Why Education Doesn't Lead to Growth in Mexico

Santiago Levy, an economist who served in several capacities in the Mexican government, has a really interesting post at the Brookings Institution site about education and economic growth in Mexico. We would logically expect a more educated workforce to generate more growth but we don't see that in Mexico (and likely not in other Latin American countries as well).

The answer is informality.

The co-existence of heterogeneous firms in the same narrowly-defined market is one manifestation of widespread resource misallocation in Mexico. If somehow the hundreds of self-employed truck drivers could be grouped in a firm, the productivity of the transportation sector would increase and, critically, so would the demand for more educated workers. 

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Many developing countries in Latin America have numerous small low productivity firms and many self-employed workers. In other words, they have large informal sectors and misallocation is a significant issue. While the specific factors that generate misallocation probably differ between countries, in each economy the phenomenon drives two undesirable outcomes: low productivity and depressed demand for more educated workers.

In Mexico there is a huge gap between the most productive and least productive firms. The most productive have educated workers doing accounting, engineering, web design, or whatever. The least productive are just one or a few people doing it on their own on a shoestring. They are not hiring educated workers.

In short, informality is a drag on economic growth, employment, and wages. And it remains widespread.

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U.S. Policy Toward Cuba After Castro

Marguerite Jimenez has an article in Foreign Affairs explaining who Miguel Diaz-Canel is and how the United States should respond to his ascension to power in Cuba. The upshot:

Although no one can predict exactly how Díaz-Canel will respond to these challenges, there is no denying that change is on the horizon. The United States and other outside actors will not determine the nature or the timing of these changes. They can, however, create a climate in which reform is easier. Strategies of U.S. engagement that recognize Cuban sovereignty and resist calling for regime change will reduce the risks to Díaz-Canel of undertaking more significant changes.

This is sensible. Six years ago I published an article in Military Review with Erin Fiorey, who at the time was an M.A. student in Latin American Studies here at UNC Charlotte. We wrote the following:

There is a fine line between caution and passivity, but this line is one the United States must successfully walk. There will be strong resistance to a foreign presence, and the possibility of blowback is very real. The United States can and must play a role in Cuban democratization, but it cannot create it.
 The policy of the United States toward Cuba has been remarkably consistent for decades, but has never achieved its stated goals, namely regime change and democratization. There is no way to predict when a political opening will occur, and it is highly unlikely the United States will be the motor of change, but we have laid out the optimal ways of addressing regime change when it occurs. The most effective responses will be constructive, measured, and multilateral, but active. These are not terms usually associated with U.S. policy toward Cuba, but they are central to a new post-Castro relationship.

The United States government is terrible at learning from past foreign policy mistakes. Our policy toward Cuba has almost always been an abject failure, not only not achieving its goals but actually making us worse off and even harming our own national security. Forgive the cliche, but this is literally an historic moment in Cuban politics and we seem poised to screw it up, perhaps even via tweets.

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21st Century Cuban Communism

The Cuban Communist Party Central Committee Fifth Plenum just met over the course of two days. They focused on the "updating of Cuba's economic and social model." Some highlights of 21st century communism:

--need to accelerate the "self-employment policy" and create a training process of over half a million self-employed workers.

--need to get people to pay their taxes and foster a culture where that is expected.

--get people to solve problems rather than waiting for the government to do so.

--reform the constitution and use other countries as a model.

Market reform is slow, even glacial, but it is happening.

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Dissident FARC

Via Colombia Reports: Ecuador says it found a dissident FARC camp in its territory near the Colombian border, a few days after Ecuadorian soldiers were attacked.

The FARC dissidents have tried to maintain control over criminal rackets like drug trafficking that were abandoned by their parent organization during the demobilization.
 The groups are believed to be supported by Mexican and Ecuadorean organized crime groups that buy cocaine from the rogue guerrillas.

This is a familiar story, as its already been told in Peru with the Shining Path. Once an actual ideological guerrilla group, after its military defeat and the capture of Abimael Guzmán, in 2015 the U.S. Treasury Department labeled it a "criminal narco-terrorist organization." Notice that the word "Marxist" isn't in there.

Unfortunately, it is extraordinarily difficult to destroy such groups, the same way its hard to destroy Mexican drug trafficking organizations. They are well-funded, well-armed, and the flow of drug money is never-ending. But an increased state presence in Colombia will help if they can pull it off, and greater Colombia-Ecuador cooperation is possible now that Rafael Correa is no longer president. It is a major border problem and cannot be dealt with by just one side.

For more on Colombia's implementation of the peace deal, check out the podcast I recently recorded with Adam Isacson.

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Coordinating on Venezuela

Geoff Ramsey has a nice post up at Venezuelan Politics & Human Rights about U.S. sanctions against Venezuelan officials, including a link to a database on them.

Two issues in particular made me wonder about international coordination, especially in the face of weakening the State Department.

First, the best way to get sanctions to work (which in this case is to free all political prisoners and have free and fair elections) is to make them multilateral. They are least effective if only the United States is imposing them. Yet only six individuals are sanctioned by the United States, Canada, and the European Union. So are there U.S. officials working on this with our allies?

Second, some of the highest Maduro officials are not sanctioned, suggesting that the U.S. is hoping to avoid bonding them permanently to Maduro himself. So are there U.S. officials working on this, especially as Tom Shannon retires?

As you might guess if you are a regular reader, I am not optimistic. But I know how many really smart people there are in the State Department, and maybe some of them are having an impact on the administration.

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RIP Charles Andrain

I just learned that Charles Andrain has died at 81. He was Professor Emeritus of Political Science at San Diego State University. While I was doing my M.A. there (1992-1994) he was Graduate Coordinator/mentor and I spent a lot of time talking to him. Just a genuinely good guy. An email from SDSU hits the nail on the head:

Throughout his career at SDSU, and even after his retirement in 1998, Andrain dedicated himself to research and writing, seeking out living spaces close to libraries and spending his days happily surrounded by books. As a long-time faculty member at SDSU, he eagerly shared his encyclopedic memory on a broad range of issues with his students who remember him as a compassionate mentor who ultimately became their lifelong friend. Under his care and supervision, the MA program in Political Science thrived and he was instrumental in encouraging students to pursue graduate level research and degrees.

I talked to him about Ph.D. schools as I went through the nerve-wracking application process. He read a ton and published a ton. After I became a professor myself, he periodically sent me letters (always letters) with clippings, discussions of how he used my work, and examples of his own. He is the only person in many years to whom I sent a hand written letter.

I will raise my glass to him.

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How John Bolton Sees Latin America

I feel obliged to comment on Donald Trump naming John Bolton as National Security Advisor. My main feeling is frustration and resignation to counterproductive policies. His every fiber wants to use force as much as possible in Latin America (and, really, elsewhere as well).

Here is where he as come up on my blog before:

--Heraldo Muñoz criticized him in 2008 for failing to understand Chile's position vis-a-vis the Iraq invasion.

--in 2006 I noted how he must be loving Venezuela's inability to take the rotating seat on the UN Security Council.

--also in 2006 I criticized him for wanting to punish countries that did not give ICC waivers to the United States.

What does he think of Latin America now? Easy enough: just read what he wrote himself in January. I will just give you the highlights. Or lowlights, if that is such a thing.

--Obama unfroze relations with Cuba because of ideology (meaning socialism, I guess, who knows).

--the Monroe Doctrine is a good thing and Obama should have kept it alive.

--Obama ignored all threats in Latin America, like Middle Eastern terrorists and Chinese investment.

--he cannot spell Colombia. Yes, he uses Columbia.

John Bolton is a hawk among hawks. He joins a Secretary of State who is hawkier than hawky hawks. Unless a miracle intercedes, in Latin America we will see more use of force, more belligerent statements, more Latin American moves to embrace China and Europe, and approval of the U.S. government will drop to somewhere around James Polk levels.

Unintended but foreseeable and avoidable consequences, here we come.

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Review of Neruda

I saw the movie Neruda last night. I was asked to give some introductory remarks as part of an international film festival on campus. I talked briefly about Chilean politics mid-century and how political Pablo Neruda was.

The film, in fact, is about how he went into hiding and then exile after the Law for Permanent Defense of Democracy outlawed the Communist Party and led to his arrest warrant. Director Pablo Larraín does not bother with a straight biography, but instead has Neruda leading an introspective police inspector on a wild goose chase, leaving copies of crime novels for him to find, which taunt the inspector since he knows he just missed him. I thought it was great. We see Neruda as an ardent communist who is viewed suspiciously by rank-and-file communists, who don't have access to the movie, women, wine, and influence that he has. But they still respect him for giving them an international voice through poetry. We see Chile struggling with political polarization (there is even a cameo by Augusto Pinochet at a prison camp) and the curious mix within Neruda of political fervor, love of luxury, and creativity. Many scenes bent reality (e.g. urinals inside the Senate chambers where everyone was eating, drinking, and debating?) but it all came together nicely.

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China's Interest in Venezuela

China showing another sign that its patience with Venezuela is waning.

China is likely to extend an agreement providing crisis-stricken Venezuela with favorable loans repayment terms but will not lend fresh funds to President Nicolas Maduro’s government, according to sources in Caracas and Beijing familiar with the situation.

This should remind us of two key issues with regard to Latin America-China relations.

First, China's interest in Latin America is material, not ideological. I've been making this argument for a long time and have not seen anything to really challenge it. China has nothing to gain politically and a lot to lose financially from Venezuela, so its strategy appears to be avoiding outright collapse in order to facilitate loan repayment. Even then, I think the Chinese leadership figures it can work with the opposition just fine if it comes to that. If Maduro falls, then for the Chinese it is ¯\_(ツ)_/¯.

Second, China is still wary of becoming too politically involved in Latin America. For all the talk of challenging U.S. hegemony, there are few signs that China is going beyond its own narrow interests such as maintaining access to primary products and countering Taiwanese influence.

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Podcast Episode 50: Implementing Peace in Colombia

In Episode 50 of Understanding Latin American Politics: The Podcast I talk with Adam Isacson, who is Director of the Defense Oversight Program for the Washington Office on Latin America. He has been studying Colombia and its conflicts for many years, and recently traveled there to evaluate a USAID project to bring government services to post-conflict areas of the country. We talked first back in Episode 3 in September 2016 about the then upcoming plebiscite and uncertainty, so we discuss what's been accomplished (or not) from a firsthand perspective, what the outlook is, and what the Colombia-Venezuela border looks like.

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Review of King's An Excess Male

Maggie Shen King's novel An Excess Male (2017) is unique and engrossing. It shifts from human interest story to thriller and back, with Chinese authoritarian politics infusing everything. The setting is Beijing in the not-too-distant future, where the one-child policy has led to such an imbalance of men and women that men find it difficult to marry wives. One answer has been to allow for women to be married to more than one man. Wei-guo is single and in his 40s, and a matchmaker (hired by his two fathers) finds a possible wife who already has two husbands. The idiosyncrasies of that family frame the novel because they are brothers. One is homosexual and one appears to be high functioning autistic (he prefers to be called XX). The government punishes the former and is wary of the latter. Finally, Wei-guo plays a military-style real-life simulation intended for single men in which he is part of a mini-rebellion that angers government officials.

The female character, May-ling, loves her husbands but does not connect fully with either one. Part of the story is the evolution of her feelings toward Wei-guo, who falls almost immediately in love with her. He also connects with their rather difficult young child. The novel is really about what family means, and the human cost of government repression and control, which creates a lot of unnecessary misery.

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Thoughts on the Petro Sanctions

Donald Trump issued an executive order prohibiting U.S. citizens from making transactions in the Petro (the Venezuelan government's new cryptocurrency). Here's the wording:

Section 1.  (a)  All transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018, are prohibited as of the effective date of this order.

The Petro was a last gasp effort by the Venezuelan government to have some sort of functioning currency while also providing more means of evading sanctions. So this closes out some options. Some thoughts:

First, I wonder how many speculators were going to want to make transactions of any scale when the government is so well known as incompetent. In other words, how many transactions will this actually prevent? I love this quote from Russ Dallen:

“Since most cryptocurrencies are not actually backed by anything real, cryptocurrency speculation is based on the greater fool theory -- I can buy this at $100 because there is someone who is a bigger idiot who is going to buy it at $200. When you take the U.S. out of that equation, you reduce the interest and potential for that speculation.”

Speculation would be based no how many other people you think are stupid. Perhaps that's almost infinite.

Second, this particular action shows the two-track strategy, which combines targeting Venezuelan government officials (which the Obama administration also did) but also U.S. citizens (which to the best of my recollection Obama did not do). It is a considerable one-two punch.

Third, the Trump administration has been going after government officials but does not appear to be thinking of any exit ramp for them. Right now there is no permanent Secretary of State and Tom Shannon's (who was experienced at good cop/bad cop) tenure is running out. If Mike Pompeo is confirmed, then U.S. policy will likely become more punitive. My worry is that this increases the amount of violence we will see as the Venezuelan government feels more cornered.

Fourth, I and others have long made the case that sanctions can be counterproductive because the Venezuelan government can use them as a foil. I feel like some line of incompetence has been crossed where this no longer holds. It would be great to operationalize this somehow, but at some point the government is so obviously dysfunctional that only the devout will buy the argument, and they don't need you to provide a foil anyway. The devout are those 20ish% or so of Venezuelans who support the government no matter what.

Fifth, I think it is irresponsible at this point to talk about "self-determination" in Venezuela, as Lula just did. Self-determination means that the people of Venezuela are able to make their own decisions. That does not currently hold there because the government will not allow it.

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Podcast Episode 49: Latin America and Autonomy

In Episode 49 of Understanding Latin American Politics: The Podcast I talk about my new book project on Latin American autonomy in the context of U.S.-Latin American relations. I presented a first draft of the first chapter at the SECOLAS meeting a little over a week ago in Nashville. One part of this project is to give the Latin American IR literature more attention, which unfortunately often doesn't happen enough in the U.S.-based literature.

I will definitely be writing and talking more about this as time goes on.

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Latin America Responds to US Trade Policy

Interesting article in the NYT about how the Trump Administration's trade policies are pushing Latin American countries to a) pare back their own protectionist policies; and b) forge more trade relationships with each other.

Certain ideas that started among academics and political pundits are also reaching the status of conventional wisdom, where Latin American presidents say them aloud:

“I think that with this attitude the United States is leaving a void, and that void may be filled by China,” President Sebastián Piñera of Chile said in a recent interview, adding that he was startled by the messages that the Chinese and American leaders presented at the recent World Economic Forum in Davos, Switzerland.
 “The president of the United States was defending protectionism, and the president of China was defending free trade,” Mr. Piñera said. “It felt a little like the world upside down.”

I've said this many times, and will repeat it ad infinitum I imagine, but this sequence of events is detrimental to U.S. interests and a boon to China. I should also hasten to point out that this is a conservative president saying this. Piñera should be a natural ideological ally, same as Mauricio Macri, but the administration is explicitly slapping them.

The upshot: the U.S. no longer can identify a clear ally in the region--it labels all of them a problem in some manner. And Latin American presidents are responding accordingly.

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Race 3: Shamrock 4 Miler

Race 3 this year was today's Shamrock 4 Miler. I ran a 7:51 pace, which is the fastest I've run in a really long time. It is the first in a Run For Your Life 6 pack my wife and I are doing. One great things about these races is that they all have NoDa Brewing Company beer afterward. Today it was CAVU Blonde Ale.

It is the sort of course I like, with gentle up and downhills, so unlike some parts of Charlotte you're not doing any real climbing. I slowed with each mile but I was trying to go fast so this has less to do with hills and more with my declining energy.

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Support for Military Rule in Brazil

For quite a while, the Latin American Public Opinion Project has documented the weak support for democracy in Latin America, which is troubling.

A recent poll shows 43% support in Brazil for a provisional return to military rule. Younger people support it more than older, which makes sense because of course older people remember what it was like. From The Washington Post:

“This sentiment is in the air and is being exploited. The intervention in Rio is an attempt by the president to explore that feeling — the nostalgia, the feeling that the military is an anti-political, tough, external body,” said Pablo Ortellado, a public policy professor at the University of Sao Paulo. “Depending on how the intervention goes, if it succeeds in even appearing to reduce crime, it could generate a dangerous wave of militarism.”

This is all so familiar. When I was in graduate school in the 1990s, I was immersed in the literature on civil-military relations, which discussed anti-political thought (here is a great example), popular support for the military, the military's belief in its role as savior, and the disintegration of presidential systems under the weight of political polarization. Fortunately, we no longer have the Cold War as a backdrop, but we are talking about the same things again.

Most Latin American militaries are back in the barracks, or at least mostly so. We need to keep them there. At this point, my hunch is that the Brazilian military has no interest in intervention, and nothing good will come from trying to change that.

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Peru is Tough on Presidents

Peruvian journalist Simeon Tegel has an article at Americas Quarterly about how Peruvian presidents have the political deck stacked against them. I've written numerous times about how unpopular Peruvian presidents always seem to be.

Tegel points to institutional design. In particular, Peru has a hybrid presidential/parliamentary system with a dual executive, which he argues "serves both to institutionalize conflict and prevent fresh voices with public backing from entering the political arena." Congress has outsized power that has consistently crippled the president. That system is also why PPK pardoned Alberto Fujimori.

Further, Peru has a unicameral legislature, which when combined with high threshold for parties to even register, has fostered legislative dominance in many ways. Thinking again of PPK, it meant that Congress could use impeachment as extortion. And good luck getting electoral reform through that body.

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Quick Thoughts on Mike Pompeo and Latin America

Franco Ordoñez writes that Latin America might look favorably upon Mike Pompeo as Secretary of State. What the "favorable" really boils down to is the idea that Latin American leaders don't want to be ignored almost completely, as has been the case up to this point. But Pompeo is hawkish even for hawks and I expect initial shared interest in pushing Venezuela to sour. I expect the specter of Middle Eastern terrorists going crazy in Latin America and getting ready to invade the U.S. to reach the highest heights we've seen yet. I expect Cuba policy to deteriorate further just at a moment of opportunity with change of leadership. And I expect all that to start chafing before too long.

I do hope I am wrong. 

It seemed like Rex Tillerson would be moderate, and that was true. It would not surprise me if Pompeo's reputation for hawkishness holds up as well.

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Refugee Guidelines for Venezuelans

Emigration from Venezuela has reached the point where the United Nations' High Commissioer for Refugees issued guidance about how to deal with it. Although the statement takes pains not to be political, the last sentence in this quote really says it all.

There has been a 2,000% increase in the number of Venezuelan nationals seeking asylum worldwide since 2014, principally in the Americas during the last year. Although over 94,000 Venezuelans have been able to access refugee procedures in other countries in 2017, many more of those in need of protection opt for other legal stay arrangements, that may be faster to obtain and provide the right to work, access to health and education. Yet, hundreds of thousands of Venezuelans remain without any documentation or permission to stay legally in asylum countries. This makes them particularly vulnerable to exploitation, trafficking, violence, sexual abuse, discrimination and xenophobia.
 Within this context, UNHCR’s guidelines encourage States to ensure Venezuelans have access to territory and refugee procedures. In addition, UNHCR welcomes and calls on governments to adopt pragmatic protection-oriented responses for the Venezuelan people, such as alternative legal stay arrangements, including visas or temporary residence permits, as well as other regularization programmes, which guarantee access to the basic rights of health care, education, family unity, freedom of movement, shelter and the right to work. UNHCR applauds countries in Latin America that have introduced such arrangements, and hopes that costs and requirements are eased, where necessary to ensure accessibility.
 In view of the situation in Venezuela, it is crucial that people are not deported or forcibly returned there.

By contrast, Nicolás Maduro argued yesterday that he's helped create a "productive revolution" proving that the "capitalist model" was the wrong path.

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Venezuela and Teapot Dome

Remember the Teapot Dome scandal? Maybe not--it was in the early 1920s during the Harding Administration. But it was a huge deal then, as the Secretary of the Interior Albert Fall got bribes from private oil companies in exchange for access to oil fields the department controlled. Fall was convicted and spent a year in prison.

Fast forward to 2018.

The president’s oldest son and Texas hedge fund manager Gentry Beach have been involved in business deals together dating back to the mid-2000s and recently formed a company, Future Venture LLC, despite past claims by both men that they were just friends, according to previously unreported court records and other documents obtained by AP.
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Last February, just as Trump Sr. was settling into office, Beach and an Iraqi-American businessman met with top officials at the National Security Council to present their plan for lightening U.S. sanctions in Venezuela in exchange for opening business opportunities for U.S. companies, according to a former U.S. official with direct knowledge of the proposal.

Career foreign policy experts were instructed to take the meetings, first reported last April by the website Mic.com, at the direction of the West Wing because Beach and the businessman were friends of Trump Jr., the official said. 

Pay money for better access to Venezuelan oil. The fact that the president didn't bite doesn't make it any less corrupt.

The irony here is that first Hugo Chávez and now Nicolás Maduro have always said the U.S. is being aggressive because it wants to take Venezuelan oil. This is actually an example of the exact opposite.

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