Libertad para matar

Hay un debate polarizado sobre el derecho a poseer y portar armas en Estados Unidos. Estalla cada vez que se produce una matanza como la que perpetró James Holmes en un cine de Aurora (Colorado). También, en cuanto se presta atención a la guerra que mantienen los ejércitos del narco en México con armas de asalto compradas en su inmensa mayoría en el país vecino. Menos atención merecen las armas en la violencia cotidiana, aunque alcanza proporciones alarmantes. La tasa de homicidios con arma de fuego es la más alta entre los países desarrollados: 80 muertos al día. Un arma por cada ciudadano: 300 mill. en total. Más que Yemen, segundo país en el mundo en número de armas por ciudadano. El arsenal doméstico crece constantemente, pero como la riqueza: cada vez más en menos manos. En 1973 había un arma en uno de cada dos hogares; ahora en uno de cada cinco. Épocas ha habido de mayor control y otras más laxas. Ahora estamos en una de estas, gracias a la acción del grupo de presión que se constituye alrededor de la Asociación Nacional del Rifle. Todo da facilidades a los asesinos. Hay 78.000 vendedores, 26.000 tiendas, multitud de ferias donde se venden armas sin restricciones: Las Vegas Sands, de Sheldon Adelson, acoge una de las mayores. Hay controles, claro, escasos y débiles, a cargo de la Oficina para Alcohol, Tabaco, Armas y Explosivos, con sus 2.500 agentes, insuficientes para un mercado tan extenso. La revocación de una licencia, normalmente por venta a criminales, tarda 15 meses de promedio en hacerse efectiva. Solo 20% de las tiendas se inspecciona anualmente. Según el Journal Sentinel, “instituciones federales de control raramente revocan una licencia, cuando lo hacen, vendedores rápidamente eluden suspensión mediante un amigo, pariente o conocido que obtiene una licencia nueva”. Este diario de Milwaukee ha localizado 35 vendedores revocados que siguen trabajando en conexión con clientela criminal. El fundamento de esta deriva es la interpretación de la 2da enmienda de la Constitución americana: “Siendo necesaria una milicia bien regulada para la seguridad de un Estado libre, no deberá limitarse el derecho de la gente a poseer y portar armas”. Para los jueces progresistas es derecho subordinado a la pertenencia a un cuerpo armado estatal, derecho individual inviolable para conservadores. Los dos candidatos presidenciales, Obama y el aspirante Romney, prefieren ocultar sus preferencias, aunque el primero las prohibiría si pudiera y el segundo legisló en contra cuando fue gobernador en Massachusetts. El debate afecta a la libertad de los Estados federados para legislar sin interferencia del Gobierno federal. Pero el mercado libre conviene sobre todo a los fabricantes, los vendedores y los asesinos. (Fuente: Lluís Bassets – El – 29/07/2012)

ECB Divided over Efforts to Save Euro

(…..) Draghi’s maneuvering is starting to annoy many central bankers. “You never know where he stands”, often complain representatives of creditor and borrower countries alike. Even more critical is the fact that, with his most recent plan to rescue euro, he is jeopardizing the fragile equilibrium between north and south in the ECB Governing Council. According to plans were circulating among Europe’s monetary watchdogs last Friday, ECB might buy bonds of the threatened Spanish government again as a supplement to the purchases by the EFSF. Plan envisions having Luxembourg-based temporary bailout fund buy bonds directly from governments because ECB is not allowed to make such purchases on so-called primary market. However, under Draghi’s plan, the monetary watchdogs will buy securities of banks or investment funds in the so-called secondary market so as to drive down yields. This would double the firepower of the euro zone’s crisis weapons while simultaneously preventing Spain itself from having to resort to bailout fund and accept stricter constraints on its reform programs. But it is already clear the plan will encounter resistance. Many monetary watchdogs, including Weidmann and, most of all, central bankers from Netherlands, Belgium and Finland, have already been very outspoken in recent months about their opposition to new bond purchases. Many members of ECB Governing Council view the purchase program that quietly expired at the end of last year as expensive, risky and generally counterproductive. Fewer and fewer central bankers are willing to do the work of the politicians and add more risks to the ECB’s balance sheet. Moreover, the purchases made to date have not proven very successful. When the ECB bought a large number of Spanish government bonds last August, yields declined by more than a percentage point at first. But, soon thereafter, when ECB cut back on its purchasing program, yields promptly shot back up. In fact, by mid-November, Spanish government already had to offer investors higher bond yields than before the ECB’s emergency measure had begun. In the case of Greece, the effect has completely evaporated. When situation escalated there in early May 2010, the monetary watchdogs intervened and, within a few weeks, bought Greek sovereign debt worth dozens of billions of euros. Yields were cut in half after that, declining from more than 14 to about 7% for five-year bonds. But then they shot back up above 10% within the next month and a half. And when the ECB terminated its purchasing program, the yields on Greek government debt reached new record highs. Today, situation in Greece is more hopeless than ever. Unintended Consequences. There is another reason why ECB cannot bring lasting calm to the market by buying sovereign debt: Central bank is merely fighting symptoms of the crisis rather than its causes. But the financial markets regain confidence in a country’s government bonds if its government decisively implements reforms and things start changing for better. Not surprisingly, Draghi’s recent plan is being viewed critically in Germany, by monetary watchdogs and politicians alike. Carsten Schneider, parliamentary budget expert for the center-left Social Democratic Party (SPD), calls the plan “unconditioned and unauthorized intervention.” Critics are also speaking out within governing coalition, made up of Merkel’s Christian Democratic Union (CDU), its Bavarian sister party, Christian Social Union (CSU), business-friendly Free Democratic Party (FDP). Norbert Barthle, CDU’s chief budgetary expert, says that it is “not the central bank’s job to buy up government debt.” And his colleague with CSU, Hans Michelbach, is “speechless Draghi is catering to comprehensive-coverage mentality of the southern countries.” For this reason, says Michelbach, the euphoria in the markets could “quickly turn into depression once again.” That’s the tragic aspect of Mario Draghi’s rescue idea: What is intended to keep the monetary union together could actually drive it even further apart.


Latin America’s challenge: the “Boring Stuff”

We all know what conventional economists say about future of Latin America: Venezuela, Argentina, Bolivia and other countries pursue populist policies will go downhill, whereas Chile, Peru, Colombia and others pursue “responsible” economic policies will do great. So when I interviewed most unconventional among the best-known U.S. economists, Nobel Prize winner Paul Krugman, last week, I was eager to know whether he agrees with conventional wisdom on Latin America. (Andrés Oppenheimer – Miami Herald – 29/07/2012)

Paul Krugman, who has just published a book entitled “End this depression now!”, where he argues that the United States and Europe should increase their economic stimulus packages to jumpstart the world economy, rather than continuing to cut public spending, is often cited by Latin America’s populist governments as a supporter of their big spending policies. Earlier this year, Argentina’s President Fernández de Kirchner enthusiastically cited in a speech one of Krugman’s “Conscience of a Liberal” blogs in The New York Times, in which he stated Argentina’s economy is getting unfair treatment from the media. Asked whether he agrees with the mainstream U.S. economists that Latin America’s “populist” governments will end up destroying their economies, while “responsible” governments will do much better, Krugman surprised me for being much closer to mainstream, at least on this issue, than one might have suspected. “The little bit that we know is that the old rules still apply: If you print money to cover your bills even when the economy is not in a recession, you will get high inflation. If you follow irresponsible populist policies, it will hurt growth. So I don’t think that Venezuela is any kind of role model,” he said. “On the other hand, the hard-line free market stuff has not worked the way it was supposed to,” he added. “We had heard promises of great growth in Mexico for decades now, and Mexico is not terrible now, but it certainly has not had the kind of takeoff. The economies that seem to do the best are the ones seem to have somewhat middle-of- the road policies, that are basically free market, responsible fiscal policies, but also make some serious efforts at poverty reduction, Brazil being the obvious case.” Asked about Argentina, “it’s not a good story either, although it’s not in Venezuelan league”. According to Paul Krugman, “Argentina had a remarkable recovery from its crisis of the early years of last decade, but clearly they have gone on with populist policies too far too long….If they had made a turn to more moderate policies in 2007, then Argentine story would be an entirely positive one. Instead, they kept their foot on the gas pedal”.

Despite the fact that the region’s economy is expected to slow down from 4.3% last year to about 3.7% this year, Krugman said he is “still relatively optimistic” about the region. “I don’t see anything in the latest data that would lead me to believe it’s actually going to get caught up in the full depth of the (world) crisis,” he said. On whether he is more optimistic about Brazil or Mexico, he said that “while I am not a dire pessimist about Mexico,” Brazil right now looks more promising. “I don’t think there is an easy policy explanation about why Brazil has done better. It just seems that there seems to be more of an entrepreneurial drive,” he said. Asked what would be his advice for Mexico’s virtual president-elect Enrique Pena Nieto, Krugman said that Mexico has been pursuing sound economic policies, but that now “it needs to work on all boring but necessary stuff: education, infrastructure and rule of law, which is a big issue for Mexico”. “The best thing you could do for the Mexican economy would be to control the drug trade and the crime wave, and hope that the re-shoring of production from China (to Mexico) finally generates the economic miracle we keep waiting for”. My opinion: I agree with most of Paul Krugman’s views on Latin America, especially his recommendation that Mexico focus on “boring but necessary stuff,” such as education, infrastructure. That should be sound advice for the entire region, and perhaps for the United States, too. I would only add that biggest challenge for our part of the world is to stop seeing these tasks, especially education, as “boring”, re-packaging them as the most exciting challenge of our generation. 

Cúpula Extraordinária dos Chefes de Estado do MERCOSUL

Será realizada, em Brasília, Cúpula Extraordinária Chefes de Estado do MERCOSUL. O encontro será precedido por reunião informal dos Chanceleres do bloco, no dia 30 de julho. Convocada por ocasião da XLIII Cúpula de Chefes de Estado do MERCOSUL, a reunião em Brasília acolherá a entrada da Venezuela membro pleno do bloco. Permitirá, ainda, que a Presidência Pro Tempore do MERCOSUL, a ser exercida pelo Brasil até dezembro de 2012, apresente suas prioridades. Com o ingresso da Venezuela, o MERCOSUL contará com uma população de 270 milhões de habitantes (70% da população da América do Sul), um PIB a preços correntes de US$ 3,3 trilhões (83,2% PIB sul-americano) e um território 12,7 milhões de km² (72% da área da América do Sul). A incorporação da Venezuela altera o posicionamento estratégico do bloco, que passa a estender-se do Caribe ao extremo sul do continente. O MERCOSUL se afirma, potência energética global tanto em recursos renováveis quanto em não renováveis. Fundado em 1991, MERCOSUL possibilitou significativo incremento dos fluxos comerciais entre os membros fundadores. Em 1990, o intercâmbio entre membros do bloco era US$ 4,1 bilhões; 2011, atingiu US$ 104,9 bilhões. Superação das assimetrias entre países do grupo é o objetivo do Fundo de Convergência Estrutural MERCOSUL (FOCEM), investe US$ 100 milhões anuais em projetos que aumentem competitividade e a coesão social do bloco. (Fonte: MRE – Nota à Imprensa nº 190 – 30/07/2012)

The Crisis of Multilateralism

Something has snapped in workings of our multilateral institutions. And there seem to be too many problems in too many places for this to be entirely coincidental. If the late 20th century was an age of coming together, the early 21st century looks like being an age of drifting apart. Some countries won’t mind that. China, for example, has always instinctively favoured bilateral negotiation over many competing voices of the multilateral roundtable. ASEAN’s problems over how to handle territorial disputes in the South China Sea have been well publicized: the association is now effectively split into pro- and anti-China camps. Less widely covered was last week’s move by Uzbekistan to suspend its membership of the Collective Security Treaty Organization. (Trefor Moss – The Diplomat – 26/07/2012)

While ASEAN and the CSTO are quite different groups that aim to do quite different things, essentially have the same problem: their members have conflicting visions of how their region’s strategic landscape ought to develop. And when members of a club can’t agree on basic issues, the club ceases to work. Other institutions face similarly uncertain futures. EU, once model for the likes of ASEAN, is in turmoil. NATO, for so long bedrock of Western security, will limp away from Afghanistan without much sense of its future direction. The organization is now centred, from U.S.’s perspective, on wrong ocean; Washington has become more interested in its dynamic Asian partners than in its declining European ones. Another example is UN Security Council: it is yet another type of multilateral grouping, but it resembles many of those already mentioned if only in its diminishing ability to function, as demonstrated by tht enervating deadlock over Syria. These groupings of nations operate by consensus. But consensus is becoming ever more elusive. The ASEAN members, which have never balked at publishing some pretty bland assertions of like-mindedness in the past, were unable to profess solidarity in even the most superficial terms last week, failing to issue a joint communiqué for the first time in their 45-year history. How can we explain this phenomenon of increased polarity in international politics? In some cases it could simply be that the structure of the institution has outlived its usefulness, most would probably agree with this where UN Security Council is concerned, with exception of the five permanent members. The countries that first came together to form these various institutions are not the same places they were then: nations that once had similar priorities and visions may now have drifted apart politically and economically. The structure of international politics has also been transformed beyond all recognition. Countries have risen and fallen as political and economic powers, while institutions that serve these countries have struggled to keep pace, reforming too slowly, too timidly. The power of these groups to help their members to navigate the geopolitical challenges that they face has waned as a result. The world has many multilateral institutions, but too few work well. They need to update their visions of regionalism and multilateralism for the 21st century. This quest will end, for some, in the realization in new geopolitical order there is no longer a common thread that ties their members together. 

Money for Nothing

For various years, allegedly serious people have been issuing dire warnings about the consequences of large budget deficits, deficits that are overwhelmingly result of our ongoing economic crisis. In May 2009, Niall Ferguson of Harvard declared that the “tidal wave of debt issuance” would cause U.S. interest rates to soar. In March 2011, Erskine Bowles, co-chairman of President Obama’s ill-fated deficit commission, warned that unless action was taken on deficit soon, “markets will devastate us,” probably within two years. And so on. (source: Paul Krugman – NYTimes – 27/07/2012)

Well, I guess Mr. Bowles has a few months left. But a funny thing happened on the way to predicted fiscal crisis: instead of soaring, U.S. borrowing costs have fallen to their lowest level in the nation’s history. And it’s not just America. At this point, every advanced country that borrows in its own currency is able to borrow very cheaply. The failure of deficits to produce the predicted rise in interest rates is telling us something important about the nature of our economic troubles (and the wisdom, or lack thereof, of the self-appointed guardians of our fiscal virtue). Before I get there, however, let’s talk about those low, low borrowing costs, so low that, in some cases, investors are actually paying governments to hold their money. For the most part, this is happening with “inflation-protected securities”, bonds whose future repayments are linked to consumer prices so that investors need not fear their investment will be eroded by inflation. Even with this protection, investors used to demand substantial additional payment. Before the crisis, U.S. 10-year inflation-protected bonds generally paid around 2%. Recently, however, rate on those bonds has been minus-0.6%. Investors are willing to pay more to buy these bonds than the amount, adjusted for inflation, government will eventually pay in interest and principal. So investors are, in a sense, offering governments free money for the next 10 years; in fact, they’re willing to pay governments a modest fee for keeping their wealth safe. Now, those with a vested interest in the fiscal crisis story have made various attempts to explain away the failure of that crisis to materialize. One favorite is the claim Federal Reserve is keeping interest rates artificially low by buying government bonds. But theory was put to the test last summer when Fed temporarily suspended bond purchases. Many people, including Bill Gross of the giant bond fund Pimco, predicted a rate spike. Nothing happened. Oh, and pay no attention to the warnings any day now we’ll turn into Greece, Greece I tell you. Countries like Greece, and for that matter Spain, are suffering from their ill-advised decision to give up their own currencies for the euro, which has left them vulnerable in a way that America just isn’t.

So what is going on? The main answer is that this is what happens when you have a “deleveraging shock”, in which everyone is trying to pay down debt at the same time. Household borrowing has plunged; businesses are sitting on cash because there’s no reason to expand capacity when sales aren’t there; and the result is investors are all dressed up with nowhere to go, or rather no place to put their money. So they’re buying government debt, even at very low returns, for lack of alternatives. Moreover, by making money available so cheaply, they are in effect begging governments to issue more debt. And governments should be granting their wish, not obsessing over short-term deficits. Obligatory caveat: yes, we have a long-run budget problem, and we should be taking steps to address that problem, mainly by reining in health care costs. But it’s simply crazy to be laying off schoolteachers and canceling infrastructure projects at a time when investors are offering zero- or negative-interest financing. You don’t even have to make a Keynesian argument about jobs to see that. All you have to do is note that when money is cheap, that’s a good time to invest. And both education and infrastructure are investments in America’s future; we’ll eventually pay a large and completely gratuitous price for the way they’re being savaged. That said, you should be a Keynesian, too. The experience of past few years, above all, the spectacular failure of austerity policies in Europe, has been a dramatic demonstration of Keynes’s basic point: slashing spending in a depressed economy depresses that economy further. So it’s time to stop paying attention to alleged wise men who hijacked our policy discussion and made the deficit the center of conversation. They’ve been wrong about everything, these days even financial markets are telling us, we should be focused on jobs and growth.

Getting China to Turn on Iran

Over the past decade, as United States employed increasingly robust sanctions to gradually ratchet up pressure on Iran to curb its nuclear ambitions, Washington has struggled with the question of how to elicit more cooperation from China, a major buyer of Iranian crude oil and no fan of sanctions, especially unilateral ones. On June 28, the Obama administration granted China an exemption from U.S. sanctions on the Central Bank of Iran for significantly reducing its crude-oil purchases from Islamic Republic. This suggests that one of the biggest carrots Washington can offer to China in exchange for greater support for the U.S. sanctions regimen is expanded opportunities for China’s national oil companies (NOCs) to invest in oil and natural-gas exploration and production in United States. The greater the stakes that China’s NOCs have in United States, the thinking goes, the greater the chance they will think twice about doing business in Iran. The Chinese government responded to the new U.S. sanctions signed into law by Obama on December 31, 2011, by saying Washington should not expect any cooperation from Beijing. Over past six months, officials from China’s foreign ministry have repeatedly stated that China’s energy trade with, and investment in, Iran do not violate the various United Nations Security Council resolutions on Iran and that the new U.S. sanctions would not affect China-Iran energy relations. Despite Beijing’s implication that China would continue to import oil from Iran at 2011 levels (more than 550,000 barrels a day), the main Chinese buyer of Iranian crude oil, Sinopec, responded to new U.S. sanctions by dramatically cutting its purchases from Iran by 25% in the first five months of 2012. At the end of every year, Chinese oil traders negotiate their supply contracts with National Iranian Oil Company for the following year. The commencement of their negotiations in late 2011 coincided with growing support in Washington, especially on Capitol Hill, for ratcheting up the pressure on Iran by subjecting foreign firms that do business with CBI, primary clearinghouse for Iranian oil transactions, to U.S. financial sanctions. When China’s oil traders sat down at negotiating table with their Iranian counterparts, Iran’s increasing international isolation was palpable. Sinopec pushed for lower prices and a longer credit period, while NIOC insisted on higher prices and a shorter credit period. The two companies did not sign a new contract until late March 2012 (Sinopec reportedly extracting some concessions, which have not been disclosed publicly), causing plunge in China’s crude oil imports from Iran (…..) The ability of United States to secure additional Chinese cooperation may depend in part on the scale of investments made by China’s NOCs in the United States. The more money these companies pump into the American market, the more likely they are to refrain from doing deals with Iran might jeopardize those business prospects. Consequently, creating more welcoming environment for Chinese investments just might have a geopolitical payoff in form of greater Chinese compliance with Iran sanctions. Moreover, letting China’s NOCs take lead in complying with, at least not undercutting, U.S. sanctions on Iran is politically palatable to Beijing. Chinese officials can maintain their public opposition to U.S. sanctions while avoiding increased tensions with Washington over the Iranian nuclear issue. This dual stance is attributable to the business decisions made by China’s NOCs.