Hoping to resurrect this blog

Have a bit more free time now. Stay tuned.


Happy Earth Day

Windsor Mann waxes poetic about styrophobia. Great SBTB reference.


Monday, March 24, 2008

Spain and US: Latin Partners?

The United States should explore broader cooperation with Spain in Latin America, where their companies face similar challenges.

LATIN TIES: Spain maintains close ties with countries like Mexico. Here Prime Minister Jose Luis Zapatero with Mexican President Felipe Calderon. (Photo: Government of Mexico)
TENSE MEETING: Spain's King Juan Carlos (center) and Venezuelan President Hugo Chavez (right) at the Ibero-American Summit in Chile in November. At left, the host, Chilean President Michelle Bachelet. (Photo: Iberchile)


The re-election of Spanish Prime Minister Jose Luis Rodriguez Zapatero on March 9 was noted without enthusiasm in Washington. After all, soon after his first election in 2004, Zapatero fulfilled a campaign promise when he hastily withdrew Spanish troops from Iraq, and he remains the only EU leader who has not met with President Bush. Yet despite these differences, Zapatero’s re-election may in fact provide an opportunity for renewed collaboration, so long as both Madrid and Washington put pragmatism before ideology and focus on areas where progress can actually be made.

The results of the Spanish election were close, though not unexpected. American voters might recognize the hot button issues: a slowing economy, immigration, and terrorism. The March 9 contest was a rematch of 2004, when Zapatero came from behind in the polls to defeat Popular Party leader Mariano Rajoy three days after the March 11 train bombings, which were mishandled by the ruling conservatives. This time around, the socialists were able to hold on despite a burst in the housing bubble that has led to increased unemployment and a ten-year high in inflation, and Zapatero has already announced a program to juice the economy going forward.

The question for the United States is, where do we go from here? Yes, there is residual bad blood over the fact that Zapatero failed to stand as the American flag passed by during Columbus Day commemorations in 2003, and the uncoordinated manner in which Spanish troops were withdrawn from Iraq. In addition, Spain has recently taken steps to increase engagement with Cuba, a policy at odds with the United States embargo as the baton has been passed from Fidel to Raul Castro. These are important and emotionally-charged issues.

Yet despite this diplomatic overhang, there are many areas where the United States and Spain are partners, including the war on terror given the fact that the United States actively maintains two military bases in Spain, including one which serves as the main transit point between the United States and Iraq and Afghanistan. On trade and investment, Spanish investment in the U.S. renewable energy sector is soaring: Spanish companies own the largest solar and wind power plants in the world, both located in the United States. Spanish financial, tourism, and telecommunications service providers are also aggressively moving into the U.S. market, focusing in particular on the growing Hispanic market here.

Moreover, both countries have invested heavily in Latin America. Spanish and American firms face similar challenges in the region in terms of the rule of law, corruption, tax policies, and education levels, to name but a few. Together, our nations should work to improve Latin America’s competitiveness and standing in the global economy. One specific way could be by establishing an expectation for corporate social responsibility which would encourage participation in such activities by Latin American corporate entities themselves. Energy and climate change is another area ripe for exploration, and cooperation between the United States and Spain would provide an anchor for Latin America in both North America and Europe in addressing these critical issues together.

We should also explore broader cooperation in Latin America. After all, it was an exasperated King Juan Carlos who, speaking for most if not all of the leaders present, harshly rebuked Venezuela’s Hugo Chávez during the 2007 Ibero-American Summit. His “Por que no te callas” (Why don’t you shut up?) instantly became a leading candidate for inclusion in the Spanish language equivalent of Bartlett’s quotations. And with the recent revelations of Chavez’ funding for the vicious FARC guerrillas in Colombia, Spain and the United States should consider standing together to support democracy in the Andes by establishing, with other willing regional partners, a contact group for Venezuela that would begin to forge a path toward mitigating the worst tendencies of the Venezuelan regime.

If the United States and Spain focus on those areas that potentially unite us rather than divide us, we will be best able to address the issues that are most in our self-interest. The one certainty about the Spanish elections is that Prime Minister Zapatero will now have the opportunity to work with a new U.S. president next year. But there’s no compelling reason why we should choose to wait that long.

Eric Farnsworth is vice president of the Council of the Americas. Christian Gomez, Jr. is program assistant for democratic governance at the Inter-American Dialogue. Both are in Washington. They wrote this column for Latin Business Chronicle.

© Copyright Latin Business Chronicle


Venezuela, Mexico Need to Reform State Oil Companies

By Marifeli Pérez-Stable and Christian Gómez

WASHINGTON , DC—On January 3, crude oil futures broke $100 a barrel for the first time ever. While prices have cooled since then, falling below $90 a barrel on January 16, worldwide demand for oil shows no signs of abating. Although high oil prices have led to soaring government revenues for the main oil-producing countries in Latin America, continued high prices will affect each country differently. The main factor is the behavior of national oil companies.

Mexico will not stand to take advantage of the boom in oil prices. Increased oil revenues, which represent 35 percent of public spending, helped Mexico grow 3.5 percent in 2007, the highest rate since 1989. Nevertheless, Pemex, the state oil monopoly, is in dire financial and technological straits. Production is declining and may have already peaked, due to a lack of investment and exploration. Some analysts predict that Mexico might become a net oil importer in 10 years. Opening up the oil sector to foreign companies requires a change in the Constitution—a daunting political fight on the immediate horizon for President Felipe Calderon.

Despite claims to the contrary, Venezuela's PDVSA has also seen a fall in output. On January 7, El Universal reported that in 2007 oil production was 680,000 barrels per day (bpd) lower than the goal set by PDVSA's 2012 strategic plan, and 430,000 bpd lower than the 2007 national budget estimate. High oil prices have fueled President Hugo Chavez's domestic and international spending sprees, but increased spending will become unsustainable should prices fall, as no significant new oil reserves have been discovered. The likelihood of such discoveries has declined as Chavez has nationalized projects owned by foreign oil companies. While increased oil revenues led to 8.4 percent growth last year, inflation was 22.5 percent, the highest in the region.

Pemex and PDVSA might serve to learn from Brazil's Petrobras, which recently set a daily production record of just over 2 million barrels. Two reasons explain Petrobras' higher oil output. In 1997, Petrobras opened exploration and production to competition from outside companies. Since 2000, it has sold shares in the New York and Sao Paulo stock markets. Today, about 60 percent of total equity belongs to outside shareholders. The company has developed technological expertise in deepwater drilling. The Tupi deepwater field, discovered in November, is estimated to hold between five and eight billion barrels, representing the world's biggest oil find in the last eight years.

On January 14, Calderon, Chavez, and Brazilian President Luiz Inacio Lula da Silva met in Guatemala City at the inauguration of Guatemalan President Alvaro Colom. "One day, oil is going to run out," said Chavez. "We were talking ... looking for a way to become partners, to form an alliance ... to create new ways of cooperating to increase reserves." Chavez's moment of prescience aside, cooperation will not be enough to weather a potential fiscal crisis—with implications for the regional economy—should prices fall without needed reforms in Mexico and Venezuela.

Marifeli Pérez-Stable is Vice President for Democratic Governance at the Inter-American Dialogue. Christian Gómez is a Program Assistant at the Dialogue.


Monday's News

  1. Aiming for a New Pittsburgh, and Falling Short – New York Times
  2. Noriega To Ask Judge to Block Extradition – Miami Herald
  3. Fireworks Mark Castro’s 81st Birthday – Miami Herald
  4. Medical Tourism Will Be the Next Big Latin American Boom (Oppenheimer) – Miami Herald
  5. Mexico City’s Princess and the Paupers – LA Times
  6. Latin America Agenda – Financial Times
  7. Chavez Deepens Petrocaribe Oil Pledges – AP
  8. ‘Stolen’ Guatemalan Children Found – BBC
  9. The Free-Trade Divide (Broder) – Washington Post


Friday's News

Government prosecutors are seeking to close the Congonhas airport in Sao Paulo. New York Times

Cristina Fernandez de Kirchner announced her presidential bid. McLatchy

Fernandez announced that she would continue the economic policies of her husband’s government were she to be elected president. Financial Times

Bolivia signed a deal for the largest foreign investment ever in the country, a $2.1 billion deal with Indian company Jindal Steel and Power. Financial Times

Fidel Castro is visible, but Raul Castro is still firmly in control of Cuba. Financial Times

El Nuevo Herald speculates whether Venevisión owner Gustavo Cisneros and Venzeulan president Hugo Chavez cut a deal back in 2004. El Nuevo Herald


Monday's News

Sergio Fajardo has revitalized Medellin as mayor through various construction projects and increase in funding for education. New York Times

Corruption cases have been prosecuted in Brazil, whereas in the past they may have been swept under the rug. Washington Post

Forty percent of the economy of Opopeo, Mexico is supported by remittances. Miami Herald

Community councils in Venezuela are part of president Hugo Chavez’s 21st century socialism. Miami Herald

Andres Oppenheimer argues that a higher ranking Spanish official should have met with Cuba’s dissidents during a Spanish delegation visit in April. Miami Herald

Santo Domingo’s poorest residents are fighting to save the city’s trees. LA Times

Bolivian president Evo Morales aims to increase legal industrial production of coca products while eliminating illegal cocaine production. LA Times

Panama’s vice president Samuel Lewis called for the US to ratify the FTA with Panama. Financial Times

Brazil has requested the extradition of Russian Boris Berezovsky for money laundering; Argentina continues to face energy shortages; RCTV is back in Venezuela on satellite; and further tapes have been revealed in Ecuador’s “secret videos” scandal. FT Latin American Agenda

Jose Maria Aznar argues for the ratification of the US-Colombia FTA. Wall Street Journal

Fidel Castro writes in an essay that the US allows terrorist attacks to happen on its own soil. AP

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