Hugo Chávez and ethanol
Hugo Chávez is now talking more about ethanol. He now says he will “knock down” any agreement between the U.S. and Brazil to combat the evil empire’s effort to create a cartel. Instead, Latin America should focus on Venezuela: “because all the oil and fuel it needs is here in Venezuela.” He made specific mention of corn, but seems now to be making more clear references to rejecting ethanol of any kind. All this leaves us with some questions.
--How will he justify Venezuela’s own deep interest in and activity related to ethanol?
--Does he want to combat cartels or just cartels that he does not lead?
--To what degree will a “fossil fuels only” policy strike a chord in the region?
--Given Brazil’s own commitment to biofuels, how long can he realistically keep up the argument that his criticisms are aimed only at the U.S., and not at Brazil?
15 comments:
Does he want to combat cartels or just cartels that he does not lead?
Considering his support for the creation of a natural gas cartel, we know the answer to that question.
On Brazil, Chavez and Lula will meet in a few days to discuss energy issues. My guess is that Lula knocks Chavez down a few steps in private, then allows him to save face in public by signing on to a bilateral ethanol deal with Brazil that he can claim balances or counters the US agreement.
If that happens, Brazil will get what it wants, which is increased biofuel production and a leadership role on regional energy integration. The US gets part of what it wants which is increased biofuel production. Chavez gets what he wants, which is simply to criticize the US. If Brazil can pull this off, it's a win-win-win situation with Lula coming away as the big victor.
Should be an interesting energy summit.
Since at least the early '70s, geo-politics has been strongly influenced by one form of cartel or another. We had the OPEC embargo, which drove oil prices through the roof and led to the petro-dollar influx into Western banks, which then lent those dollars at low interest rates to developing countries(which had become even more strapped for cash as a result of the oil price hike).
Along with that, we've had the dollar cartel, whereby the United States controls the dominant reserve currency of the world and can thus create all kinds of turbulence in the world economy by simply adjusting its own interest rates. It was precisely the Fed Reserve's hike in interest rates in '79 that drove up interest rates worldwide and ultimately led to the debt crisis in the developing world.
Then we had the IMF-led creditors' cartel, which brought together the OECD's financial community and coordinated the cutoff of credit to developing countries that didn't prioritize debt repayment and restructure their economies in the ways that first world capital wanted them to. (This neoliberal project turned out to be a catastrophic failure, even on the neoliberals' own narrow terms, as the world growth rate declined throughout the neoliberal period and inequality increased --quite sharply in some cases-- in most of the world.
And, finally, since Chavez's rise to power in '99, OPEC has reasserted its cartelized power by adhering more closely to production quotas. With Venezuela's economic stabilization following the opposition's failed coup and economic sabotage, Chavez has essentially begun to use his cartelized power to take on the creditors' cartel. He has done this by providing unconditional loans to other countries, virtually removing the IMF from the game (currently) and thereby disabling it from imposing its onerous conditions. This is precisely why the IMF's former chief economist, Kenneth Rogoff, recently declared that "the influence of Chavez in Latin America is cancerous" and that it threatens "long-term U.S. interests." Chavez's sponsorship of a new Bank of the South further threatens the creditors' cartel.
So there you have it, Greg. The battle of cartels. The bottom line is that the world is chock full of cartels, many of which I don't have time to describe here. So the whole question comes down to how cartelized power is wielded. Do you want it wielded in the interests of financial and multinational capital (as it was in the '80s and '90s) in ways that not only increase inequality but also sap world economic growth? Or do you want it wielded in the interests of development, the erradication of poverty, the provision of health care to the poor, etc. etc.
I think the choice ought to be clear.
Hooray for cartels.
Mesié Delacour forgets Cali's Cartel which did so much to increase cocaine's price in the eighties.
"Hooray for cartels."
To facetiously say "hooray for cartels" is analogous to facetiously saying "hooray for conventional weaponry." None of us may like it, but if the other guy has it and is using it (or threatening to use it) against you, you can either get on your hands and knees and beg for mercy (as Latin America did in the '80s and '90s in the face of the creditors' cartel) or you can acquire the tools necessary to defend yourself and assert your own independence (as Chavez does via OPEC, not only to defend his own country's independence from the creditors' cartel but also that of other Latin American countries).
In a world where financial and multinational capital wields cartelized power for the purpose of furthering its own interests, it is completely absurd to suggest that a developing country's combined acquisition of cartelized power and use of that power to defend itself and others against the first world's cartelized power is somehow illegitimate.
We live in THIS WORLD, where cartelized forms of power are used by the rich countries every day. We do not live in some fairy tale planet where big bad Hugo came along one day and, lo and behold, started wielding his club for no apparent reason.
Two of these comments are so funny that they cry out for a rebuttal:
1) "...the United States controls the dominant reserve currency of the world and can thus create all kinds of turbulence in the world economy by simply adjusting its own interest rates."
No one is forced to use the dollar as their reserve currency. If a government does not like the Fed's policies, then go ahead and use the Indonesian Rupiah as your reserve currency. The reason the dollar is used is because it is the most stable and widely accepted currency in the world. The Fed's repsonsibility is to manage the US economy, not make adjustments which suit other countries.
2) "...or you can acquire the tools necessary to defend yourself and assert your own independence (as Chavez does via OPEC, not only to defend his own country's independence from the creditors' cartel but also that of other Latin American countries)."
You don't actually believe Chavez has even an ounce of interest in defending the interests of other Latin American countries, do you? Chavez's responsibility is to defend the interests of Venezuela, not the entire region. Governments to act in their own self interest, and they should. Sadly, in the case of Chavez, the only interest he is actually defending is his own and that of his supporters. As long as Chavez and his buddies can continue to fill their pockets with oil money, they will befriend anyone who can help them keep the gravy train running.
"You don't actually believe Chavez has even an ounce of interest in defending the interests of other Latin American countries, do you?"
Setting aside Chavez's interests, let's just take a look at the facts. Does Argentina consider it to be in its interest for Venezuela to provide it loans and thereby free it from dependence on the IMF? Have you seen Chavez's approval rating in Argentina (as of late 2005, at least)?
Does Ecuador consider it to be in its interest for Venezuela to provide it loans and thereby free it from dependence on the IMF? Have you seen the comments of Ecuador's recently elected president on the subject?
I could go on, but I don't think I need to. Nevertheless, I would encourage you to take a look at a very interesting article about the subject by the economist Mark Weisbrot.
So I read an article in which the president of Uruguay did not share the same opinion as Chavez or Fidel in regards to ethanol. He stated that the issue is not black or white but in a gray area and that ethanol production does not have to adversly affect food production. Apparently Urugauy imports all of its energy.
"Economist Mark Weisbort" haha... don't make me laugh! The only numbers in his PhD thesis were the page numbers (I'm not joking either).
Oh, I see, KA. So now you deem yourself more qualified to assess the merits of Weisbrot's professional status than his dissertation committee at the University of Michigan's economics department??
If anything is laughable, it is your questioning of Weisbrot's professional status.
By buying Argentina's debt Venezuela becomes Argentina's creditor.
Chavez is the capitalist here.
How does that help Argentina's independence?
"Chavez is the capitalist here.
How does that help Argentina's independence?"
The difference is that, unlike the International Monetary Fund and the first world banks, Venezuela doesn't attach conditions to its loans. It doesn't tell Argentina that, in order to get loans, it has to privatize this or that industry, cut social spending, increase regressive taxation (such as the Value-Added Tax), or carry out other neoliberal "reforms" that not only exacerbate already atrocious levels of inequality but also fail to bring about higher rates of economic growth.
By the way, the simple provision of credit from one country to another is not intrinsically capitalist. Few would have described Soviet extension of credit to Cuba during the Cold War as "capitalist," for example.
In the long run, though, it will make more sense for Venezuela to transfer this lending role to a regional financial body, which is what it is already seeking to do through the formation of a Bank of the South.
Venezuela doesn't attach conditions? What do you suppose would happen if the right in Argentina (or someone more to the center than Kirchner) wins the next election and then pulls away from Chavez? Do you think Chavez will just sit back and hope he gets paid someday? His money comes with nothing BUT conditions. Any government that decides to not support his extreme positions will get a "loan due in full" bill immediately.
As a dictator who is destroying the democratic instutions of his country, I suppose that is his prerogative, but let's at least call a spade a spade. Chavez is far from the belevolent neighbor you make him out to be.
Actually, Mike, Kirchner is a fairly moderate president. Center-left, perhaps, but definitely not a leftist in the traditional sense of the term. Paraguay's Nicanor Duarte is likely to get considerable assistance from Venezuela as well, and Duarte is certainly no leftist.
The point here is that Kirchner does what he wants with the loans that the Chavez government provides. Unlike the IMF, the Chavez government doesn't tell the Argentine government that it has to implement this or that economic policy to qualify for the loans.
Once again, just ask the Argentine people whether they prefer Chavez over the IMF. The proof is in the pudding.
If country A loans country B money, then I think we can agree that country A has leverage over country B. However, it is also true that Chávez hasn't yet tried to use that leverage. Maybe someday he will, but he hasn't yet.
How come nobody cared about my other questions in the original post? I actually thought my question about cartels was the least interesting.
"If country A loans country B money, then I think we can agree that country A has leverage over country B. However, it is also true that Chávez hasn't yet tried to use that leverage."
Sure, and that's why I say that, in the long run, it will make more sense to transfer said lending function to a multilateral body, the proposed Bank of the South.
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