The Count

38,700,000...

...is the dollar price tag on Evo's new presidential jet. That's right, Bolivia's prez is out shopping for a new Dassault Falcon 900.

But before you start jumping to the conclusion that the famously humble and austere prez is living it up, consider that the current presidential jet was bought back in 1975. Indeed, the decree authorizing the purchase cited "incidents that put in danger the lives of the head of state and those who accompany him, due to different technical malfunctions as well as a plane's normal wear and tear."

Also, $38.7 million isn't much when compared to high rollers like Brazil and Venezuela, with their big Airbus A319s (with average price tags of $70.3 million).

Now all that remains to be seen is what he'll name it. Any guesses?

Sorry Neruda

Would you rather name your international airport after some unknown military asshole, or would you rather name it after a Nobel prize winning world renowned poet?

Well, apparently Chile's right prefers the former. Today Chile's Congress voted down a proposal from 2004 to rename Santiago's international airport after the one and only Pablo Neruda. Ok, so I know that as representatives of the right you can't vote to rename the airport after a communist priest. But I mean, COME ON, this is THE Pablo Neruda we're talking about.

Anyway, sorry Neruda. But maladjusted is still with you and in your honor I'll deviate slightly from our usual content to provide our dear readers with my favorite poem of yours:

Walking Around
From: ‘Residencia en la tierra II’

It so happens I’m tired of being a man.

It so happens I enter clothes shops and movie-houses,

withered, impenetrable, like a swan made of felt

sailing the water of ashes and origins.

The smell of a hairdresser’s has me crying and wailing.

I only want release from being stone or wool.

I only want not to see gardens and businesses,

merchandise, spectacles, lifts.

It so happens I’m tired of my feet and toenails,

my hair and my shadow.

It so happens I’m tired of being a man.

Still it would be a pleasure

to scare a lawyer with a severed lily

or deal death to a nun with a poke in the ear.

It would be good

to go through the streets with an emerald knife

and shout out till I died of cold.

I don’t want to go on being just a root in the shadows,

vacillating, extended, shivering with dream,

down in the damp bowels of earth,

absorbing it, thinking it, eating it every day.

I don’t want to be so much misfortune,

I don’t want to go on as a root or a tomb,

a subterranean tunnel, just a cellar of death,

frozen, dying in pain.

This is why, Monday, the day, is burning like petrol,

when it sees me arrive with my prison features,

and it screeches going by like a scorched tire

and its footsteps tread hot with blood towards night.

And it drives me to certain street corners, certain damp houses,

towards hospitals where skeletons leap from the window,

to certain cobbler’s shops stinking of vinegar,

to alleyways awful as abysses.

There are sulphur-coloured birds and repulsive intestines,

hanging from doorways of houses I hate,

there are lost dentures in coffee pots

there are mirrors

that ought to have cried out from horror and shame,

there are umbrellas everywhere, poisons and navels.

I pass by calmly, with eyes and shoes,

with anger, oblivion,

pass by, cross through offices, orthopaedic stores,

and yards where clothes hang down from wires:

underpants, towels, and shirts, that cry

slow guilty tears.

What is going on at the Washington Post?

So yesterday morning was a morning like any other at the Washington Post; the editorial board trashes Venezuela and calls the government soft on terrorism. The Post characterizes the US government as not caring about Venezuela's "abuses" and even says the US is ignoring the "links" to terrorism because they don't want to sanction Venezuela. But then something strange happened, by midday the editorial was no longer available on the website. Technical error maybe? Doubtful, by last night it was back....but much different. Instead of leading with criticism of the State Department's treatment of Venezuela, they just plain old bash Venezuela. Finally in the last paragraph the Post calls Obama soft on Venezuela, but it sure is toned down from the original; removing the "we don't care" quote and replacing it with something much harsher from State.

What happened in these few hours that may have changed the tone of the editorial? I guess we don't know, but I know what I think. In any case, here are both versions of the editorial below (bold in the first means it was cut, bold in the second means it was added). Read them both; if you don't think the Post got a call from State complaining and then changed their editorial stance, well, let me know what your theory is, I'd be happy to hear it. Changing your editorial line to be less critical of the government due to government pressure? Sounds pretty much like the Post's criticism of Venezuela....just saying. Stay classy Washington Post.

First version:

Mr. Chavez's weapons
Wednesday, April 7, 2010

RUSSIAN PRIME Minister boasted after returning from a visit to Venezuela on Monday that he had sold President Hugo Chavez another $5 billion in weapons -- a huge sum for a Latin American army. Hours later State Department spokesman P.J. Crowley was asked for a reaction at his public briefing. First answer: "We don't care."

Mr. Crowley went on to say that State didn't see a legitimate need for all that equipment and was concerned that it might "migrate into other parts of the hemisphere." But his initial response was all too indicative of the continued complacency with which the Obama administration regards the political, economic and human rights meltdown underway in a major U.S. oil supplier -- and where it may lead.

The last time we looked in on developments in Venezuela, in January, we pointed out that Mr. Chavez had reacted to the unravelling of his economy and his own shrinking popularity by stepping up repression of the opposition. That continues: In the last couple of weeks the government arrested and brought criminal charges against three more leading critics. One is a former state governor and presidential candidate, who said in an interview -- correctly -- that Venezuela has become a haven for drug traffickers and terrorists. A second is the owner of the last television network that dares to criticize Mr. Chavez; the third is a deputy in the National Assembly who had denounced corruption involving members of the president's family.

Mr. Chavez's move against former Gov. Oswaldo Alvarez Paz came after a Spanish judge issued an indictment accusing the government and armed forces of facilitating contacts between Colombia's leftwing FARC terrorists and those of the Basque group ETA, who were allegedly concocting plots to assassinate the Colombian president and other leading politicians. Mr. Paz's "crime" was to talk about this development. The Spanish dossier is one of several demonstrating material support for terrorism by Mr. Chavez, who has made little secret of his preference for the FARC over Colombia's democratic government.

That brings us to the latest round of arms puchases from Russia, which come on top of $4 billion in weapons Mr. Chavez already ordered from Moscow. The arsenal includes T-72 tanks, MI-17 helicopters, and advanced fighter jets -- weapons suitable for the conventional war with which Mr. Chavez has repeatedly threatened Colombia.

The Obama administration's response has been to ignore or soft-pedal most of this. Political arrests are met with perfunctory statements of concern; the extensive evidence of support for terrorism is studiously ignored, lest the United States be compelled to act on its own laws mandating sanctions in such cases. About the flood of Russian weapons, aimed at intimidating one of the closest U.S. allies in Latin America, the administration publicly says, "we don't care." Colombians -- and average Venezuelans -- can only hope such breathtaking nonchalance is justified.

And the one without the criticism of State but with all the same blows at Venezuela:

Venezuela's strongman splurges on Russian weapons
Thursday, April 8, 2010

RUSSIAN PRIME Minister Vladimir Putin boasted after returning from a visit to Venezuela on Monday that he had sold President Hugo Chávez another $5 billion in weapons -- a huge sum for a Latin American country that is deep in recession and busy rationing its water, electricity and hard currency. Take it as one more sign of the political, economic and human rights meltdown underway in a major U.S. oil supplier -- and where it may lead.

The last time we looked in on developments in Venezuela, in January, we pointed out that Mr. Chávez had reacted to the unraveling of his economy and his shrinking popularity by stepping up repression of the opposition. That continues: In the past couple of weeks, the government arrested and brought criminal charges against three more leading critics. One is a former state governor and presidential candidate who said in an interview that Venezuela has become a haven for drug traffickers and terrorists. A second is the owner of the last television network that dares to criticize Mr. Chávez; the third is a deputy in the National Assembly who had denounced corruption.

Mr. Chávez's move against former governor Oswaldo Álvarez Paz came after a Spanish judge issued an indictment accusing the government and armed forces of facilitating contacts between Colombia's left-wing FARC terrorists and those of the Basque group ETA, who were allegedly concocting plots to assassinate the Colombian president and other leading politicians. Mr. Paz's "crime" was to talk about this development. The Spanish dossier is one of several demonstrating material support for terrorism by Mr. Chávez, who has made little secret of his preference for the FARC over Colombia's democratic government.

That brings us to the latest round of arms purchases from Russia, which come on top of $4 billion in weapons that Mr. Chávez already ordered from Moscow. The arsenal includes T-72 tanks, Mi-17 helicopters and advanced fighter jets -- weapons suitable for the conventional war with which Mr. Chávez has repeatedly threatened Colombia.

The Obama administration's response has been to soft-pedal most of this. Political arrests are met with perfunctory-sounding statements of concern. About the flood of Russian weapons, aimed at intimidating one of the closest U.S. allies in Latin America, the State Department spokesman observed that "we're hard-pressed to see what legitimate defense needs Venezuela has for this equipment . . . we can probably think of better things that could be invested on behalf of the Venezuelan people." Colombians -- and average Venezuelans -- can only hope such nonchalance is justified.

(image courtesy of BoRev...may it rest in peace)

De jure vs. de facto capital mobility in South America (gratuitously wonky)

I know a lot of you have been waking up in the middle of the night with a cold sweat, anxiously wondering about the state of financial liberalization in South America. What's more, you've got that dreaded feeling of anguish in your stomach, that creeping suspicion that de facto and de jure measures of capital mobility might show different results. Oh the horror! Well, despair no more because maladjusted knows these feelings all too well and is here to put an end to your sleepless nights.

Remember back in the day when the IMF and other international organizations were telling developing countries that they should open up their financial markets? You know, since financial liberalization is basically the same as trade liberalization, it followed that if free trade is super awesome for development so is the free movement of money across borders. I mean, borrowing money is the same as trading goods, only across time, right? Moreover, rich countries have a lot of money and poor countries don't, so letting the rich countries invest all they want in poor countries kinda makes a lot of sense. What could possibly go wrong? It's not like capital flows can suddenly stop, create dangerous asset bubbles, exacerbate the business cycle or lead to financial crises.

Whatever. The point is that developing countries have sought to open up their financial markets to foreign capital and South America is no exception. The graph below takes a first look at capital mobility. We'll call it the "de jure" approach.

[De jure capital mobility, 2008]

This shows how freely money can move in and out of each country in principle. The index was put together using the IMF's Annual Report on Exchange Arrangements and Restrictions (AREAR), which catalogs every member country's regulations and restrictions on international transactions. AREAR distinguishes between 13 different types of regulations on capital flows, ranging from restrictions on financial derivatives to foreign direct investment. In any case, if a country has regulations in all 13 categories it gets a score of zero, meaning that capital is not very mobile. At the other extreme, if a country gets a score of 100 it means it doesn't have any regulations and capital is perfectly mobile.

Chile, Peru and Uruguay have the least restrictions on capital mobility, with equal scores of 84.6, while Argentina, Brazil and Venezuela are on the other end of the spectrum with relatively high restrictions. Now, the outlier here is Colombia, which has by far the most restrictions and a low score of 7.7.

Yes indeed, the US' BFF actually has labyrinth-like restrictions and regulations on international financial transactions. If a type of transaction exists, chances are Colombia regulates it. Colombia pretty much regulates everything from personal capital movements to foreign direct investment (curiously, the only type of transactions it doesn't restrict in some way are those pertaining to real estate).

But what's the problem with the de jure index? Well, it is based on restrictions in principle, which is to say that it only tells us about the laws governing capital flows in each country but doesn't tell us anything about how they are enforced or how restrictive they each are. For example, two countries could both have restrictions on financial derivatives. Say country A has a 2% tax rate on each derivative while country B has a 30% tax rate. Obviously country B is much more restrictive but under the de jure index both regulations are given equal weight. Similarly, A country could have restrictions on almost every type of transaction but in practice might not have the institutional capacity (read: is too corrupt) to enforce them.

This takes me to our second measure of capital mobility. While the de jure measure can be loosely interpreted as the "intention" to regulate or restrict capital flows, the de facto measure below shows capital flows in practice.

[De facto capital mobility, 2003-2006]

This one measures capital mobility in terms of actual flows. It basically takes the absolute value of the capital and financial account of each country's balance of payments (courtesy of the IMF's international financial statistics) and divides it by GDP. In other words, it sums the amount of money entering and leaving a country and shows it relative to the economy's size. Also, in order to avoid the effect of yearly fluctuations and the contraction of flows during the global financial crisis, all the values are taken as an average of 2003 through 2006.

So now that we have both measures of financial liberalization, what can they tell us? The first thing to notice is that there's a bit of a reshuffling in the order of countries, meaning that the countries with the most laws and regulations on capital flows do not necessarily have the least capital mobility. Chile and Uruguay still lead the pack but now Chile dwarfs every other country. Peru goes from the top bracket down to sixth place. Also, Colombia jumps up a few spots.

Another insight is that while Venezuela comes in as the second to last place in the de jure index, it is third according to the de facto measure. The emerging market darling Brazil comes in pretty low in this case, but this is mostly because of the sheer size of its economy (has a much, much larger denominator than any of the other countries).

Well, there we have it folks. It seems that feeling of dread in your gut was justified afterall: de jure and de facto measures of capital mobility paint different pictures about the state of financial liberalization in South America. I hope maladjusted was able to put your mind at ease and help you get some sleep.

Some REAL News on Honduras

Excellent job, as always, from Jesse Freeston at The Real News Network. The State Department is trying to get everyone to believe that things are all hunky-dory in Honduras, but the REAL news can see through the bullshit, check it out:

Much Ado About Nothing...

So the man George Bush called "Pootie-Poot" was in Venezuela this past week and virtually all the media coverage was about Russia selling arms to Venezuela. Specifically, Putin told a press conference that arms sales to Venezuela could exceed $5 billion, at which point the mainstream media's heads began spinning until they were soo dizzy that instead of doing any research or thinking they just ran with their pre-fab story. The whole thing even prompted a response from the US State Department.

There was one sane commentator that put this number in some sort of context, Richard Weitz at World Politics Review wrote (emphasis mine):

In reflecting on the results of his first-ever visit to Venezuela, Russian Prime Minister Vladimir Putin estimated on Monday that Venezuelan orders for Russian weapons "could exceed $5 billion." The resulting headlines are somewhat misleading, and may overlook developments that will have a larger impact on the bilateral relationship in coming years.

The $5 billion figure appears to include Russian arms still being supplied under existing contracts, including four MI-17 multirole combat helicopters whose delivery coincided with Putin's visit. These were the last in a contract for 38 of the helicopters signed in 2006. No new arms deals were announced before, during, or after Putin's trip last week.

After signing a dozen contracts with Russia to buy a total of $4.4 billion worth of weapons between 2005 and 2007, Venezuela made no major purchases in 2008 and early 2009, despite the Russian government approving a $1 billion loan in September 2008 to facilitate such sales.

Weitz's main argument is that the Venezuela/Russia alliance is really much more about energy than arms, and I would have to agree with him there. But he does give credence to the opinion that Venezuela spends more on defense than is needed, which takes me to my next point. Personally, I think almost ANY military spending is more than is needed, but when you compare Venezuela to the rest of South America the "arms race" theory really just falls apart.

There are a number of measures you could look at, and they all would tell you pretty much the same thing, but below is a chart with military spending per capita in South America. It compares levels in 2008 to 1998 to get a sense of where things have gone over the last decade. The numbers are from the Stockholm International Peace Research Institute and are in 2005 USD.



As you can see, not only has Venezuela barely increased their per-capita spending over the last decade, but that they are getting out spent by a number of other countries in the region, who apparently really really need all those arms, unlike Venezuela.

One reason for all this hoopla is that it seems so nefarious for someone to buy arms from Russia, I mean, everybody knows the US is the largest arms trafficker in the world, that Hugo has to be up to something going all the way to Russia to buy arms....

Not exactly; as Weitz writes, "Washington introduced an arms export ban on Venezuela in 2006 that applies to all U.S. companies as well as foreign weapons that contain American-made components -- a provision that has blocked proposed weapons sales from Europe and Israel."

But what about all those weapons that the US sold Venezuela previously? I mean how do you maintain those? How do you replace old weapons? Well, this one is pretty simple, YOU BUY THEM FROM RUSSIA.

The Venezuelan embassy responded in 2008 (PDF) to criticism of their arms purchases:

The purchase of 24 Russian fighter jets corresponds exactly to the number of F- 16s sold to Venezuela by the U.S. in 1980. Since the U.S. refuses to supply key parts necessary for maintenance of these planes, Venezuela has been forced to look elsewhere to rebuild its air force. These planes are a replacement, rather than an expansion, of its fleet.

Similarly, the 2006 purchase of 100 thousand rifles was made in order to replace Belgian-made rifles that were over fifty years old and were obsolete.

The purchase of 53 helicopters was made in order to patrol the border with Colombia. These helicopters will be used to fight drug trafficking and other illegal activities in the area. Ironically, Venezuela is being criticized for taking a direct step towards securing its borders from drug traffickers and guerillas.

But don't expect to find any reference to this in the mainstream media's analysis though.

The other issue with the arms sales that continues to rear its ugly head is that it is worrying that Venezuela is buying arms because they might give them to the FARC. This is pretty much what J.P. Crowley, speaking for the State Department said yesterday:

But our primary concern is that – that if Venezuela is going to increase its military hardware, we certainly don’t want to see this hardware migrate into other parts of the hemisphere.

A pretty clear reference to the FARC, despite there being NO evidence that this has ever happened. The best response to this is definitely from the same Venezuelan embassy response:

To accuse Venezuela of providing arms to Colombian insurgents due to some weapons being transited through Venezuela would be like accusing the U.S. of providing arms to Mexican drug cartels, given that over 90% of weapons confiscated from these groups are first purchased in the U.S. There has also been an allegation that “heavy duty weaponry has been stolen from Department of Defense facilities and National Guard armories and trafficked into Mexico.” Despite these statistics and claims, it would be irresponsible to accuse the government of the United States of participating in or allowing illegal weapons trafficking. It is similarly irresponsible to accuse Venezuela of the same.

Well put. And so concludes a much, much too long post about a non-issue that just won't go away.

2nd episode of the presidential island is out...

...so check it out at El Chigüire Bipolar or watch it below.