the IACHR has taken up and defended the rights of children, of women, of indigenous communities, of sexual minorities, persons deprived of liberty, afro-descendents, people with disabilities, migrants, defenders of human rights: in short, people in vulnerable situations. The IAHCR and its judicial arm, the Inter-American Court of Human Rights have continued to denounce and sanction violations of human rights. Throughout the Chilean, Argentinean and Brazilian military dictatorships of the 1970s and early 1980s, the commission and the court played key roles in making visible the victims of abuse. Despite perennial criticisms of the OAS for its failure to defend democratic institutions, the IACHR and the court are considered to be the main collective achievements in defending the rights of individual citizens in the Western Hemisphere.

On September 11, 2001, at the same time as the United States suffered critical attacks, the OAS General Assembly reaffirmed that the promotion and protection of human rights is a basic prerequisite for the existence of a democratic society. The Inter-American Democratic Charter was signed on this historic day in U.S. history. In its Article 8 it gave the right to “any person who consider that his or her human rights have been violated may lodge a complaint or petition before the inter-American system for protection and promotion of human rights.” Individual citizens were recognized as legitimate actors in the consolidation of democracy.

It was therefore disturbing when in 2010, Ecuador and Venezuela raised three complaints about the IACHR: the budget should be limited to contributions from member states and not from observer nations and civil society; the Office of the Special Rapporteur for Freedom of Expression should receive less funds and no more than the amount granted to other OAS rapporteurs; and, third, the headquarters for the IACHR should move out of Washington, preferably to Argentina.

The demands of Ecuador and Venezuela were discussed for over 22 months and through 37 meetings of IACHR and 29 working groups, the presentation of 98 documents from civil society, five academic meetings, three hemispheric audiences and one Extraordinary Session of the OAS. When the sought-for reforms were raised at the 44th Special Session of the OAS General Assembly last week, Ecuador and Venezuela threatened to walk out if their demands were not addressed.

Ecuador and Venezuela – with Bolivian and Nicaraguan support – called to limit the IACHR budget. This was an effort both to limit outside influences on the human rights commission as well as to reduce, even further its effectiveness. Currently, 55 percent of the IACHR’s budget comes from the OAS, the remaining 45 percent comes from member countries, observer nations and civil society. In 2012, the IACHR had an annual budget of $10 million with which to pay rapporteurs, attorneys and staff. With only 34 attorneys for 35 member countries and 31 other staff members, the work of investigating the 448 complaints submitted in 2012 is already inadequate because it enables consideration of only 10 percent of the complaints. Rather than reduce further the IACHR budget, the commission has requested doubling its budget to $20 million in order to hire more attorneys and consider more complaints.

The second complaint was more serious, namely a reduction in the budget for Office of the Special Rapporteur for Freedom of Expression. The work of this office is dedicated to preserving “the right to seek, receive, and disseminate information and opinions freely.” (Declaration of Principles on the Right to Freedom of Expression). The call to reduce the budget for this office was a demand to limit, if not curtail its effectiveness. In both Ecuador and Venezuela, the press has been censured, and in certain cases closed, because of stories critical of the government.

The third complaint requesting that the IACHR move out of Washington did not receive the same objection. Both Costa Rica and Peru offered to host the commission, should it have to leave the OAS building and support structure thereof.

It is noteworthy that Mexico, which has received more complaints before the IACHR in the last two years than any other nation within the OAS, rejected the demands of Venezuela and Ecuador. Colombia, which during its civil war with the FARC had been the object of criticism from numerous, alleged victims of human rights, also rejected the demands. While Bolivia and Nicaragua joined in the Ecuadoran demand, the Caribbean members of the Bolivarian Alliance for the Americas (known by its Spanish acronym ALBA) did not do so; nor did Peru, Costa Rica, Brazil, Canada and the United States. The four ALBA continental nations were marginalized and on this occasion failed to modify the rules and process of the OAS. Only Argentina prevented the walk-out of Ecuador and Venezuela by presenting a motion that enabled the OAS to continue debating the three reforms.

The contest will continue and Ecuador will seek to lead its ALBA allies in rejecting liberal democratic concepts, such as human rights and press freedom. The significance of the 44th Extraordinary General Assemblyof the OAS is that the ALBA countries failed to undermine the democratic principles of the Inter-American system. If anything, the criticism has strengthened the resolve of the Western Hemisphere to retain its ideals and maintain a process by which individuals can bring complaints before an international body that accepts the sovereignty of the people, not the governors.

Authors

Diana Villiers Negroponte

Image Source: © Juan Carlos Ulate / Reuters

The Death of Hugo Chavez and What it Means for the Future of Venezuela

Diana Villiers Negroponte — Thu, 07 Mar 2013 00:00:00 -0500

The time is ripe for change in Venezuela, notes Nonresident Senior Fellow Diana Negroponte. Following the death of its president, Hugo Chavez, Venezuela has two objectives. It must elect new leadership and it must get its economy back on track. Despite its rich oil reserves, Venezuela is mired in a deep economic crisis shaped by its devalued currency and rising inflation. Vice President Nicolas Maduro has alarmed some onlookers with recent questionable tactics.

Video

The Death of Hugo Chavez and What it Means for the Future of Venezuela

Authors

Diana Villiers Negroponte

Chavez's Death and a Forthcoming Political Battle in Venezuela

Diana Villiers Negroponte — Wed, 06 Mar 2013 00:00:00 -0500

Hugo Chavez's supporters poured into the streets, crying and mourning the loss of a man whom many considered a saint. They may explain the shortages in the stores, the soaring inflation and the failure to deliver government services to Chavez's illness, but the cause of the economic woes began long before December 2012 when Chavez left Venezuela for a hospital in Cuba.

Nicolás Maduro is the chosen heir. As vice president, the constitution empowers him to run the country while elections are organized and held within 30 days. This timeline may well be adjusted; shortening the time to capitalize on the emotional outpouring or lengthening the time due to "turbulencia" (unrest) in the country. Whichever, the opposition party that gathered together for presidential elections in October 2012 will have a hard time winning this election.

Governor Enrique Capriles Radonski is the leader of a coalition, known as MUD (mesa de la unidad democratica). The government's political tactics of last October—limited access to the nationally controlled airways, overwhelming distribution of public goods—will probably be repeated in this forthcoming election. The MUD faces an uphill campaign, and is unlikely to succeed.

However, the economy is in shambles and the blame will be posted firmly on the government's door. Whoever wins the forthcoming presidential election will have to confront an overvalued currency, despite the most recent 32 percent devaluation, the need to reinvest revenues from the state-owned oil company, PDVSA, in maintenance and parts, and 20% inflation. Once the election is over, economic austerity will have to begin. Venezuela's president will have to undertake unpopular, but necessary economic policies. Fortunately, oil continues to flow but much of it is already committed to pay off international creditors. Venezuela may now need the help of the multilateral institutions. Contemptuously treated over the last few years, they are the bankers of last resort.

Authors

Diana Villiers Negroponte

Image Source: Reuters

Hugo Chavez's Death an Opportunity for More Pragmatic Relationship with U.S.

Diana Villiers Negroponte — Tue, 05 Mar 2013 19:13:00 -0500

The death of Hugo Chavez presents an opportunity for the new Venezuelan leadership to tone down the rhetoric of anti-Americanism and put our bilateral relations on a pragmatic basis.

The U.S. remains the principal purchaser of Venezuelan oil which is refined in Gulf Coast refineries for later export to China and other markets. Food and pharmaceutical products, cosmetics, spare parts and electrical equipment are bought from the U.S. although payment for these goods is delayed and consumers must wait 4 to 5 months for the new inventory to arrive at Venezuelan ports.

Venezuela is in the midst of an economic crisis with shortages of U.S. dollars, a devaluation of 32 percent and the prospect of searing inflation. Furthermore, Venezuela needs foreign direct investment, technical expertise and spare parts from the U.S.

Rather than demonizing Washington, an opportunity exists for Caracas to reframe the relationship to a realistic mode.

Authors

Diana Villiers Negroponte

Image Source: © Jorge Silva / Reuters

Summitry between Europe and Latin America

Diana Villiers Negroponte — Fri, 25 Jan 2013 00:00:00 -0500

After decades, if not centuries, of relative distance from Latin America, the leadership of the European Union (EU), as well as German Chancellor Angela Merkel, Spanish President Mariano Rajoy, French Prime Minister Jean-Marc Ayrault, Portugese Prime Minister Pedro Passos Coelho, senior ministers from Ireland and the U.K. will participate this weekend in a summit between European leaders and the presidents of Chile, Mexico and Colombia and their respective delegations in Santiago, Chile. Their counterpart in this summit is the Community of Latin America and the Caribbean (CELAC). Both the United States and Canada will be observers at this meeting because neither is a member of CELAC. What is the significance of this meeting and what might be achieved? Should the United States be concerned at finding itself excluded?

First, this meeting is the first time that European leaders fly to South America with the specific intent of "doing business" in the western hemisphere. Instead of heading up the mountain to the World Economic Forum at Davos, the leaders fly westward. After decades of focus on European challenges, the leadership has recognized the potential of the western hemisphere, with its 575 million people and $6.8 trillion GDP, for trade and investment. They recognize that Latin America has changed significantly since the 1980s when protectionist trade policies and rigid exchange rates made this hemisphere a less attractive place to do business. Sound macro-economic policies, strong reserves, flexible exchange regime and invitations to invest in energy, communications and infrastructure have radically changed the perspective of foreign traders. Nearly all countries in the western hemisphere are now “open for business.” Therefore, accompanying government leaders is a delegation of European CEOs representing GDF Suez, Endesa, InterEnergy Holding, KGHM Polska Miedz, among others.

Apart from the final Summit Declaration on January 27, which we should expect to commit to future summitry, close collaboration on climate change and the need to strengthen financial security, the discussions between business leaders over specific investment projects present real opportunities for joint ventures. Electrical grids will be designed, machinery will be purchased, communications equipment and software will be developed on both sides of the Atlantic. European business is wide awake to the potential for business in South America, as well as Mexico.

Should Washington care? Yes. This is a wake up call from entrepreneurs who compete with U.S. manufacturers, scientists and engineers. The Europeans have not arrived at the CELAC meeting to buy primary commodities. They have flown over to explore ways in which to combine their management skills and funds with the opportunities presented by energetic entrepreneurs, known as “multi-latinos.” They will find governments, such as the Mexico’s and Colombia’s, who understand fully the value of foreign direct investment, scientific and technological expertise. They will communicate in languages and cultures that are compatible with South American values.

U.S. business needs to play a leadership role and not wait for Washington to organize the next delegation. The U.S. Chamber of Commerce, the Business Roundtable, the Council of the Americas can stimulate their members to visit Mexico, Colombia, Peru, Chile, Uruguay and Brazil with a view to doing business. Medium size businesses in the United States can access the support of the U.S. Foreign Commercial Service to find partners in the hemisphere. There is plenty of business opportunities for both the Europeans and the North Americans, but we must get off the couch and develop alliances and joint ventures. Otherwise, the Europeans might eat our lunch!

Authors

Diana Villiers Negroponte

Image Source: © Eliseo Fernandez / Reuters

Venezuela's Transition – A "Delicate Condition"

Diana Villiers Negroponte — Fri, 04 Jan 2013 15:10:00 -0500

President Hugo Chávez is reported to be in a “delicate condition” following recent surgery to remove cancerous cells. He remains in a Havana hospital, remote from the economic and security problems of Venezuela. In his place, Nicolás Maduro governs the nation as the executive vice president with powers far in excess of those designated to a U.S. vice president. For all intents and purposes, the union leader with strong socialist inclinations has the constitutional power to appoint and dismiss ministers, negotiate with the National Assembly and to preside over the Federal Government Council. Were Chávez to die on, or after January 10 – the constitutionally designated inauguration day – Maduro would assume the office of the president and proceed to hold elections 30 days thereafter. It would appear that a peaceful transition can take place.

A peaceful transition becomes more complicated if Chávez dies before January 10. In that event, according to the constitution, National Assembly President Diosdado Cabello shall assume the presidency and arrange for presidential elections. Cabello has indicated publicly that he is willing to postpone the inauguration, which would extend the time in which he is eligible to inherit the presidential responsibility. With Maduro as Chávez’ chosen successor, and the clear favorite of the Cuban government, there appears little risk of upsetting the pre-determined transition to Maduro. However, Cabello is a master behind-the-scene-player of Chavista factional politics and a former general in the Venezuelan army. He should not be discounted. Furthermore, a former Venezuelan Supreme Court Justice has accused Cabello of masterminding a drug trafficking ring, and he is said to be on the DEA’s watch list.

However, the subsequent presidential elections provide a strong opportunity for the opposition forces, gathered together in the mesa de la unidad (MUD), to win. The MUD’s candidate in the October elections led a well-organized campaign that lost because it could not distribute housing, social services and was limited to three minutes per day of radio/TV time while Chávez monopolized the media with 10 hour per day use of national media. Despite the uneven, if not unfair, campaign terrain, Chávez did less well in 2012 than he did at the previous presidential election. The opposition remained united and stood behind its standard bearer, Henrique Capriles Radonski.

Maduro will be well placed to use the same tactics to win the presidency. He can offer to fulfill Chávez’ promise of 25,000 new homes in Caracas. He can dominate the airwaves and warn the electorate that a vote for the opposition is a vote for upheaval. We should not assume, therefore, that Chávez’ death will result in the death of Chavismo, known by the party’s official name the Partido Socialista Unido de Venezuela (PSUV).

Should Capriles and the MUD demonstrate a sustained lead in the polls, the PSUV can call upon its 400,000 militia to provoke disturbances. These young men and women, wearing their signature Chávez red shirts, have been trained to fight against a foreign invasion. An internal electoral campaign is not a foreign invasion, unless rumors of U.S. support for the opposition provoke increased antagonism. Short of taking up arms, the militia can occupy roads and organize counter presidential rallies that result in numerous injuries, if not deaths. They might succeed in creating serious political unrest that justifies the call for “un estado de excepción” (state of exception, a.k.a. state of emergency). In this event, Article 337 of the constitution permits the executive vice president, together with his cabinet, to suspend temporarily citizens rights, with noted exceptions. According to Article 338, in the event of internal or external conflict which might threaten the security of the state, the state of emergency can last for 90 days with a further extension of 90 days. During that time, constitutional guarantees would be suspended.

Three factors work in favor of stability and against declaring a state of emergency: Cuba’s need to sustain the delivery of 90,000 barrel per day of subsidized oil, the China Development Bank’s interest on continued payments on its $42.6 billion loan to the Venezuelan government, and Washington’s desire to improve relations with Caracas and reintroduce the DEA into Venezuela. For several months, Maduro had discussions with senior officials at the State Department, and there is talk of resuming diplomatic relations at the level of ambassador.

Furthermore, Maduro faces significant economic problems. Severe macroeconomic distortions, an over-valued currency, capital flight and shrinking domestic production require responsible management of the economy and the support of the multilateral lending agencies, as well as the return of private investors. As Foreign Minister, Maduro was exposed to the realities of international pressures, as well as opportunities should he redirect the ship of state towards a stable, balanced and investor friendly management of the Venezuelan economy.

Authors

Diana Villiers Negroponte

Image Source: © Carlos Garcia Rawlins / Reuters

Mexico's Enrique Peña Nieto Confronts the Challenges of Federalism, Fiscal Reform and Education

Diana Villiers Negroponte — Fri, 30 Nov 2012 13:48:00 -0500

The PRI leader, Enrique Peña Nieto, assumes the Mexican presidency on Dec. 1. Manufacturing output is up, official unemployment is low and drug related homicides are down. This is an auspicious time to inherit the presidency. What are the principal challenges facing a historic party in a modern era?

Corruption is endemic with the Mexican federal government lacking the tools with which to hold the state governments accountable for significant federal transfers. Under a national reform reached in 1998, federal funds are dispersed to the 31 states and Mexico City in proportion to their population, local revenue and poverty rate. Federal transfers replaced local tax revenues. However, use of the federal funds was supervised by state legislatures, not federal legislatures. This has resulted in inflated state budgets to justify continued federal transfers. Ample opportunity for corruption by state and municipal officials exists. The incoming president will seek to devise and implement a new form of federalism which establishes reporting requirements and accountability for use of federal funds. A president from the PRI should have an easier task introducing this reform because 21 governors from the 31 states and Mexico City are members of the PRI. With less need to use federal transfers, for local political purposes, they are more likely to accept presidential instruction and conform to party discipline.

The use of educational funds presents a clear need for overhauling the federal transfer system. Non-conditional federal transfers are distributed based on the number of teachers in the state. The number of students is not considered. With the powerful teachers’ union, SNTE holding the capacity to influence the outcome of political elections, state politicians accept whatever number of teachers the union has established. Whether or not the teachers show up in class, federal funds are determined on those comisionados, i.e. licensed teachers. Presently, there are 160,000 comisionados in Mexico who do not show up to teach. If more comisionados = more Federal funds = more political support, the opportunity for corruption is obvious.

Reform of the federal structure is also related to fiscal reform. Currently, approximately one-third of federal revenues derive from the national petroleum company, PEMEX, but oil production has fallen from 3.4 million bpd to 2.55 million bpd. Falling production results in decreased royalties and taxes for the state. Therefore, the government must consider alternative forms of revenue raising measures. The easiest way is to raise the IVA (sales tax). However, the IVA is a regressive tax, impacting lower incomes more than those with medium to high income. A rise in the IVA conflicts with the president’s commitment to reduce the number of Mexicans living below the poverty line, currently estimated at 46% of the population. Therefore, other forms of raising revenue are being discussed. Raising or broadening the income tax is a possible solution, but Mexican citizens are skilled at avoiding this tax. (A pervasive cultural attitude suggests that only fools pay income tax.) Returning to the old system of higher state taxation may have to be considered. The downside of this proposal is that greater opportunity for corruption exists, but the advantage of decentralizing taxation is the potential for increased local responsibility and accountability for state and municipal programs, including education.

Education reform is essential. The OECD places Mexico at 51^st in math, 48^th in reading and 50^th in science out of the 65 countries participating in the PISA 2009 scores. The World Economic Forum business leaders ranked Mexico’s education quality among the lowest in the world: 120^thout of 139 countries surveyed. In large part, the problem lies with the SNTE (teachers union) to which all teachers are obliged to pay fees and which Elba Esther Gordillo rules with populist authority. Early in his administration and before the mid-term elections for governors, Enrique Peña Nieto needs to establish education goals and be ready to use political capital to implement them. Education reforms may require confrontation with the SNTE, a conflict that most politicians are unwilling to consider, given the power of the union. Needed is a comprehensive focus to mobilize parents, co-opt teachers and prosecute corrupt union officials. The task is herculean. If President Peña succeeds, he will enable the school students of today to participate in the modern economy and reduce the poverty rate. Otherwise, another generation of Mexican students will be condemned to half-time schooling, subpar skill sets and the inability to participate productively in the modern economy.

These challenges address underlying societal problems. They are more complex and maybe harder than reforming the energy sector. Nevertheless, now is the time to channel the soaring public expectation for positive change into these three directions: a new federalism, a fiscal reform that is fair, and a radically improved education system.

Authors

Diana Villiers Negroponte

Conversations with Experts on the Future of Central America

Diana Villiers Negroponte, Alma Caballero and Consuelo Amat — Mon, 19 Nov 2012 00:00:00 -0500

Introduction:

Between May 2011 and March 2012, four public events took place at the Brookings Institution, thanks to a partnership with the Central American Bank for Economic Integration (CABEI, or BCIE in Spanish). They were on:

Experts from the region brought their perspective on challenging subjects and engaged in spirited discussions both with fellow panelists and the audience.

The most challenging issue is how to develop the physical and human infrastructure to enhance growing intra-regional trade and exports to the hemisphere, as well as the traditional U.S. market. Preferential export regimes and expanding maquiladoras have produced double-digit export growth in most Central American countries. But this growth is accompanied by increased criminal violence and gang warfare that depletes citizen’s trust in their respective governments and is estimated to cost 8-9 percent of GDP per year. If Central America can work as a region to stimulate trade, surely it can develop regional projects to counter trans-national criminal organizations and protect the young men and women whom they prey on.

Despite economic growth, the push to migrate northward remains. In 2010, 3 million Central Americans resided in the United States with widely different legal situations. They remitted a large portion of their salaries back home, providing 20.2 percent of GDP in Honduras and 17.5 percent in El Salvador. These remittances have provided major economic and social support for Central Americans, as well as a safety valve permitting the young to escape unemployment and underemployment in their own nations.

The economic potential of Central America will not be realized until infrastructure in ports, roads, electrical grids, and broadband connectivity is accomplished. Greater use of bond markets and means to access long-term capital finance is needed to pay for much needed infrastructure. Currently, less than 2 percent of GDP is dedicated to physical infrastructure. At 5 percent of GDP and with international financing from multilateral organizations and public private partnerships, prospects improve for accomplishing regional infrastructure projects with close oversight to ensure effective and transparent use of funds. The private sector is an indispensable player in this area, providing investment, technology, management, and training.

An electrical grid exists among six Central American nations, permitting the transmission, sale and purchase of electrical energy under the supervision of the Regional Operating Entity. This permits the sale of excess energy supply to areas with a deficit of electricity. Currently missing is the agreement of participating governments to enter into long-term contracts. In 2012, with the extension of the electrical grid to both Mexico and Panama, the private sector has greater incentive to participate in a more robust and larger market with economies of scale. This should benefit an effective regional energy market.

Finally, situated between the Pacific and Atlantic oceans, hurricanes, earthquakes, floods, and volcanoes have led, in recent years, to more than 50,000 deaths and the displacement of over 10 million people in the seven Central American countries. Central America is not to blame for the rise of CO2 because it produces less than 5/1000 of green house gas emissions. However, it bears the brunt of climate change brought about by large industrialized emitters. Regionally, the intensity of climate change-related disasters has increased by 5 percent a year. To meet this challenge, a scientific and technical perspective is needed. Also, governments need to develop comprehensive strategies which take into account tourism, coastal projects, shelter management, and erosion. The creation of Early Warning Systems (EWS) in Guatemala are applauded to bring scientific and management skills to the problems of food shortages, hazardous materials and natural disasters. From national to regional, the EWS demonstrates the need to address the problems of the isthmus at a regional level with outreach to experts from around the world.

This report contains the principal points and conclusions from four events on the politics, and economic and social development of Central America held at the Brookings Institution in partnership with the CABEI in 2011 and 2012. The ideas contained here, although not attributed in the text to individual experts, came from the panelists, moderators and keynote speakers of these events. Their remarks are their own and do not reflect the opinions of CABEI. This report is organized by event and identifies three areas: general overview of the topic, main challenges, and policy recommendations.

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Authors

Diana Villiers Negroponte
Alma Caballero
Consuelo Amat

The Foreign Policy Debate: Key Issues and Omissions

Tue, 23 Oct 2012 10:30:00 -0400

On October 22, President Barack Obama and Governor Mitt Romney met in the last presidential debate of 2012, this time focusing on foreign policy. Read the reactions to the debate by Brookings Foreign Policy experts: Justin Vaïsse looks at Romney’s caution regarding military interventions and what the debate reveals about the foreign policy mood of American public opinion; Feng Wang analyzes current U.S.-China relations and the candidates’ statements on trade and political dialogue with China; Steven Pifer examines the U.S.-Russia relationship and how each candidate plans to approach Russia if elected; Tanvi Madan comments on the omission of India from the debate, and the importance of addressing the U.S.-India relationship in the future. Diana Negroponte evaluates Romney’s statements on Iran and Afghanistan.

It's Official: Come Home, America
Justin Vaïsse, Director of Research, Center on the United States and Europe and Senior Fellow, Foreign Policy
Foreign Policy

The striking thing about Republican nominee Mitt Romney's position in this third presidential debate was how much he retreated from the military assertiveness he seemed to have embraced so far. Of course, he reaffirmed his support for a strong military and for increasing the defense budget. But consider this:

Romney did not call for a no-fly zone in Syria, as many hawks like Max Boot have suggested. He did not call for Congress to pre-authorize military action in Iran, as some of his neoconservative advisers like Elliott Abrams have advocated. He didn't criticize Obama for relying excessively on drone strikes instead of human operations, a choice that hampers the collection of intelligence by obliterating sources of information, as many critics of the president like Charles Krauthammer have rightly charged. He didn't qualify his endorsement of the 2014 deadline in Afghanistan by saying that he would consider the situation on the ground and ask the generals, like he had before.

Instead, Romney insisted that America's purpose "is to make sure the world is peaceful. We want a peaceful planet... I want to see peace... We don't want another Iraq. We don't want another Afghanistan." As for military action, it is "the last resort. It is something one would only, only consider if all of the other avenues had been tried to their full extent."

Read the full article at foreignpolicy.com »

Beyond Trade with China
Feng Wang, Director, Brookings-Tsinghua Center and Senior Fellow, John L. Thornton China Center

In their last presidential election debate on October 22^nd, both President Obama and Governor Romney acknowledged that China as a partner, and put economics on the top of their agenda for their China policy. For relations between the world’s largest and the second largest economies, such a stand from both candidates is assuring.

When asked about his plan to designate China the status of currency manipulator on day one of his administration, Governor Romney stood by his promise and also explained why he believed that China might not want to enter into a trade war with the United States: the trade disparity between the U.S. and China. China exports much more to the U.S. than vice versa, and China therefore needs the U.S. market more than the U.S. does.

Whether China chooses to have a trade war with the U.S. may depend more than the economic calculations Governor Romney laid out, as economic decisions are rarely made on economic considerations alone. A designation of the currency manipulator status, after the Chinese RMB has appreciated substantially over the last few years, will not only set the new tone of the U.S.-China relations, should Governor Romney enter the White House in January 2013, it could well have ramifications that can cloud the U.S.-China relations for an extended time period, a year or more, which will not help a recovering U.S. economy.

As with the U.S., China is under a leadership transition. A new Chinese leadership will be fully in place by March 2013, with the transition beginning in public two days after the U.S. presidential election, on November 8^th in Beijing, when the Chinese Communist Party begins its 18^th National Congress. The emerging Chinese leadership would not want to appear "soft" when faced with a gesture from a new U.S. administration that is seen as not fully justified and overtly hostile. Domestic politics here in China, hence, will almost certainly affect any decisions that the new Chinese leadership will make. If there is any doubt about such a prospect, the recent chilling of Sino-Japanese economic relations resulting from the island territory dispute is a fresh reminder.

Governor Romney and Russia as America’s Geopolitical Foe
Steven Pifer, Director, Arms Control Initiative and Senior Fellow, Center on the United States and Europe

In last night’s debate with President Obama, Governor Romney again reiterated that Russia is America’s major geopolitical foe. To be sure, the U.S.-Russia relationship faces tough issues; Vladimir Putin will not be easy to deal with and has taken Russia backwards on democracy. But the bilateral relationship is more complex than the governor suggests. U.S. and Russian interests converge on certain issues, and cooperation on those questions makes eminent good sense.

One explanation for the governor’s view may be a political calculation that taking a strong stance against Russia plays well with a segment of the American electorate. Both countries seem to suffer something of a lingering Cold War hangover. Indeed, during his presidential campaign late last year and early this year, Mr. Putin played the anti-U.S. card in a thinly veiled appeal to the conservative part of his Russian constituency.

But the fact remains: whoever sits in the Oval Office in 2013, he will seek Moscow’s help on key questions. Take Afghanistan. Russia the past three years has permitted the United States and NATO to move manpower and supplies—including lethal military equipment—through Russia and Russian airspace to Afghanistan. Washington will want to ensure that it continues to have that access, or is Mr. Romney prepared to depend solely on the Pakistanis, who cut the supply routes to Afghanistan last year following the killing of Osama bin Laden?

Moscow has not come as far as Washington would like in pressuring Tehran, but it has come further than anyone would have predicted a few years ago. The Russians in the UN Security Council supported stronger sanctions on Iran’s nuclear program, including an embargo on all arms sales. That came at a price for them; they ended up cancelling a previously concluded sale of sophisticated S-300 anti-aircraft missiles to Tehran. Planners in the U.S. and Israeli air forces, which could be called upon to carry out strikes against Iran, undoubtedly appreciate that they would not have to contend with the S-300. Would Mr. Romney be prepared to see that Russia cooperation unravel?

The Obama administration’s "reset" in Russia policy was based on a calculation that showing a readiness to take account of some Russian concerns, for example, with regards to nuclear arms control, could produce Russian support on questions such as Afghanistan and Iran. Maintaining Russian help on these questions, which will be at the top of the White House in box next year, will be important.

Managing the complex U.S.-Russia agenda has never been easy. The governor has criticized the reset and called for showing more backbone and less flexibility in dealing with Moscow. That might make for good campaign rhetoric, but as with most international relationships, Washington must take account of at least some of the other country’s interests if it seeks that country’s support. The challenge is to find a balance between cooperation where interests converge while defending U.S. positions where positions differ. Simply reiterating time and again that Russia is America’s geopolitical foe does not appear to recognize that complexity.

Just Breathe: Why Sometimes Not Being Mentioned in a Debate is a Good Thing
Tanvi Madan, Director and Fellow, The India Project

Following the foreign policy debate between President Obama and Governor Romney last night, there was much comment about the omission of a number of countries and issues. Among the Indian Twitterati – as well as others in the Twitterverse – there was some consternation about the fact that neither candidate mentioned India. Laments followed about what this said about the state of the U.S.-India relationship and about the importance of India. Viewed through a different prism, however, India should probably be glad that it was left out of the discussion last night.

Consider the countries that did get mentioned the most (leaving aside Mali): Afghanistan, China, Iran, Israel, Pakistan and Syria. They are either countries (a) on which the two candidates disagree, (b) considered to be in crisis or a threat to U.S. national security, and/or (c) seen as important to mention because they are perceived by the candidates as resonating in crucial swing states like Ohio (China) and Florida (Israel).

Seen in this context, Indians and advocates of India might want to breathe a sigh of relief that it was not mentioned. For one, there aren't major disagreements between the candidates on India: if anything when India has come up in this campaign cycle, it has been mostly in the context of who has done more (or less) to maintain and further support the U.S.-India relationship. Second, it is a good sign for India that it is not seen as being in crisis. To remember what that was like, think about the time when it was most often brought up in discussion as being part of the "most dangerous place in the world." India is also not seen as a threat. China was the large Asian country that was portrayed as threatening—either to U.S. jobs at home or to American economic and security interests around the world. Advocates of India and U.S.-India relations should probably be glad that, unlike the rise of China, India’s rise was not mentioned by the moderator just before he asked, "What do you believe is the greatest future threat to the national security of this country?" Finally, in previous campaigns when India has come up as a political issue, it has been in the negative (think outsourcing and the Obama campaign labeling then-Senator Clinton as the Democratic senator from Punjab in the 2008 primaries). Indian-Americans, while more and more politically active and seen by both parties as increasingly important to court, have not reached the stage where they are seen to mean the difference between a swing state being in the D column or the R column. So, positive shout-outs to India in the political context weren’t likely to be high on the priority list of either candidate. Advocates of U.S.-India relations should be thankful that India at least did not come up in the negative, with China instead taking the heat on outsourcing.

Overall, there were some other omissions that were more surprising – the Eurozone crisis and the pivot/rebalancing towards Asia among others. In a debate where a country like China was only mentioned 10-15 minutes before the debate was scheduled to end, the lack of mention of India was hardly a surprise. One can debate the overall quality and range of the foreign policy discussion yesterday, but the omission of India from the discussion should not spark another round of doubt and hand-wringing about the U.S.-India relationship. There’s a broader case to be made that India needs to think about what it needs to do to maintain its importance to the U.S. and that it can’t take this importance for granted. Even if it had been a critical or long-term ally, however, this would not have guaranteed a mention. After all, think about how much—or rather how little—countries like Australia, Britain, Japan and South Korea came up.

New Realism Emerges in the Third Presidential Debate
Diana Villiers Negroponte, Nonresident Senior Fellow, Latin America Initiative

Much of what the candidates debated last night was “old hat.” We knew ahead of time of foreign policy positions long held, as well as those which had evolved. But there were two pieces of news:

First, Governor Romney supported bilateral talks with the Iranians. Our mission in Iran “is to dissuade Iran from having a nuclear weapon through peaceful and diplomatic means.” He welcomed “potentially having bilateral discussions with the Iranians to end their nuclear program.” The exchange indicated that such a dialogue maybe underway, although President Obama denied newspaper reports of such talks. Romney reiterated his call for tighter sanctions, diplomatic isolation and called for the international community to indict Ahmadinejad for his genocidal rhetoric against Israel. What he did not discuss was his support for, or objection to, the International Criminal Court in which such an indictment might be presented. Romney’s support for bilateral negotiations indicates awareness of the need to counter Iran through a wider range of options.

Second, Governor Romney stated that he would leave no U.S. troops in Afghanistan after 2014. “I will bring our troops out by the end of 2014…our troops will come home at that point.” No longer would Romney wait to hear from senior military advisors. Now, he supports President Obama’s decision to withdraw combat troops in 2014. What remains uncertain is whether a residual force of trainers and logisticians would remain under a Status of Forces agreement that is still to be negotiated.

Both news items indicate that the realism which should accompany a potential Commander in Chief has settled upon Romney’s shoulders. Both candidates are conscious of the global role that the U.S. assumes. Neither candidate shared U.S. national security interests with multilateral institutions, or allies. Neither was isolationist. Instead, we saw two robust men project U.S. power in a way that may disturb our friends because it indicated that the U.S. is ready to act unilaterally when necessary.

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In Venezuela, Hugo Chávez’s Last Hurrah

Diana Villiers Negroponte — Tue, 09 Oct 2012 09:30:00 -0400

Barclays and the respected Venezuelan pollster, Consultores 21, predicted a small but significant victory for the opponent to Venezuela’s President Hugo Chávez. Both were wrong. At the end of a long night of counting votes, Henrique Capriles, the leader of the opposing coalition, Mesa de la Unidad (MUD) conceded defeat. Whether the president’s victory lay in the voter roll, the electoral machine or the count, Capriles acknowledged Chávez’s victory and moved on to future electoral battles. The debate over the fairness of the election will continue, but a more significant debate is what happens next: How might Chávez govern and for how long?

Chávez faces some structural challenges: Inflation at 25%, stagnant oil production, weak job creation, capital flight, distortive price controls and rising debt must be addressed urgently. The need for fiscal transparency contradicts Chávez’s preference for treating public assets as a political slush fund. Strengthening the independence of the Central Bank collides with the centralization of power in the president’s hands. The national oil company, PDVSA, needs a major corporate revamping, but with a doubling of employees from 2 million to 4 million since 2004, it is being used as an employment agency rather than a for-profit business.

Venezuela also faces some economic challenges. A devaluation of the official Venezuelan currency, the bolivar, is likely with continued currency control measures. Economists predict devaluation of the official rate in January 2013 from 4.3 bolivars to 6.2 bolivars per U.S. dollar. The result will be a serious hike in inflation based on the importation of approximately 75 percent of Venezuelan consumer goods. This will affect the debt-to-GDP ratio which is estimated to reach 52 percent by December 2012, more than doubling the 23 percent rate in 2008. The rating agencies predict a weakening in Venezuela’s B+ credit rating, with Fitch announcing a review for potential downgrade. This will increase the cost of debt repayments, except the fixed 6 percent interest on its $42.5 billion due to the Chinese Development Bank and Para-state enterprises. Bank of America Merrill Lynch anticipates a 3.5 percent reduction in Venezuelan growth next year.

What could Chávez do to strengthen the Venezuelan economy? He could reduce social spending – free government housing, cash stipends for the elderly and pregnant women -- that are calculated at 5 percent of GDP. However, reductions, let alone termination, would undermine his credibility. He could focus on rebuilding the domestic energy sector to avoid rolling blackouts via investment in critical repairs and domestic infrastructure. He could reduce the sale of energy at subsidized prices to his allies in the Bolivarian Alliance, a.k.a ALBA. Chávez could also end his criticism of the private sector and follow Raul Castro’s lead in encouraging small business and the creation of wage-paying jobs.

A renewed mandate might encourage Chávez to engage further with the government of Iran. The presence of Hezbollah and members of Iran’s Revolutionary Guard in Venezuela is public knowledge. Beyond, enabling Iran to circumvent the UN Security Council’s sanction regime, the presence of technical assistants in state security, intelligence, and energy matters has enabled Tehran to play a peripheral, but influential role in Chávez government. To carry out their work, these advisers acquire Venezuelan identify cards and passports. With these and a revised name, Iranian advisers can seek to circumvent the Department of Homeland Security’s terrorist-suspect data base.

In domestic political terms, Chávez reelection could allow him to be magnanimous and forgive the 6.1 million people, including some government workers, who voted for the opposition. Alternatively, he could retaliate against teachers and others who made their opinions known. He could ignore the critical media, including social media. Or, he could consolidate his authority by further curbs on publishers, independent bloggers and journalists.

This fourth presidential term was made possible due, in part, to the sheer determination of an extraordinary fellow with rare charisma and influence. Assiduously he has sought the loyalty of his vice president, the military high command, central bankers, high court justices and a majority of the legislators. Chávez is emperor and this election victory must be attributed to him and those around him. But the emperor is sick and few believe that he can survive his six-year mandate. Despite the naming of a vice-president, there is no clear successor.

Should Chávez become incapacitated in the next four years, the constitution requires another presidential election. Meantime, elections for governor will be held on December 16 and elections for mayor in April 2013. The constitutional and democratic system provides for several more elections that will test voters’ desire for continuity or change. In October 2012, many voters may have been intimidated into voting for Chávez. In the near future, those same voters will have greater freedom to recognize a sickened emperor and vote their own mind. This election was Chávez's last hurrah!

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Diana Villiers Negroponte

Venezuelans Go to the Polls amidst Fears of Violence

Diana Villiers Negroponte — Wed, 03 Oct 2012 13:00:00 -0400

On October 7, 19 million Venezuelans will vote on whether Hugo Chávez should have a further term after 13 years in power, or whether the opposition candidate, Henrique Capriles Radonski, the 40-year-old former governor of Miranda state and former vice president of the lower house, should become president. No other posts are up for election on Sunday. Consequently, this vote becomes a referendum on Chávez’s leadership.

The latest polling has narrowed the gap between Chávez and Capriles. Datanalysis gives Chávez a 10 point lead. As of mid-September, Consultores 21 gives Capriles a two point lead. Other polls continue to put Chávez ahead, but all pollsters share the proportion of undecided voters at approximately 14%. Most of the undecided should be classified as “unwilling to declare” for fear of losing government benefits or a job. The outcome lies with these people, who could provide Capriles with the majority. Only Chávez believes that a clear victory will be his. Most analysts predict a close outcome.

A narrow win by either side risks the loser provoking disturbance. Until September 29, the campaign had been noisy with frequent gunshots, but no deaths. On that day, two of Capriles’s staff and one spectator were shot and died during a rally some 240 kilometers from Caracas. Chávez condemned the violence stating that “It’s not with violence that we are going to face each other. It’s vote against vote.” However, intimidation against Capriles followers is widespread and rumors of mobilization by the Chávez’ militias are current. Restraint is needed in the final days leading up the election.

Conscious that Chávez could declare un estado de excepción (state of emergency) and suspend most civil liberties should disturbances “gravely affect the security of the Nation,” Capriles has called on his followers to exercise restraint. A state of emergency could last up to 90 days, with a further 90-day extension that would prevent Capriles, should he win, from taking the oath of office in mid-January. Restraint may be difficult to sustain when the young, 250,000-strong militia are let loose to celebrate or challenge the outcome.

What role should the U.S. government play? The policy of not saying anything about Chávez in order to reduce the bulls-eye for Chavista anti-imperial rhetoric could continue through the election. However, that would indicate that unfair elections in the hemisphere are acceptable to Washington, or in the alternative that the Obama administration does not care about the Venezuelan election. Secretary Clinton was articulate in support of a democratic outcome to the Honduran political crisis in 2009 and advocated respect for the outcome of the Salvadoran presidential election that same year. The U.S. government should not limit its pronouncement to small countries. Instead, our democratic principles should be advocated broadly. Liberal democracy is built upon free and fair elections, a free press and the rule of law. We should publicly affirm our principles and ask that the Venezuelans be allowed to exercise their civil rights in a peaceful environment, free of intimidation. José Miguel Insulza, the Secretary General of the Organization of American States (OAS) could do the same based upon the principles of the OAS Charter.

A peaceful election is necessary for the Venezuelan people mired in homicide rates that are among the highest in the world. Also, citizens need a peaceful mechanism to resolve their intense political disputes. But this vote is not unique. Despite the fact that it has become a referendum on Hugo Chávez, it forms part of several elections to determine how Venezuelans wish to be governed. Since Chávez was first elected president in 1998, Venezuelans have voted for president four times, national legislature five times, regional elections five times and referendums four times. It took multiple elections to consolidate the dominance of President Chávez and his party, the Partido Socialista Unido de Venezuela (PSUV).

Nevertheless, beginning in 2010 the opposition unified in the Mesa de la Unidad Democrática (MUD), which was modeled after the Chilean efforts to defeat Pinochet’s dictatorship. They coalesced around a single candidate and succeeded in denying Chávez’s party a two-third majority in the National Assembly, thus denying him ability to pass both organic and enabling legislation. Following this week’s presidential election, voters will elect regional governors on Dec. 13 and mayors on April 14, 2013. Elections for the next National Assembly will take place in September 2015. Meanwhile, should a re-elected president Chávez become disabled within the next four years, Article 233 of the Venezuelan constitution requires that another presidential election take place 30 days after declaring his physical or mental incapacity.

A series of elections may be necessary to restore liberal democracy, a free press and the rule of law in Venezuela. Not everything hinges on the October 7 elections. It is one battle in a prolonged effort to install true democracy in Venezuela. It is important that these electoral battles take place in a relatively stable environment so that voters are not scared away from the polling stations. We wish the Venezuelan people well.

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Diana Villiers Negroponte

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