Martin Redrado was always an economist of great interest. In his first weeks in office I was lucky enough to see Mr. Redrado give a talk at the LSE on the many economic struggles faced by Argentina and Argentina’s central bank since 2001. A few key points were made at the beginning of his term as the governor of the bank. In good humour, he apologised for the chaos of previous bank policies and made the point that the bank had to claim some responsibility for failed policies of the past in order to be successful in the future. He also made it clear that slow growth and the de-politicisation of the bank is a crucial part of regaining Argentina’s stability and re-entrance into the global economy as a competitive nation. His last major point was that the models and transparency of the bank has to be beyond clear to investors in order to normalize the economy of South America’s second largest economic power.

Despite many years of modest surpluses in Argentina, the default in 2001 still has the effect of limiting access to international capital markets for Argentina. The fact that international investors do not have much faith in Argentina’s investment climate, and bondholders since 2005 refused to accept Argentina’s debt restructuring leaves President Kirchner limited avenues for finding extra revenues. While post 2002 resulted in Nestor and Cristina Kirchner being the only ones who wished to tackle Argentina’s debt crisis after a series of failed presidencies due to the collapse of the Peso. Despite economic gains post 2003 until the 2008 crisis, recent years and pressures have matted out the shine of their positive achievements. Battles with the opposition in Congress have left Kirchner with fewer options, as the opposition gained a majority in Congress last summer and economic troubles to the north have set not only Argentina, but all economies on a voyage to find extra funding. In an unwise and perhaps desperate move, Kirchner chose to challenge the one Che in power who has economic stability in mind, that of Central Bank governor Martin Redrado.

Today, Redrado has survived his ousting as bank governor by President Cristina Kirchner via a legal challenge last Friday. The Executive wished to transfer $6.6 billion of Argentina’s foreign currency reserves to service public debt, but with the Central Bank being legally independent from the Executive branch, Congressional support is needed in order to authorize the transfer of funds. Therefore when Redrado asked to study his legal options in the matter of a transfer issued by President Kirchner, Kirchner sought to remove him from his position. Legal quarrels however forced Kirchner to keep Redrado as governor as a judge in Argentina re-clarified his independent legal position as Central Bank governor where he remains today. Kirchner insists that opposition leaders in Congress seek to block the Presidency from addressing issues of national debt, but with the legal ruling restricting her and Redrado’s staunch statements claiming himself as a professional economist and not a politician, he might be the only one limiting small yet significant run on the Argentine Peso in this current political skirmish since the failures of 2001. A likely conclusion will be a compromise, where Kirchner calls in favours and taxes on other parts of the economy, with whatever is left, and Redrado gives her some reserves, albeit with a measured amount to maintain Argentina’s economic reputation and of course in a polite manner.

While Redrado fights to keep Argentina’s economy out of the negative spotlight, Venezuela’s economy has made world headlines with the devaluation of the Bolivar, Venezuela’s currency. Venezuela and Argentina often lead a fight in the region for Latin America’s highest inflation rate, while being two very different economies. Venezuela’s devaluation comes from several different factors, but the largest rationale for the move is in order to gain added revenues from Venezuela’s lucrative oil exports. Oil in Venezuela has become very much a part of the reserves for Presidential policies, even lending funds to Argentina, mind you at a higher rate now than in the past. The devaluation will likely give Chavez more money and political clout via added spending on his projects and give him a popular boost before legislative elections take place in September. Rates on essential food and medicine imports being set at a lower rate than non-essential goods is also part of the new exchange rate, officially being a two tier rate with a second higher rate being applied to imported good deemed as ‘non-essential’. A third tier rate might arise out of the black market however, as Venezuelan companies who are not favoured by the government’s social reforms will have a harder time getting US Dollars and turn to other means to keep afloat. With Venezuelans running out to buy consumer goods before the new exchange rates take effect, and security forces being ordered to enforce against any retail price hikes on any retailers who overcharge consumers, the image of any Latin American running to the streets to spend their soon to be devalued currency is not often one that gives confidence to many investors. Despite this, the long run impression of devaluations in Venezuela is seen as political, but not wholly unjustified as Venezuela is essentially an oil economy and has to address falling oil prices in many markets. Redrado no doubt wishes to keep Argentina’s reserves out of the political fray of local politics and not turn the Peso into a currency based on one commodity or one person’s political ambitions. While Venezuela’s economic policies are validly criticised for their inherently political motivations, Argentina does not have an oil cushion to soften any economic blows, and must rely on investor confidence in its reserves and creativity by the Kirchners in order to cover their end of the year 13 billion dollar debt payment.

Every so often a story of a unique nature, crossing many different previously unrelated countries and debates arises when studying Latin America and globalisation. Colombia has now become one of the destinations for migrants who wish to go to the US, but originally coming from Africa, as opposed to from the rest of Latin America. Many issues involving African migrants relate to threatened Somalis going to Yemen and Saudi Arabia as well as economic migrants coming into Europe, in both cases via make shift boats or via smugglers that overload otherwise structurally sound smaller boats. The debate surrounding African migrants has dominated migration and human rights issues in both regions. The issue of legal rights and security for African migrants has become one of the most difficult policy concerns to address for many in the Middle East and Europe. Detailed accounts of lives being lost at sea, and refugees being returned to Africa has constantly headlined papers in Spain, Italy, Malta, Portugal and the EU as a whole. Accounts from human rights agencies have often criticised inhumane treatment of African boat people by the government of Yemen and even EU border patrols in the Mediterranean and between the African coast and the Spanish territory of the Canary Islands. Now African migrants are showing up in the Caribbean, and it is curious to find out how and why this is occurring so far away from Africa.

Cesar Sabogal who writes for the South African publication Mail & Guardian Online published an article this past weekend on the movement of African migrants towards Colombia specifically. According to Colombia’s head of intelligence and migration service, African migrants choose Colombia as a destination in the Americas due to its access to the Caribbean Sea and Pacific Ocean and its close proximity to Central American ports to help gain access into the US. Many claim refugee status in Colombia as well, despite Colombia having one of the highest rates of internally displaced citizens in the world. Many people trafficking networks have sprung up in Colombia; in some cases being run by African’s themselves. In 2009 alone, Colombia expelled 285 African and Asian citizens, with the average African paying approximately $5000USD to be trafficked into the US. Colombian officials also pointed out that many traffickers end up working with or for drug traffickers as well, trading information on routes to access Central America and the US. While many African migrants claim refugee status in Colombia, it is difficult to know who is a refugee for human rights issues and who is an economic refugee. Most migrants who reached Colombia were from Somalia, Ethiopia, Sudan, Benin, Zimbabwe, Côte d’Ivoire and Liberia, according to the foreign ministry. Colombia also receives migrants from Asia, but most are African migrants who often come to Colombia’s port of Buenaventura.

African migrants to Latin America do not only arrive in Colombia according to Luis Andres Henao of the same publication above. In his November 2009 article, he discusses the number of Africans seeking refugee status in Argentina and Brazil. With restrictions in Europe now becoming increasingly enforced against many African asylum seekers, countries in the Americas have become a second distant options. In Brazil alone, 65% of asylum seekers originate from Africa, and in Argentina, 3000 African refugees now reside with 1000 refugees a year coming into the country from abroad, mostly from Africa. This growth trend comes with increasing security in Europe and will likely increase exponentially as trade flows from Asia and Africa grow with the Southern Cone and refugee policies remain the same in Colombia, Argentina and Brazil. A debate might arise, as immigration in North America is often seen as adding to nations already full of immigrants in addition to the same issue and the rationale in Europe as creating a young workforce to support the tax base for the large number of retired people that will become an issue in most developed countries in the near future. In Latin America however, which is a relatively young population, and the source of many émigrés to North America and Europe might see refugees from Africa as defying the cultural norms and displacing work that many locals do require. This traditional immigrant debate will be one of interest if the African and Asian refugee trend continues to the region, as Argentina, Brazil and Colombia have also had large numbers of immigrants come to their shores in the past, and have made for an intriguing cultural dynamic in Latin America.

It’s hard to resist presidential decree. Yesterday, after calling for his resignation, President Cristina Fernández de Kirchner issued a decree to remove the governor of Argentina’s Central Bank, Martín Redrado, from his post. The impasse has been brewing for some time, coming to a head this week.

Kirchner wanted Redrado to devote $6.6 billion in foreign currency reserves to paying off national debt. Meeting a $13 billion debt that comes due this year is critical to Argentina regaining access to global credit markets, which left the nation isolated after its 2001 default, the largest external default in history. Since then, the weight of default has been eased by strong economic growth, particularly from 2003-2007, and large loans offered to Argentina by Hugo Chavez. Now growth is flagging, and the interest rate on Mr. Chavez’s loans exceeds 10%.

Tax hikes or entitlement cuts are the more orthodox tools under such circumstances. These appear a bit too sour to the political palette of the president, who told reporters “It was not Redrado who gathered the reserves, it was the government.” True enough, but sacking Redrado and raiding foreign reserves is bound to spark a short-term backlash. A sell-off of the peso seems inevitable. Mark Mobius, executive chairman of Templeton Asset Management, said investors should “generally” avoid Argentina.

More troubling are the medium-to-long-term implications. The independence of central banks throughout the region is critical to economic stability. Should the banks (once again) become the handmaiden of populist politicians the beast of inflation may return—already Argentina has Latin America’s second-highest rate of inflation, eclipsed by Venezuela.

The twilight of 2009 gave cause to celebrate for gay rights activists in Latin America. Same-sex marriage was legalized in Mexico City ten days ago to campaigners’ chants of “yes we can.” In a separate motion the city assembly also sanctioned adoption by gay couples. Then, in Ushuaia, Argentina’s southernmost city, Alex Freyer and José María di Bello exchanged vowels, becoming the first gay couple to marry in Latin America.

Alex and José’s story was poignantly covered on PRI’s The World, and bears repeating. Each man is a noted human rights campaigner, and each is HIV-positive. Their battle to be married was meant not only as “a romantic proposal” but a “political proposal” too, according to Alex. After originally being told “no” when they applied for a marriage license in the Argentine capital, the men sued, claiming violation of their constitutional rights. A judge ruled in their favor. The couple was originally slated for a Buenos Aires wedding on December 1, but a higher-level court nixed the ceremony at the last minute. Their dream was finally realized on December 28.

Should Argentina legalize same-sex marriage, Uruguay, which became the first nation in the region to legalize same-sex civil unions in 2007 and adoption by gay couples in September, would likely follow suit. Chile probably wouldn’t be far behind. Alex thinks Buenos Aires could start it all: “We win this round…Now the rainbow is here. You know when we say ‘Somewhere over the rainbow.’ It’s here! It’s in Buenos Aires.” By the end of 2010 the Southern Cone could form a rainbow row of countries that permit same-sex couples to marry, and possibly adopt.

Activists are hoping that just such a domino effect will transform the region. Editorial pages in Chile asked when that nation would approve gay marriage. Amidst the tumult of Alex and José’s fight, on December 23 ten same-sex couples in Rosario, Argentina, filed legal motions demanding the right to marry. Unfortunately for likeminded same-sex partners in Argentina, the December 28 ceremony does not set legal precedent—the state governor issued the couple a special decree.

Constitutions and the Catholic Church pose significant barriers to a watershed of same-sex marriages in the region. In Mexico, social liberalization in the capital has, so far, engendered sweeping conservative backlash. Take abortion. In 2007, Mexico City moved to allow elective abortion. The past two years have seen a slew of abortion bans, spanning 17 of 32 Mexican states, many of which are more punitive to women than pre-existing prohibitions. Now a nationwide abortion ban is in the offing. That’s because amendments to the Mexican Constitution can be proposed by individual states. If an amendment passes Congress, support by a simple majority of states will make it law. Armando Martínez, head of Mexico’s Catholic Lawyers College, forecasts a similar pushback “because Mexican culture is not ready for these things and they [the city assembly] can release a level homophobia that no one will be able to stop.” Mexico City taking a step forward in ’09 could mean Mexico taking two steps back this year, or next.

Legal options offer more hope in Argentina—civil unions have been permitted in Buenos Aires since 2002—but mores are much the same as in Mexico, and elsewhere.

And the issue of adoption by gay couples remains prickly. While the news of Mexico City’s legalization was met with the predictable array of hysteria and ho-hums, public opinion in Mexico seems decidedly opposed to adoption by gay couples. The comment page of Mexico City’s leading daily, El Universal, registered over 1,000 entries for its story on same-sex marriage and adoption, most vociferously opposed to the adoption measure. Isaac Villa, a 35-year-old taxi driver in the capital told TIME, “If two men want to be together, that is their decision. But adopting children is a different story.” Another resident said, “Children growing up in a gay marriage would be traumatized.”

In my view, activists must hone their political tactics. The headlong charge for marriage, and adoption, is likely to disaffect droves. Latin America is (nominally, at least) the most religious region on earth; most nations are 90% Roman Catholic, and the silent majority remains conservative on social issues. Acceptance of homosexuality is increasing in the region—according to Latinobarómetro, those who would not like to have homosexuals as neighbors has dropped from 59% in 1995 to 29% in 2009—but only from a very high level of homophobia. Despite evidence of increasing social tolerance, the Catholic Church still exerts huge sway.

Civil unions can offer the meat and potatoes of the m-word while treading lightly on the hollowed ground associated with it. Recognizing this, activists should seek to extend the rights of civil unions enjoyed in certain cities nationwide. Doing so would also lay the legal foundation for more progressive legal challenges. This incremental view is bound to annoy, but is an important and meaningful half step.

Latin America is unlikely to host a rainbow row in the near term. Perhaps we are witnessing a chasm emerge between the more progressive capitals—Bogotá, Buenos Aires, Mexico City—and the flinty heartlands. Regardless, one thing seems certain: as empowered activists face off against the vanguard of traditional values, there is sure to be a major row over the rainbow.

Around the world the way to deal with the aftermath of past violence and police states has yet to come to a definitive closure or method to resolve crimes of the past. Often the ruling class in one era of a society remains in the next era, whether it be a peaceful one or a continuation of state rule. Whether it be in Rwanda and Kosovo in the last few years or currently in places like Iran and North Korea, the dialogue on the past and search for resolution starts with those who have been affected personally, and often leads to at best a national dialogue on the issues of former rulers and regimes. Much of this opening of society started in the 1980s after the fall of police states in Chile and Argentina and has formed the framework for dealing with such atrocities worldwide. Documented cases of those missing have only been produced quite recently, as writers, journalists, lawyers, and activists make public crimes of the past.

On PBS next Monday Director Juan Mandelbaum brings his personal experience growing up in Argentina during the military junta to American networks. Information about the airing of the documentary is listed below:

OUR DISAPPEARED/NUESTROS DESAPARECIDOS is the heart-breaking chronicle of director Juan Mandelbaum’s personal search for the souls of friends and loved ones, idealistic young students and activists, who were caught in the brutal vise of the right-wing military and “disappeared” in his native Argentina during the 1976-1983 military dictatorship. OUR DISAPPEARED/NUESTROS DESAPARECIDOS will air nationally on the Emmy Award-winning PBS series Independent Lens, hosted by Terrence Howard, on Monday, September 21, 2009 at 10PM (check local listings.)

While this blog often addresses issues between nations and between power brokers on many of these nations, it is crucial to view political views from the perspective of those individuals who have suffered personal trials within the context of a larger political events or crisis. I encourage everyone to try to watch the documentary if living in the US or having access to a PBS station. If information for those you living outside to US is made available in accessing the film, I will post further information about dates or viewing times on this blog.

Please tune in!

The last month of economic news has been as diverse as the last 10 months of the same forecasts. With the start of July, the drop in recent markets worldwide and predictions of further problems in large economies such as the UK and Japan set to bring the recession further attention, but by mid month the result was that some US banks were making some profits, even paying back small sums of money to Mr. Obama and some auto manufacturers were not destined to be completely eliminated as stability slowly crept back into market forecasts. While these announcements will likely change in the next few weeks as SME’s continue to wind up their companies, the biggest market change seems to be coming from China and India. While many believe that only 8% growth in China may be the limit in order to stave off mass discontent among its population, growth rates of 5% or more in places like India, and lower yet stable rates in Brazil draw attention to hopes of an economic recovery coming from the recently famous super emerging economies of the BRICs. Of great interest and increasing popularity, Brazil, who has managed to maintain a stable growth rate in their economy since the 1990’s global economic troubles between 3-5% and was able to reasonably shield itself from the meltdown of Argentina’s economy in 2001. Brazil is beginning to change into the next large emerging market economy in form and function. The recent recession has taken the new Brazil and brought its relative successes in the last few months into the meeting rooms and policy branches of those economies who wish to change the relationship between North America and Europe towards South America’s largest and most promising economy.

In the Americas there are two large economies outside of the United States that while being hit hard by the recession, have managed to keep the core financial and economic systems of their countries in good shape. Canada and Brazil have stood out as two of the largest stable economies in the Americas and worldwide. With banking systems that have not collapsed and reserves of cash from past years of growth shielding some of the effects of the global economic crisis, both countries could begin to push the Americas and world economy back into positive territory. Limits to BRICs and other relatively healthy economies may be restricted formally and informally however depending on how the EU and US decide to react to other large economies worldwide. Effects on countries such as Canada and Brazil might be produced by restrictions coming from the new Buy America provisions in the US or as an example, be expanded by talks of a possible EU-Canada Free Trade Agreement. Limiting trade between NAFTA partners in North America and retracting from agreements between the US and trade partners in the Americas is what all trading partners of the US fear in the region as well as globally.

Many experts on global economics such as Zakaria and Khanna see the US as possessing a major role in the future world economy, but also one of shared influence and regional power as a necessity. Limits to expanding the economies of the Americas in a united fashion is seen in the lack of interest in regional trade agreements and the lack of support for trade agreements as with the one with the US and Colombia. While the US seeks to put pressure on its economic allies during the recession, the EU is seeking increased open trade with large economies such as Canada, India and China, and China is seeking many economic ties with countries such as Peru, Chile, Venezuela, Argentina and of course Brazil. Even Canada has ratified a trade agreement between itself and Chile, Colombia, Costa Rica and is working on agreements with CARICOM. Effects from Buy America might better regarded as the Buyer Beware provisions, as the US creates a policy environment to push its allies to trade with other economies outside of the Americas and produce economic legacies outside of the US which will strangle future growth of private industry in the US itself. As with any investor, the prospect of future governmental and trade restrictions by doing business with a US company or investor will produce negative incentives in the long run. With so few healthy investors currently, economic legacies such as Ford, Disney, Coca-Cola and McDonalds may be replaced by those created and grown in other healthy economies outside the US and the Americas…bad economic policy is simply a caveat emptor of economic growth.

Not all US policy experts agree with Buy America, and some even have been making attempts to approach Brazil as the next India or China. Mind month, the publication and discussion of the new book: Brazil as an Economic Superpower? Understanding Brazil’s Changing Role in the Global Economy was accompanied in Washington DC by a discussion of Brazil as a rising global economic power. This book launch and discussion followed the Brooking Institutions release of interesting economic data and reports on the region as a whole. Many of these discussions focus or Brazil or Latin America as the next China or India, but in reality the Latin American method or growth and that of growth in China, India and Russia only bare some basic similarities. Latin America and Brazil have traditionally depended on commodity prices principally. While the Brazilian economy is fairly diversified, a large portion of its GDP does come from commodity and oil prices, which is similar to a country like Canada who have a great deal of GDP linked to natural resources. Manufacturing in all economies, including Canada, Brazil, China and India have been greatly affected, leaving China with a growth rate of 6.1% in the first quarter of 2009. While oil prices and other commodity prices have bounced back and forth since 2008, manufacturing has taken severe hits in all nations. China and to a certain degree, India, depend greatly on the demand in foreign markets on US and global consumer spending. Entrepreneurial Organisations such as the SBA.org in the US and CFIB in Canada would be able to make the point that many of the jobs in the US and North America depend on SME’s, and with the increase in bankruptcies and the lack of business loans coming from banks in any financial state, the job loss will only increase and create a further decline in consumer spending. Manufacturing depends on its consumers being able to purchase its good and grow the economy. China, who produces many of these good in the US and EU are entirely dependent on these economies as their growth is directly linked to US and EU consumers. Brazil, while dependent on consumer spending has less than 40% of its trade with the US and is balanced by heavy industry, commodities and technology industries. While many of these sectors are hurt by the recession, it gives Brazil some added security in the long term within the global economy.

The news on recent increases in growth in China and India are positive, but with many consumers losing jobs recently and many smaller industries only failing in recent weeks, it is hard to predict a concrete economic demand for consumer products and link growth in China to the markets it depends on. In reality, many smaller and larger US firms often depended on cheap operating loans from US banks, and without not only financially stable banks, but banks willing to give out loans to investors, it is impossible to justify any prediction of growth in consumer spending when SME’s are neglected from economic recovery and are the last to receive financial aid in the economic crisis, yet provide the majority of jobs in many developed countries. Countries like Brazil and Canada should be considered a relatively strong option for investors, as historically and logically growth seems more likely for all levels of industry in few similar countries in the long run and the avoidance of economic bubbles have been relatively successful in the past.

An interesting piece I encourage you all to read:
Latin America and the Economic Crisis: Designing and Implementing Stimulus Policies
Mauricio Cárdenas, Director, Latin America Initiative
The Brooking Institution

June 25, 2009 —
Dani Rodrik recently wrote in his daily blog that Andrés Velasco is the living example that sound macroeconomic policies have a high dividend. Chile’s decisive fiscal stimulus package—adopted last January—has made him President Bachelet’s most popular minister. Not too long ago, during the years of high copper prices, many Chileans questioned their government’s economic management for saving too much and postponing key investments. Of course, those critics are silent now. Events are showing that a commitment to rules that focus on long run objectives, rather that immediate gratification, pays-off.

But rather than talking about Chile, I would like to make a more general point regarding Latin America. Today’s conventional wisdom –and I say this in complete awareness that ministers generally adhere to, and oftentimes shape, mainstream views—is that stimulus packages are working and that Latin America will soon be out of the recession. In Brazil, for example, most analysts consider that the contraction is a thing of the past. I want to take issue with those views.

Let me start by stating what, in my view, is the conventional wisdom:

The adoption of sound macroeconomic frameworks, mostly since the late 1990s, allowed Latin America to bring down inflation and public debt. Foreign reserves are high for historical standards, reflecting stronger current accounts and access to external capital. As a result, Latin America is coping with this crisis much better than a decade ago. In fact, there has been no crisis, just a mild recession.

Key to the current episode has been the ability to conduct countercyclical monetary and fiscal policies. In the current phase of the cycle, policy rates set by the central banks have been cut to 0.75% in Chile (a reduction of 7.5 percentage points), 4% in Peru, 4.5% in Colombia, 4.75% in Mexico, and 9.25% in Brazil.

Fiscal stimulus has also been the norm, although the size and composition of packages has also varied from country to country. The largest expansions have taken place in Chile (2.5% of GDP), Brazil, Peru, and Mexico.

Macro-financial variables have shown remarkable stability. In 2009, inflation has been falling, exchange rates have appreciated, stock prices have increased, and spreads on sovereign debt are falling.

Even though production and employment figures are still declining –and GDP growth projections are being revised downwards– virtually all forecasts suggest that the recovery will start soon. The latest Global Development Finance Report from the World Bank (the less optimistic of the existing “official” reports) projects major rebounds in all economies. The difference between the 2010 and the 2009 GDP growth forecasts is 5 percentage points for the world economy. The corresponding figure is 5.4 percentage points for the OECD countries, and 4.2 percentage points for Latin America. The expected rebound is spectacular for Mexico (7.5 percentage points).

I think this view errs on the side of optimism. Latin America should hope for the best but prepare for the worst. By not properly considering the risks ahead, governments have the temptation of exhausting the policy tools and not reserving any ammunition for battles that are foreseeable. My critique of the conventional wisdom is based on the following four points:

The numbers on real activity and aggregate demand conditions which are coming out from Latin America are not that encouraging

Although it is true that retail sales in Brazil increased 6.9% in April (relative to a year before), industrial production registered a 14.8% contraction in May. In Mexico, where GDP contracted by 8.2% in the first quarter, industrial production fell 13.2% in April, and consumer confidence continued to fall in May. The Chilean economic activity contracted 4.6% in April and industrial production fell by 11.1%. The figures for other countries show a similar picture: Latin American economies are experiencing a deep contraction, and the evidence does not suggest a significant recovery underway.

Of course, all this could change with a big rebound in the second semester. But, is that realistic? The contraction in investment has been in the double digits during the first months of this year for the majority of countries in the region, and will have an impact on future growth. More importantly, investor and consumer confidence measures are very low and still falling in the majority of Latin American countries. We know from past episodes that it takes time –and a good amount of positive economic news– to reverse the direction of these perceptions, especially the consumer’s sentiment.

Latin America is betting on the rebound of commodity prices

China’s real GDP growth slowed to 6.1% during the first quarter of this year. Although several measures of real activity and domestic demand have been improving lately (investment grew by 32.9% in five months to May), exports continue to deteriorate. Chinese exports contracted by 26.4% in May, suggesting that there is excess capacity. To the extent that exports do not recover, investment will loose momentum as well as commodity imports, which have increased for stockpiling purposes. These are very negative news because they suggest that the surge in commodity prices will not last. Why commodities moved ahead of the fundamentals is not clear, but Latin America should be prepared to deal with prices which are more in line with lower Chinese import demand in future months.

Private capital flows are shrinking at an alarming pace

The World Bank projects that net private debt and equity flows to developing countries will decline from 8.6% of global GDP in 2007 to 2.0% in 2009. This is much worse than in the debt crisis of the 1980s or the Asian and Russian crises combined. Many in Latin America argue that the region is somehow immune to this trend, mainly because of the role that foreign direct investment plays in the region. This could be true, but at the same time, the evidence available suggests that FDI flows depend largely on growth in the OECD countries. With the major contractions expected in the U.S., Europe and Japan, FDI flows will fall in the medium term. The latest IMF data suggests that this is already happening. The investment projects under way are likely to be completed, but starting new investments is a different game. The recent drop in the cross-border M&A activity is a strong signal in this direction.

For the emerging and developing countries as a whole, private debt and equity flows will likely fall short of meeting external financing needs. The question is how much of the shortfall will affect Latin America. Some countries are better prepared than others. Countries with large current account deficits, strong dependence on tourism and remittances, and limited access to private debt and equity flows will suffer considerably. This of course, points in the direction of Central America and the Caribbean, where a sharp adjustment seems inevitable.

In the largest countries, with access to international markets, much will depend on the ability of private firms to roll over their debt. There are hundreds of corporations in these countries that borrowed in the international syndicated loan market and some that issued international bonds during the last few years. They hold the majority of the outstanding short term external debt as well as the medium to long term obligations coming due in 2009. Financing the public sector is not the problem; the real issue is how to refinance the large Latin American corporations.

The prospects in this regard are not all that encouraging. The supply of credit to the region could fall even further because there are mounting pressures on the capital position of the major banks. Liquidity problems in the global interbank market remain an obstacle for banks to fund additional assets, while tightening of credit standards has been generalized. Last but not least, government ownership (even if temporary and partial) of the large banks changes the priorities in the direction of domestic recovery in the developed world, rather than greater credit risk exposure in emerging countries.

There is no ammunition left

The capacity of central banks to cut interest rates and of governments to provide more fiscal stimulus is very limited. Even in Chile, there is discussion that the fiscal deficit is already too high and that the government should bring it down again next year. The Mexican central bank has said that further cuts in interest rates are not likely, in line with the language other monetary authorities have used recently. In other words, fiscal and monetary policies do not have many degrees of freedom. If the world economy does not recover soon and private capital flows to Latin America remain low, there is not much that Latin American countries can do. Even worse, it is possible that some of the expansionary policies of the recent months will need to be reversed. This is already part of the debate in countries like Mexico, where the government may need a tax increase to cut the fiscal deficit in 2010.

In summary

In summary, Latin American governments and multilateral banks are betting excessively on a sharp economic recovery. For their projections to be right, a major recovery should be already underway. The latest figures, however, do not support that view. Even if the U.S. shows a moderate V- shaped recovery in the next two quarters, China’s imports, commodity prices, and private capital flows could still be the source of very unpleasant news for the region.

This weekend leaders from across the Americas have made their way to Trinidad and Tobago for the fifth meeting of the Summit of the Americas to discuss the future relations between nations in North and South America, the Caribbean and between others interest groups in the region. The Summit is often the centerpiece for inter-governmental discussions and policy formations between nations in the region. The last few Summits have been dominated by the formation of multilateral and bilateral trade discussions, albeit with slowly dwindling support for the FTAA since the Quebec City Summit in 2001, the Summit of the Americas has moved away from discussions of a multilateral agreements into the shiny and new 2009 Summit which seeks to patch up open ended policy debates in the region, address security issues and produce some form of future dialogue between the US and states which formally have had rough relations with the Americans in the past. The best evidence of this new Summit approach is the move by the Obama administration to open a dialogue with Fidel and Raul Castro which has been reciprocated this week, make open discussions of how the US and Mexico can claim their part in the drug war, create and new open-hand diplomacy towards Venezuela and Bolivia and have increased trade with traditional allies in the hemisphere. Below I will discuss the possibility of some future developments between the US, its neighbours in the hemisphere and relations between other members and internal struggles within some countries in the Americas.

This week saw an attempt on the life of Bolivian President Evo Morales. I was able to see a live discussion with President Morales via webfeed on the Summit Website earlier on Saturday which was quite impressive and needed to be noted. Bolivia has gone through a great deal of policy changes with Morales. As one of the first indigenous leaders in Latin America, Morales has shifted much of his policy into poverty reduction strategies and through popular support, and adjustment in the power structure in his country. With a recent protest to withhold eating until anti-poverty measures and land reform issues were passed through into policy by the Bolivian Parliament and a very recent attempt on his life, there is no doubt of his commitment to changing Bolivia. Support for Morales will likely remain due to his popularly with many poorer indigenous communities that give him a large support base politically. A possible opening of relations with Bolivia’s allies in Venezuela and Cuba with the United States may change the situation greatly. In most cases Morales will be there until he is unable to satisfy the popular elements in society or so greatly alienates what he refers to as the oligarchs in society that he is unable to withdraw from protests. Bolivia will likely follow the natural course of populists in the region, albeit hopefully without violence becoming an end result.

A possibly historic move by President Obama during the Summit might be a sign of thawing relations, as Barak Obama made his way to shake the hand of Hugo Chavez in an act of good will. While Chavez was criticized in US media recently for claiming that Obama needed to study up on Latin America, Obama’s active move towards open-hand diplomacy was met by a friendly response. Obama was even given a book about the history of Latin America by Chavez, but in maintaining his position Chavez handed Obama a book which some call an academic work which compiles a drastic account of state-to-state oppression by the US in Latin America. Despite slight posturing, an opening of a dialogue has already resulted in Venezuela re-instating its Ambassador to Washington and might result in some added passive economic ties between Venezuela and the US that builds on already existing trade in many markets between the two nations. The larger effect of Obama’s move to open dialogue further with Chavez likely comes from his very open and quick moves to re-initiate ties with Cuba. Although Cuba was ejected from the OAS in the early 1960s, thus did not have a formal representative at the Summit, Obama made it clear that a lifting of the travel restrictions on Cuba would be a priority as well as talks with Cuba’s leading family which were accepted by Castro before the Summit commenced. A discussion of this further by FPA’s Great Decisions program can be seen on a video titled The Latin American Left. Click here to see the video link.

Before the Summit, Obama went to Mexico to show his support for and claim some responsibility for the drug war now taking place in Mexico. Many in the US and Mexico believe that in order to conquer the drug cartels in Mexico itself, a concerted effort must be coordinated between the source of the narcotics in Mexico, and the source of weapons and main market for drugs in the US, and even the market in Canada where Canada’s Olympic city has been enveloped by a mini-drug war itself. In addition, Obama’s stop in Mexico City before the Summit brought Mexico into a similar light with the issues surrounding Cuba. The United States closest Latin American neighbors for the first time in two generations are finally being properly re-engaged, which sends a message to the rest of the region and creates a new energy for the Summit that shows the US as an open-hand to discussions in the region after many years of neglecting US-Latin American Relations. In his speeches, Obama sought to claim responsibility for US actions in the region in an attempt to clean old wounds between neighbours. He also stated that despite US actions in the region, it also must not become a scapegoat for all problems in the Americas. To see an article and video by the FPA writer Marco Vicenzino on Obama and Latin America, please click here.

The US policy towards Latin America has often been linked to free trade, and while the issues of trade and protectionism might not have been in the spotlight this weekend, America’s closest allies in the Americas have not forgotten the importance of this relationship. Economic powerhouses in the Americas such as Argentina and Brazil have been battling through the latest economic crisis but seek to open further trade ties with the US and other investors. China’s role in investment in Argentina and Brazil and other Latin American markets have started to rival those coming from the US, World Bank, IMF and IADB in levels of investment, albeit with more favorable lending conditions. Canada, the United States’ largest trading partner in the region sought to assist the US in opening relations with Cuba, to which Canada has always maintained, but hoped to keep the issue of trade protectionism in the focus of the Summit leaders as both developed and developing nations in the Americas would be greatly hurt if trade was sacrificed in the process of reinvigorating the economy in the Americas. A $4 billion cash infusion was also promised by Canada to the IADB during the Summit and moves towards a CARICOM-Canada FTA. An opening between the US and Cuba was seen as a positive for Canada as well, as support for trade between all three countries is seen as a benefit from US investment.

The greatest concern for many worried about trade protectionism in the melee of new policies and ideas at the Summit is what to do about trade and countries such as Colombia, who is the United States’ strongest ally in South America, but is being battered by interest groups in the US and opposition in Canada for the extension of Free Trade between the US, Canada and Colombia due to human rights abuses against labour leaders in Colombia. Opposition to a Colombian FTA is so great that it is doubtful that a minority government in Canada will be able to ratify it, and despite the US having strong trade ties with China and an opening with Cuba who also have numerous human rights violations, a Colombian FTA has been placed in a holding pattern of policy formation in the US Congress. Perspective must be taken into serious consideration, as the US often cannot justify trading with some partners, and penalizing others such as Cuba for human rights offences. Colombia is a success story against the drug war in the Americas, and opening a stronger economy between Colombia and North America, while pressuring for increased human rights in the process is the only way the United States and re-establishes itself in its own backyard. This statement justifying an opening of relations with Cuba cannot stop at Cuba and the US trade relationship with China.

At the end of the 5th Summit of the Americas, success will only come with a strong arm extending towards an open-hand of diplomacy in the Americas. Obama’s policy towards countries with human rights abuses must be measured and moral in its development of relations that benefit the US and the Americas as a whole.

Click here to see the Reuters Video of Chavez Meeting Obama

Click here to see the Reuters Video of Obama on New Ties with Cuba

This week’s New York Times published a fascinating article about a topic that many experts on Latin America should find very intriguing. The article titled Deals Help China Expand Sway in Latin America by writers Romero and Barrionuevo was an analysis of China’s growing influence in Latin America, with examples of how Chinese liquid investment in many large projects in the Southern Cone and Andean region seek to take American influence via multilateral organisations and FDI and divide the regions investment among the US, EU, China and the rest of Asia.

Since the admitting of China to the WTO and the drastic change in global trade and manufacturing flows, China has become a benefit to some in Latin America and less of a benefit to others. The New York Times article goes into many examples of how Chinese FDI seeks to fund many large projects in the region, from a development fund in Venezuela, to a hydroelectric project in Ecuador and providing Argentina $10 billion in financial loans and Brazil’s national oil company a similar amount to ensure future projects will send a guaranteed percentage of future oil to China. Relations between the US and many of its southern neighbours often have been strained politically in places like Venezuela and Bolivia, or have been tied in with economic restrictions such as Argentina’s relationship with many international financial institutions which set high risks for investment in the country, often funded and controlled by US investment policy within those institutions. For some in Latin America, Chinese investment is not only a good alternative, but can equal the amount invested by the IMF, World Bank and the US itself as noted in the article.

Concern from American officials will likely become greater as China seeks to displace any US and European FDI and by-pass conditions set by many international institutions that often placed Latin American and other developing countries into a position of forced policy measures. Chinese investment, most notably in Sudan and other parts of Africa, Latin America and Asia are starting to become an alternative source of funds for many countries which prefer to receive investment, but do not want conditions on their local policies, namely those which affect human rights and those connected to poverty reduction strategies. A benefit to a country like Argentina, who’s loan defaults in the past has placed it in a position where poor investment ratings still linger from 8 years ago, have received Chinese investment without major sacrifices at this point. However, places like Sudan, who are responsible for one of the largest ignored genocides since Rwanda receive not only Chinese investment in developing their oil industry, but are also suspected of receiving arms which some have connected to human rights violations in Darfur. Investment without any restrictions or a moral compass was not always practised by those in the West; especially during the colonial period, but the international investment community must decide how investment should be dealt with in the future to avoid mass slaughter of innocent communities, whether it be Chinese FDI or from the West.

Investment in Latin America has often been seen in a different light, depending on the attention Latin America has been paid during various American administrations. The Summit of the Americas this weekend comes on the heels of one of those moments in history where Latin America is becoming re-engaged, at least for the first few months of the Obama Presidency until there are added problems in the Middle East once again. The issue often seems not only one of Economics vs. Security, but one of the Americas being seen as one complete investment block/FTAA vs. a source of illegal immigration and narcotics. Often this debate plays out using clear statements of interest, referring to Latin America as a region described as America’s backyard as opposed to statements linking narcotics, illegal immigration and terrorism in much of US media on Latin America. A debate on US policy always accompanies the region, wavering as Latin America fades in and out of their sphere of influence with attention due accordingly. This challenge does have a distinct element however in 2009, as Mexico continues to fight a full scale drug war and continues its very close economic ties to the US, and Cuba and the US opening dialogue between Raul and Fidel Castro and the Obama administration. These issues may keep the US tied to regional policy until those issues lose interest, as has always been the case. Luckily some policies linked with security and partnership often pay off, as Colombians have seen in 2008-2009 and some successes with Plan Colombia and in Mexico with the Merida Initiative, not always a media attention grabber, but long term policy nonetheless.

Likely future Chinese investment may re-ignite the debate on trade with Latin America if it is seen as a major threat. The US must decide in the end where it wishes to develop its trade policy as those in the Americas seek to promote their own investments abroad if the US does not wish to pursue major investment and trade in the Americas. Debates on NAFTA and trade agreements with countries like Colombia must be taken as policies which benefit not only the United States, but the Americas region as a whole. In reality, trade between those countries in South America had on average less than 40% of their trade with the US and a significant amount with the EU and Asia. China has now displaced the EU as the second largest investor. Countries such as Canada, America’s closest trading partner has signed trade agreements beyond NAFTA, with Chile, Costa Rica and are discussing an FTA with Colombia and even the EU. According to writers such as Khanna and Zakaria, the US must consider its role in the Americas as its leader and develop its interests beyond security in the region if it is to maintain investment in a strong United States. China as a matter of investment policy is often not competing in places where the US have established strong investment ties, but in those areas where the US have been absent. The next decade of American policy towards the Americas will likely been discovered in the Summit of the Americas this weekend, determining the viability of a Fortress Americas in future US investment policy.

In the last two weeks while markets tumbled, the amount of information about common issues such as poverty, the food crisis and even the economies of otherwise notable countries have also dwindled as American candidates preach of change and the rest of the world deals with economic aftershock. While Europe and the US slowly absorb their financial industries into the public purse, other middle countries and emerging economies deal with the problems and try to seek out the positive aspects of the world's financial capitals plunging into chaos.

Not all countries, even developed ones, are in the same position as their European and American counterparts. In an IMF report published in the second week of October, countries such as Sweden, Australia and Canada were credited with having very stable banking systems with well regulated capitalization requirements and having sturdy foundations to best weather the latest economic storm. Canada stood out as one of the best, influencing their own election for Prime Minister and allowing the fiscally prudent Conservative Party to absorb many opposition party seats despite having a campaign during the financial crisis that is often blamed on incumbent government policy. Since the start of the Canadian election, the Canadian Dollar plunged from 97 cents US to 79 cents US as commodity stocks lost value. With over 87% of Canada's trade going to the commodity hungry US, Canada has taken steps to keep the liquidity in their financial system and even had talks with President Sarkozy of France before his left the meetings of the Francophone to begin talks for a free trade agreement between the EU and Canada. Despite economic turndown and the drop in Canada's currency against the US, trade will likely finally open up to the EU and Latin America in order to keep relatively cash rich Canadian companies in the mindset of investing their "non-losses" into economies overseas. Activities between the EU and the US played out in the same narrative last week as Sarkozy's mission to save capitalism and create a new global economic order, a Bretton Woods II, lead him into talks with Bush in the US to coordinate a common response to the failing markets. Sarko's proactive approach even reached into France's cultural policy, by planning trade talks with Canada while trying to bring ties between Canada's English speaking and French speaking communities closer and maintain stability in the only G8 country which has not plunged into chaos. Stability in some form in the developed world is what the EU and US need, even if not inside those economies themselves. It is likely that while traditional blue chip investments will not maintain their blue chips forever, it is possible that places like Canada and emerging economies may take some benefits with the losses in the global economy.

With so little information about emerging economies coming out of mainstream media in the last two weeks, some interesting dynamics have been playing out in the process. While not a complete paradigm shift, some investment chatter has been moving towards placing money in China and India due to the recent cash rich position of those economies despite recent losses there as well. While today there was a talk of a financial rescue package between China, Japan and South Korean with its ASEAN partners, relatively China is not the worst off in Asia. While the Chinese and Indian economies are highly dependent on the purchase of consumer goods in the US and EU, cash which has been acquired in their recent economic booms will enable cash rich companies in those emerging markets to purchase shares in many failing companies in the EU and US and might place Chinese and Indian companies in a position to not just be on the production end of product development, but also purchase the ability to vertically integrate their industries by way of relatively cash rich Chinese and Indian investors. This new position does not wholly account for the fact that China and Japan own a good size of US debt, and while Tokyo's Nikkei is feeling the crush of the crisis, the 1/3 of US debt owned by China will only spur emerging markets into a relatively better position despite current losses in China and India as a whole. Even the Middle East is feeling some benefits, as the rise in 2007-2008 oil prices have left many producing countries with money to burn despite recent falling oil prices this month. This will be remedied as well as OPEC will be meeting this week and after to curb the fall in global oil prices and maintain oil at the relatively high level despite the losses in the US and EU and falling demand for their products. In the end, Dubai might replace London and New York to become the place to go for the best and brightest coming out of Oxbridge, Yale and Harvard.

An interesting dynamic has also been created in a region, which has veteran experience in dealing with economic crisis. Latin America has always suffered in the past 30 years since the last oil boom and recession in the 1970s due to poor economic policies, schizophrenic investor confidence and pure bad luck. Only recently have countries like Brazil, Venezuela, Argentina and Mexico been able to weather an economic collapse and pay back their past debts. Initially, the realization that the economic storm has finally come from the US and not from their own economic crisis was not being played down to any degree by Latin American leaders. Initially the strong Brazilian and Venezuelan economies lead leaders in those countries to direct concern about the US collapse away from South American markets. While not commonly known, trade between many countries in South America is often less than 40% with the US. While Canada and Mexico have taken measures to re-capitalise with over 85% of their trade being conducted with the US, South American countries believed their trade position, balanced economies, and well earned savings would allow them to be passed over in the latest crisis. With the collapse of the EU and Asian markets, Latin America followed with a 12 percent drop in the Brazilian exchange Bovespa and the biggest drop in Mexico's Bolsa since 2000. Despite this, IMF predictions of growth in the region in 2009 made in April of this year only shifted down slightly from 4.4% to private investor predictions of a growth rate of 3.5% for Latin America as a whole. With many investors putting their funds into the US Dollar for safety reasons, the paradigm shift, that other economies might be seen as safe investments beyond New York, Tokyo, London and Paris might buoy investor confidence in emerging economies and relatively cash rich nations in order to diversify their funds further as investment risks grow at home to the benefit of stable markets abroad. While not all emerging economies will benefit, as in those like Mexico and Russia which have been hit hard despite keeping afloat and massive recapitalisations, markets such as Brazil, India and China might be able to increase confidence in their economies in the long run and balance many diversified portfolios if economic management and legal protections can be ensured in the next few years. While the paradigm shift has not yet occurred, it is evident that a change in the global economy that was going to take another generation has perhaps emerged in the last month. With losses come opportunities, and with nervous investors and bad policies at every turn, only intelligence, patience and luck will determine if change will occur and create a new economic order.

CNN made a great acquisition taking on policy expert Fareed Zakaria and giving him his own show, Fareed Zakaria GPS which allows for a diverse perspective and a balanced international approach to a network which is often known for its Washington point of view as opposed to the perspective of global politics and policy.  The international perspective needs to be understood from the point of view of Paris, Singapore, Beijing and others. Originally the host of a PBS show and author of the book The Post-American World, Zakaria will likely become one of the most important authors on foreign policy in the next few years.

In a week of economic turmoil, Zakaria in his show F.Z. GPS decided to interview political experts from Singapore, India and China in order to get their point of view on current economic and political activities involving the US and other countries. While many perspectives were discussed, it was diverse in that countries like Singapore, India and China did not fare poorly during the last eight years of the Bush administration. While criticism did come about regarding Afghanistan and Iraq and perspectives regarding Russia's current move into Georgia, Bush's reputation is not wholly being shared by many in the Asia-Pacific, standing out in contrast to the distain for Bush in Europe, the US and even in Canada. The Canadian example is an interesting one. Currently there is a national election underway where in a recent election debate, issues concerning the country came down to 3 of 4 opposition leaders bringing the debate down to its lowest level and simply accusing the current Prime Minister, Steven Harper of being another George Bush. While Bush is not a Canadian leader and is extremely different to any existing Canadian politician, the real policy debate was wasted and the electorate was treated as people who only decide how their communities are formed based on whether George Bush's name is shouted out enough times on television. While Bush may not be popular in the Western world, the effect of using him for political gains outside the US can be just as harmful in forming illogical policy decisions based on someone who has no real effect or relation to a government outside the US at all. While the responses from many Asia-Pacific experts was logical and measured, often similar debates about the last 8 years in the Western world are foggy at best.

While new economic giants such as China and India had their perspectives shown on F.Z. GPS, it is curious to see what the last eight years have brought to countries in the Americas, and why certain policies such as immigration has been largely ignored in the recent election campaign. The focus of the Bush administration in early 2001 was immigration and the relationship between the US and the rest of the Americas regarding free trade and the FTAA. Mostly in 2008, the issue of immigration has remained a regional one in the US, concentrating around states on the US-Mexico border which take immigration to heart, but has not become a major election issue. Trade, mostly an issue with China for the US has been brought up in many border states along the US-Canada border. Talks of renegotiating NAFTA to bring jobs back to Americans was rampant, despite the issue having a lot to do with the US relationship north and south as opposed to its ties eastwards. While Mexico has ever increasing numbers going to the US illegally and a severe drug war which has taken more lives in 2008 than US lives in Iraq and Afghanistan combined, the debate on immigration was mostly nullified last year when Bush tried to pass one of his final bills opening up an immigration policy that might rationalize the current status quo on the border. After 7 years of the War on Terror, the original policy issues from 2001 were addressed, but with such complex problems and the lack of support for anything Bush ties his name to, the issue of immigration in the US will not change at all for years to come. In reality, as pointed out in the FPA Immigration Blog, some illegal immigrants are even leaving the US due to the current economic crisis and many in the US are starting to see the effect of Bush policies as changing the perception of America into a country which as one CNN reporter said, is no longer a "beacon of freedom and hope".

The rest of the Americas in the last eight years have done better than many would expect in the Western world despite many issues impacting the US itself. Canada currently stands out as one of the only countries in the G8 that is not suffering economic collapse, due to very prudent financial policies, good leadership by many governments over the last 5 years and a long term economic boom and national surplus. While being attacked in the Clinton campaign over NAFTA, Canada has been able to not be seen as another China to the US on trade and was able through a great deal of legal debates to come up with a deal on softwood lumber and push Chapter 11 decisions on NAFTA towards a more equitable framework where states have regained much of their power over companies in the NAFTA rulings. Canada has separated its support from the US, ie. regarding not supporting with troops in Iraq, but many citizens support Canadians in Afghanistan and trade with the US. Canada has not fared poorly at all, even weathering the current global crisis with merely slow growth, and keeping a lot of funds in the country and allowing cash rich Canadian companies to buy out many American and European assets if they wish. Canada's oil industry had a lot to do with this, but in the long run 8 years in Canada has not had many ill economic effects.

Brazil is currently lead by prudent left wing leader Lula and has become a beacon for reform and investment in South America. Since financial collapses that characterized the country in the 1990s, Brazil has been able to maintain a balanced level of growth and social reforms that has brought confidence into Brazil and has made it the next likely emerging economy to become another China or India. While political issues still exist to a great degree, oil and slow progress seems to be paying off and Brazil will likely weather this economic storm with a few scratches and bruises, but keep afloat. Chile is in a similar situation. With left leaning leaders and prudent economic policies and progressive social policies, stability may become a mainstay of many countries in the Americas in the future.

Venezuela also has stood out from many of its neighbours. While Brazil has benefited a lot from its oil reserves, Venezuela has had its oil reserves propel it into a forum for Chavez's influence in the Americas and remains Venezuela's only notable source of revenue. Venezuela often uses actions by Bush as the motivator of policy decisions, mostly in cases where the US has ignored Venezuela and Latin America in the last 8 years. In reality, the involvement the US has had beyond some trade policy in the last 8 years has been very minimal, only opening up further ties with economically stable countries who stabilized themselves, and not having any heavy response to populist claims by Chavez and others who often use Bush and supposed actions by the US to justify all types of local policy decisions by populist leaders. While the degree of US involvement in Venezuela is not known but likely is minimal, countries like Colombia have been able to use local and US assistance to independently address local issues. The Colombian Army's rescue of Ingrid Betancourt and American hostages from the FARC was seen as a Colombian initiative and praised by the US as solely Colombian. Ironically the FARC later was accused of having been supported by Chavez himself, mimicking accusations he had against Bush in interfering in local politics. Increasingly criticisms of Chavez come with the diminishing influence of Bush. Without Bush as a scapegoat, it will be hard to place Obama in a negative light and accuse the causation of problems in Venezuela on the President of the US. Recently a critical report on Venezuela lead to the coercive expulsion of human rights leaders from Venezuelaactions which will reflect poorly in Chavez in the future with no Bush to blame for the future.

Many other countries in the Americas have been set with their own local issues and have had some support and acknowledgement from the US in positive and negative manners. Mainly the US in the last 8 years have ignored Latin America due to The War on Terror, and minimal support and ties with the US has not had a negative effect for many in the region and their development. Ignoring the Americas, the backyard of the US and important future allies is not an option, as pointed out by Zakaria in his statements and book. A strong America's’ will do nothing but help the US reintegrate into the international community if respect and independent policies are supported by the next President of the US and progress of the Americas is valued and not hindered. Reactionist trade policy and calling the opposition George Bush when no coherent discussion is available to win votes in an election is not acceptable on any level. Policy cannot be formed by name calling, and any politician who uses this tactic does nothing but to embarrass themselves and their supporters in a democracy. The Bush era is over, and only working for new opportunities is an acceptable conclusion.