A Blog About Venezuela, Corruption and Oil

Well, Venezuela seems to be in a bad spot! With all the corruption and inflation, it’s a wonder how they are still surviving at all. Then again, that could change very easily with any slight turn of events. Corruption in Venezuela in is one of its biggest problems. Some claim that $350 billion dollars were being diverted from the economy. That’s not all, there is also a smuggling business of government food (across the Colombian border) to sell at a profit, causing food shortages. Nicolás Maduro, the current president of Venezuela, avoided a referendum to oust him thanks to the government-controlled electoral authority suspending a vote. Maduro is already continuing the policies of his predecessor, Hugo Chavez. With all this going on in Venezuela, it is important to remember where all this corruption started, and how Chávez perpetuated it.

Venezuela is no stranger to corruption and has a long history of being plagued with this problem. Going back to 1813, 1814 and 1824 with  national hero Simon Bolivar defining it as “the violation of the public interest”, and later, in 1875, the finance minister confessing that “Venezuela does not know to whom it owes money and how much. Our books are 20 years behind.” Historically, Venezuela’s finances have been subject to corruption. A string of corrupt dictatorships lasted until 1960. This led Venezuela to reformers and a period of high transparency with their own democratic presidents Rómulo Betancourt, Raúl Leoni, and Rafael Caldera, becoming a model for the Latin American world. This was until the mid-1970s when Venezuela found oil and hit the jackpot for it. This caused them to launch a program equivalent to Mao Tse-Tung’s “Great Leap Forward”. It was a disaster. The government put 2 billion dollars into industrial projects with little enforcement of regulations causing corruption to spiral of control and Venezuela to fall to the “Dutch Disease.” Venezuelans went into major debt with many national banks overseas. This trend continued until 1998, with over $100,000,000,000 in oil income wasted or stolen during the last 25 years.

This was when Hugo Chávez entered the picture, with the promise of political change, ultimately resulting in him trying to make himself dictator for life. When he was acting president, he had tried to push a nationalist, anti-United States narrative in order to gain more power, spending a lot of money from oil in “social programmes and handouts” in order to make himself look better in the public eye. He exacerbated the corruption problem with multiple counts of “grand corruption, derived from major policy decisions made by Pres. Chavez; bureaucratic corruption, at the level of the government bureaucracy; and systemic corruption, taking place at the interface between the government and the private sector” according to the CATO Institute. Some notable examples of each of these corruption types (in the order explained) would be his acceptance of “foreign contributions for his presidential campaign and even after his election” with the former president of the bank, Emilio Ibarra, claiming that he authorized a $525,000 deposit in Chávez’s account in 1998 and a $1,000,000 deposit in 1999. Another example is the corruption at the Supreme Tribunal of Justice with Luis Velazquez Àlvaray being accused of siphoning funds from money given to build a Court. In turn, he countered by accusing “Vice Pres. Rangel, as well as Interior Minister Jesse Chacón and National Assembly Pres. Nicolas Maduro, of running a gang of corrupt judges called ‘The Dwarves,’ specialized in protecting drug traffickers.” A final example of corruption is drug trafficking, with “Venezuela becoming a haven for Colombian guerrillas who move drugs across the country with impunity due to the absence of border controls.” With Chávez’s campaign promises to end corruption, he was less than effective at delivering on that promise

Oil is one of the only major exports of Venezuela. It is what their economy is based on, as well a source of a lot of the corruption in Venezuela. One of the reasons for this is that the state runs the oil company, making their access to the money generated very easy. One of the main reasons that Venezuela is in the predicament it is in is due to the mismanagement of funds from the oil revenue. President Nicolas Maduro has continued the disastrous policies of Hugo Chávez, and the people of Venezuela suffer every day for it.

Trade Skepticism: Legitimate or Trumped-up?

President-elect Trump ran his campaign largely on the theme that he could negotiate trade deals that would slow globalization and prioritize American interests. He has pledged that the U. S. will withdraw from the Trans Pacific Partnership (TPP), a trade agreement with eleven other Pacific Rim countries that President Obama’s administration has been negotiating for the past eight years, on his first day in office.

President Obama has claimed that the TPP will increase the number of American exports to the global market, help grow and strengthen the American economy, support well-paying jobs in the United States and throughout the rest of the world, and strengthen the American middle class during this period of dramatic globalization. Still experiencing the effects of the North American Free Trade Agreement (NAFTA), the TPP’s predecessor, many Americans remain unconvinced.

NAFTA went into effect in 1994, creating the largest open market bloc in the world: Mexico, Canada, and the United States. While “free” trade (already a strange term for an economy so regulated) had existed between the U. S. and Canada since 1989, NAFTA has had a significant impact in the U. S. and northern Mexico. The agreement was supposed to allow the forces of supply and demand, rather than tariff battles that hurt everyone, to regulate trade. American businesses were expected to have a much easier time than before when trading with both Mexico and Canada due to lowered tariffs, eliminated investment restrictions, and the security of intellectual property rights; the combined economies of these three NAFTA countries at the time exceeded $6 trillion, with the United States being by far the most powerful economy, an unprecedented economic powerhouse. However, Mexico continued to place extremely high tariffs (often exceeding 30%) on American imports while inefficient bureaucracy further hindered trade, making it difficult for smaller American businesses to sell goods south of the border. This meant that the flow of goods from the U.S. to our neighbors has grown at half of the rate before the deal, quite the opposite of its stated intention. Meanwhile, many American workers saw large employers setting up manufacturing facilities in Mexico, and Mexican tariffs remained on average 250% higher than American tariffs, an imbalance that placed the U.S. at an extreme disadvantage. In Mexico, poor farmers found themselves unable to compete with U.S. producers, due to huge subsidies from the U.S. for corn and other crops that the Mexican government simply couldn’t match. Both American blue-collar workers and Mexican agricultural workers, rightly or wrongly, began to blame job losses on NAFTA and establishment economics, and felt threatened by the globalization and technological advancement that NAFTA encouraged. This anger, fear, and resentment has come boiling to the surface in the past few years with the debate over the TPP, and when Mr. Trump promised to put a 35% tariff on imports from American facilities like Ford who have set up in Mexico, many Americans finally heard someone who they thought represented them.

In terms of the U.S. – Mexican relationship, the TPP is essentially a renegotiation of NAFTA that will increase the quality of living and working conditions in both of these two countries. The TPP adopts higher standards for American and Mexican businesses, governments, workers, and environmental protection. Mexico has been advancing extremely rapidly in the areas of energy, telecommunications, finance, and labor practices, and conservative lawmakers and the Obama administration hope that the TPP will only increase the many opportunities for U. S. businesses to become more competitive and to export more goods to Mexico.

There are plenty of objections to the TPP, with typically unsatisfactory excuses from the outgoing establishment. Top-secret negotiations hidden from American workers are justified as political necessity. Arbitration panels designed for giant international corporations to circumvent or even influence American regulation are “balanced out” by weak commitments from Asian governments, when these lopsided labor and environmental responsibilities are admitted at all. But these aren’t the real reasons for anger at the TPP, at least on the far-right; it’s more about a perceived “rigged system,” run by and for large corporations with no regard for the concerns of the American people. Grievances against international trade have, in fact, been boiling in the hearts and minds of Americans, with little acknowledgement or sympathy from the Republican Party, since George H. W. Bush and Bill Clinton’s negotiation of NAFTA.

One of the main issues in the American debate on trade has been our relationship with China, which is notably not part of TPP. President Obama has often criticized Mr. Trump’s harsh language toward China, especially his pledge for a 45% tariff on Chinese imports and allegations of an effective Chinese trade war on the U.S. A careful, cerebral leader, President Obama has instead chosen to snub China less directly, using the TPP to forge a protective economic alliance of Pacific Rim nations in a Cold War-style attempt to check the regional influence of our rival economy. The energy put into this agreement went to waste; the President-elect and new leader of the Republican party has a stance on trade that makes Senators Sanders and Warren look restrained.

Mr. Trump is already bringing jobs back to the U.S., having convinced Carrier Corporation through tax incentives and economic threats to keep in the country at least half of the 2,000 Hoosier jobs that it had planned to move to Mexico; however, negotiating an international trade deal acceptable to foreign leaders and the American people will be a true test of his abilities.

In a time where many are searching for unity, maybe trade is a place to start, as the 2016 election saw the Democrats and Republicans unite once again on the issue—this time to oppose free trade—with Secretary Clinton, in a rare moment of independence from the men in her political circle, vowing to immediately ditch the agreement and renegotiate. The TPP’s only hope was Gary Johnson, two-time Libertarian nominee for President, who supported the trade deal because “I’m being told that [it], in fact, would advance free trade,” echoing the establishment delusion that Americans want more open markets with low-wage countries.

Opposition to the broad free trade deals currently in place has become a political necessity because of the broad perception, which the political establishment has done little to dispel, that President Obama’s administration has come to the negotiating table with a well thought-out compromise and left with little. Mr. Trump promises as President to come to the negotiating table with extreme demands (i.e., his insistence on absurdly high tariffs) and leave with a fair compromise, which seems like a reasonable expectation for the world’s most powerful economy.

Free trade is a great phrase. After all, what could be more American than liberty and capitalism? This idea isn’t just economic; our rejection of the TPP would open up the Pacific Rim, especially East Asia, not only to China’s economic influence, but to its political and military control. But free trade only works when your partners agree to follow the same rules. An ideal trade agreement would compel foreign governments to put the same economic restrictions on their workforce as the U. S. does, so that our country wouldn’t need to sacrifice competitiveness in the global market for workers’ rights and environmental responsibility.

The world this year has seen too many referendums where the people rejected free markets, from Brexit to the election of Mr. Trump, and the refusal of many policymakers to recognize these intense and legitimate concerns has led to many of their political downfalls. President Obama and the traditional wing of the Republican party seem to think that spreading economic treats around the Pacific will curtail China’s dominance of the region, despite the fact that, not being a party to the TPP, our rival is playing by a completely different set of labor and environmental rules. The President’s opposition, on the other hand, has offered no real alternative besides tougher rhetoric and a “better deal.” But until President Obama makes a serious effort to explain and defend his stance on free trade to the American people, the country will continue to see the TPP as simply an expansion of NAFTA, complete with the obligatory $40 million of lobbying by the Koch brothers, that has been more influenced by its signatories, some of the most sluggish economies in Asia, than the Unites States.

International trade is complex and confusing, far more so than either side would like to admit. They say wisdom can come from the most unexpected places, so perhaps Gary Johnson had it right all along, and we should stand aside and let the “experts” figure out what’s best for the people.

They sent “Lawyers, Guns, and Money” The Lawyers Got Rich, and the Guns Got High.

Peru is doing alright, for now. Their economy is booming, they’re relatively democratic, and next to their neighbors, they have a manageable level of terrorism. What’s to hate? Well, a report released in September by the United Nations Office on Drugs and Crime announced that Peru has surpassed Columbia to become the world’s number one producer of coca and cocaine.

Why is this? Well it is due it part to the efforts of the US to eradicate cocaine production in Columbia. The problem is, as the US begins fumigating coca crops in Columbia, the producers simply move back across the boarder into Peru; squeeze one end of the balloon and it bulges at the other. While the US’s war on drugs has been somewhat successful in Columbia, it has taken a large toll on the countries relations with the US, as spraying herbicides from the air inevitably damages crops other than coca, and severely endangers the lives Columbian farmers. This damage also drives many farmers to join the ranks of any of the various rebel groups fighting the Columbian government. As Peru does not allow this aerial herbicide bombardment, and is opposed to such extreme measures, the drug war in Peru must be conducted more surgically.

Another difficulty in fighting coca production in Peru, is that unlike in Columbia, where the FARC accounts for a large portion of coca farming, Peru’s “Shining Path” rebels consist of only around 500 fighters, isolated to one of 14 coca producing regions in Peru. Because of this, there is no one entity to target, as coca farmers work independently from one another. This particular problem is only going to get worse, after the arrest of Gerson Galvez, known as “The Snail”, the biggest drug lord in Peru. His arrest will likely cause the members of his operation to disperse, making them harder to find.

Perhaps the hardest problems to combat are those inside of the government. Although Peru is significantly less corrupt than many of its neighbors, it is certainly not immune. Peruvian police officers often take bribes or work with drug smugglers, and recent President Garcia is said to have sold presidential pardons to smugglers for $150,000 each. One army general was discovered to have fabricated a payroll for 620 soldiers who did not exist, which he instead collected himself. To make matters worse, many wealthy drug lords from Mexico and Central America have moved their operations to Peru, as they find themselves in the US’s line of fire.

Because Peru will not adopt the extreme measures being used in Columbia, the US and Peru will have to fight the drug war more strategically, and more carefully. The problem with this, is that the further the drug is removed from the plantation, the harder it is to track and find. Drug traffickers have a plethora of methods at their disposal to transport their product, including planes, boats, trucks, and even submarines. However, one of the most common methods in Peru is by backpack. Each year, the US estimates one third of cocaine produced in Peru is carried by backpack. This is because roughly 60% of the country’s coca is grown in remote valleys, hidden by mountains. Some of this is flown out by plane, however, the planes are expensive, and not reliable in bad weather. The rest of this coca is carried on foot, hundreds of miles over the mountains, by young hikers with little to no chance of employment elsewhere. During the hike, they must also contend with rival smuglers, corrupt police officers, and armed gunmen looking to take the drugs for themselves.

All of these problems compound themselves to make Peru one of the hardest drug economies to eliminate. Life is comparably good in Peru, so many people are content with the way things are, making them resistant to the idea of starting a drug war there. Because of the complications of fighting the war on drugs in a healthier country like Peru, the cocaine trade has been able to thrive, working under the cover of the intricate web of bureaucracy.