Global News Blog
How Latin America copes with global economic slowdown
CARACAS, Venezuela — The deteriorating global economy will end five boom years in Latin America in 2009, analysts now believe.
Latin American companies are shedding workers and having trouble getting loans to finance exports. Governments are likely to run budget deficits after producing surpluses, immigrants to the US and Europe are expected to send less money home and millions of people will be forced back into poverty, even as the strongest countries spend billions to lessen the pain.
"It will be a difficult year," Alfredo Coutino, a senior economist for Latin America at Moody's Economy.com, said Monday.
The good news is that most Latin American countries saved money, found new export markets and kept inflation low during the good years. This has left them better prepared for the downturn.
Peru, Chile, Panama and Brazil seem best positioned to ride out the economic storm, analysts said.
Countries led by free-spending populist leaders could face a particularly difficult 2009.
Ecuador has defaulted on a portion of its foreign debt and seems to be turning inward.
Venezuela failed to diversify its oil-dependent economy and is facing a sharp slowdown from the global oil bust while experiencing Latin America's highest inflation rate, 30 percent.
Argentina is suffering from plummeting soybean prices, double-digit inflation and a scarcity of foreign investment.
Mexico and the Central American countries are facing an especially bleak 2009 because their economies are tied so directly to the US, whose economy is expected to contract in 2009.
Latin America is expected to grow by only 1.9 percent in 2009, according to the Economic Commission on Latin America and the Caribbean, a United Nations agency that's based in Santiago, Chile.
Latin America grew by 4.6 percent in 2008 and 5.8 percent in 2007, the agency reports.
"One by one, the motors of growth are disappearing," Alicia Barcena, the agency's executive secretary, said in a December presentation in Santiago, where he ticked off a decline in those economic drivers: export growth, remittances, commodity prices and foreign investment.
In Brazil, the world's 10th biggest economy, sales of new cars, apartments and home appliances plummeted in October and haven't recovered.
Brazilian mining and metals firm Companhia Vale do Rio Doce, facing a sharp drop in demand for steel worldwide, already has laid off 1,000 workers in Brazil and announced a worldwide reduction of 30 million tons of iron ore production.
Brazil's General Motors subsidiary has kept idled one of its three Sao Paulo manufacturing plants and is expecting to produce and sell 10 percent fewer cars in 2009 than it did in 2008, said company spokesman Renato Luti.
Brazil's economy, which grew at a robust 5.9 percent in 2008, is expected to expand by only 2.1 percent in 2009.
Brazilian President Luiz Inacio Lula da Silva announced another stimulus plan on Monday, saying the state National Development Bank would step in with loans for the private sector. Lula's government had already spent $164 billion to assist banks and private companies.
Peru, which in 2008 had its fastest economic growth in 14 years, is spending $3.2 billion to pump up its economy. Forecasters expect Peru to have the best economic growth rate in 2009 of any Latin American country, followed by Panama, Uruguay and Cuba.
Chile, which is the long-time favorite of foreign investors, announced a $2 billion economic investment plan last week. The country's central bank also made the biggest cut in interest rates in 10 years.
Past economic crises have been devastating to Latin America. Jerry Haar, a professor at Florida International University's College of Business Administration, however, said that governments and companies throughout the region are better managed and have strengthened their balance sheets.
"They have diversified their export base," he said. "They no longer have all of their eggs in one basket."
Some numbers bear this out.
Latin America and the Caribbean held $170 billion in foreign reserves in 2000. Foreign reserves rose to $500 billion last year.
Foreign debt sank Latin American economies in the 1980s. As of 2000, foreign debt was 49.9 percent of GDP. In 2008, it had declined to 36.8 percent.
"Latin American countries are in better shape than they have been in decades to manage the extremely challenging global environment," Lisa Schineller, a credit analyst for Standard & Poor's in New York, wrote in a report three weeks ago.
Eduardo Lora, an economist at the Inter-American Development Bank, said that Brazil and Colombia sold foreign bonds to investors last week — an indication that the credit crisis might be thawing. Only one emerging market country, Mexico, had been able to sell bonds since the global economic crisis hit in September.
An increase in poverty in Latin America in 2009 would reverse a trend. While 44 percent of Latin Americans lived in poverty in 2002, only 33.2 percent did in 2008, the U.N. economic commission reported.
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Hamas leader: What we want in Gaza
Monitor contributor Shane Bauer sat down on Jan. 7 with Musa Abu Marzook, deputy chairman of Hamas’s political bureau, in Damascus, Syria. While part of that conversation appeared in today’s Monitor story on Hamas’s defiance in the face of the Israeli campaign in Gaza, a fuller version of the interview, which sheds a great deal of light on Hamas’s thinking about the ongoing war, is below:
Bauer: What will it take for Hamas to agree to a cease-fire with Israel?
Abu Marzook: Hamas has held the same position since Israel’s aggression began. We have three conditions for any peace initiative coming from any state. First of all, the aggression of the Israelis should stop. All of the [border crossings] should be opened, including the gate of Rafah between the Gaza Strip and Egypt. Finally, Israel has to withdraw from the Gaza strip. We are not saying we will stop firing rockets from the Gaza strip to Israel. We are only talking about stopping the aggression from the Israelis against the civilian population in the Gaza Strip.
When others talk about a cease-fire, they are saying all military operations should stop. But we are sending a message [by firing rockets, which is:] “We will not surrender. We have to fight the Israelis and we will win this battle.” We know we are going to lose a lot of people from our side, but we are going to win inshallah [God willing].
Bauer: What exactly would you consider victory for Hamas?
Abu Marzook: A victory for Hamas would mean the Israelis did not accomplish their objectives. If they can’t stop rockets from coming into Israel, that means they failed.
But the real reason for Israel’s aggression is to change Hamas’s government in the Gaza Strip. They have been thinking about this since Hamas won the elections. It is not because of the rockets. They failed to lead the people in an uprising against Hamas in the Gaza Strip with the economic embargo. They tried to push Fatah to fight Hamas, but we defeated them in the Gaza Strip. So Israel took action.
Bauer: How do you think this Israeli aggression will affect Hamas’s position in Gaza?
Abu Marzook: The Israeli push against Hamas has increased our popularity sharply among the Palestinian people and throughout the Muslim world. After the Israelis killed Hamas leaders like Ahmed Yassin and Ismail Abu Shanab Hamas won the elections and they won 76 seats out of a 132-seat parliament. Using these means doesn’t decrease the popularity of Hamas, it increases it.
Bauer: How are relations between Hamas and Fatah now?
Abu Marzook: Now, the priority for Hamas, Fatah, or any Palestinian organization is to stand against the Israeli aggression. After we finish with this battle, I guess we can talk about reconciliation or reuniting with Fatah. We openly welcome any kind of negotiation or dialogue between Fatah and Hamas to end the separation of the Palestinians.
Bauer: When French president Nicolas Sarkozy met with Syrian president Bahsar al-Assad, many said he tried to encourage Damascus to put pressure on Hamas to stop firing rockets. Have you faced any kind of pressure from Syria?
Abu Marzook: We haven’t seen any pressure from Syria. They respect our independence. They respect our choices. They respect the policies we chose for our people.
Reporters on the Job: Tangled in Mexican tape
Staff writer Sara Miller Llana has dealt with plenty of red tape since arriving in Mexico, so she empathizes with the “victims” in today’s story.
“My work visa, which was only supposed to take a couple weeks to be processed, took four months. And until you have a visa here, you can’t do anything. You need it to open a bank account, get a cellphone, and - most important - get your furniture across the border,” she says.
“In my neighborhood in Mexico City, you can show up at your favorite restaurant to find it’s closed because of some mysterious request for documentation or because they violated some procedure,” says Sara.
International news roundup
Russia-Ukraine gas row: 'If there are no obstacles,' the flow of Russian natural gas to customers in Europe will resume at 2 a.m. Tuesday, its supplier announced. Gazprom, the state-owned monopoly, stopped sending the fuel through pipelines that cross Ukraine last week, accusing the latter of siphoning off much of it for its own use. The two sides signed a deal last weekend under which the flow would resume, but it collapsed when Ukraine submitted handwritten amendments that were rejected by the Kremlin. The deal was reapproved after the amendments were withdrawn.
S. Africa's future president - or not? New problems arose for South African political star Jacob Zuma Monday when a senior court in South Africa reinstated graft charges against him. The ruling overturned a lower court, which had dismissed the charges, and clears the way for the ruling African National Congress chief to be tried. However, he remains the ANC candidate and presumptive favorite for president in an election that could be held as soon as April.
Indonesia ferry update: Hard rain and heavy seas were complicating efforts to search for survivors from a ferry that sank off Indonesia, and the Transport Ministry said it wasn't optimistic that additional passengers would be found alive. The Teratai Prima capsized early Sunday about 30 miles from port; so far, only 23 of the estimated 267 people aboard have been rescued.
Thai politics: Political allies of ousted Prime Minister Thaksin Shinawatra lost most of the seats at stake in a parliamentary election in Thailand Sunday, strengthening the grip on power of his latest successor. The Elections Commission projected that the Democrat Party of current Prime Minister Abhisit Vejjajiva would win up to 20 of the 29 seats at stake, most of them previously held by legislators disqualified by the courts. If confirmed by the official vote count, expected later Monday, Abhisit's majority in Parliament would increase to 48 seats.
A bailout for the 2010 Olympics, please: A public meeting was scheduled in Vancouver, British Columbia, Monday to detail the risks of completing the athletes' village for the 2010 Olympic Winter Games in the current economy. City officials "quietly" are seeking a federal bailout, reports said, because Mayor Gregor Robertson has warned that taxpayers otherwise could be "on the hook" for $875 million in building costs and interest, plus $193 million for acquisition of the land on which the facility is being built. After the Games, the village is expected to be sold as condominiums, but with no guarantee that the real estate market will have recovered by then. In 1976, the Summer Olympics in Montreal ended up losing billions of dollars that took a generation to pay off.
Flooding in Fiji: A state of emergency was declared in Fiji, where flooding from relentless tropical rains was blamed for at least eight deaths and the loss of much of the sugar cane crop. The rising waters also have submerged roads and bridges and sent thousands of residents to emergency shelters. Hundreds of tourists were stranded at resorts, unable to make way for those arriving to take over their hotel rooms, reports said.
The latest Chinese recall: dog food A popular brand of dog chow was being recalled by distributors in China amid a high-profile government campaign to improve food-safety standards. Sales of Optima lamb and rice dry food were suspended after at least 20 dogs died and others were sickened from eating it. The Optima brand is owned by a US company, but it was not clear whether the chow had been imported. In 2007, the deaths of dozens of dogs and cats in the US and Canada were traced to imported Chinese pet food. Last year, hundreds of thousands of Chinese infants were sickened by drinking tainted milk.
Reporters on the Job: Riding through Afghanistan in a Humvee
Fighters Showing Restraint: When US officers in Afghanistan told correspondent Danna Harman how they were working to prevent civilian deaths (page 7), she was skeptical. The rising death toll indicated otherwise. And aid workers in Kabul belittled the efforts of US troops reaching out to Afghans in rural areas. They were, after all, trained as fighters. But after several weeks of watching American soldiers in the field, she came away “impressed.”
“I found the best of American values evident. These guys were polite to the people. What I saw was a completely positive approach in how they dealt with locals, even though they were taking fire, and there was frustration underneath,” she says.
Were they putting on a show for her? “I don’t think so. I was at one forward operating base for two weeks, going out on patrols. After hours of hiking or riding in a Humvee, they forget you’re there. You can only fake sincerity for so long. I left with a lot of respect for these young men, who didn’t have a lot of life experience but behaved very well under difficult circumstances,” she says.
Reporters on the Job: The power of patience in Iraq
If there's one thing I've learn from reporting in the Middle East it's the power of patience.
I wanted to go to Yusufiyah. This is a town of dirt roads and mud-brick buildings about 25 miles southwest of Baghdad. On Jan. 3, one of the worst suicide bombing in months had occurred. US forces were pulling out. I wanted to see how they were coping with Al Qaeda and other threats.
The day before I left the Monitor's Baghdad office, my security team spent the day in Yusufiyah evaluating potential threats and getting permission from local authorities to report in the town. But it was a case of best laid plans of mice and men.
When the team and I arrived the next day, we discovered that the Iraqi military official who'd granted them access had left on an unexpected vacation.
We practically had to start all over again. At first the Iraqi Army was resolute that they wouldn't allow me to report in Yusufiyah at all. But this is the Middle East. So, to be hospitable about the refusual, they served us a round of tea.
After a second round and a long chat, the Iraqi officer in charge not only eased up, but he offered to take us around the town himself. As an added bonus, he provided us with a small security detail.
I've found that often in Iraq that patience pays. You just have to wait a situation out.
Russia, Ukraine near gas deal - but what about next time?
Is the Big Chill over?
Nearly a week after Russia shut off gas to Ukraine on Jan. 7, affecting supply to at least 20 European Union countries, the Kiev and the Kremlin appear close to resuming regular business.
Top Russian officials including Gazprom head Alexei Miller are in Brussels today to meet with EU energy ministers and sign a deal that will include international monitors in Ukraine.
But given the on-again, off-again nature of this spigot spat, who knows?
Third year in a row
All those shivering in Bulgaria, Poland, and the rest of Eastern Europe will breathe a sigh of relief once a deal is struck. But is the problem permanently solved? As the Monitor's Moscow correspondent Fred Weir pointed out in an audio report last week, this is getting to be an annual New Year’s event with shutoffs in 2007 and 2006. (Notice there are never any gas disruptions in the muggy summer months.)
Europe needs gas, and it gets about a quarter of its total supply from Russia – 80 percent of which comes through Ukraine. And Ukraine happens to be one of two states on Russia’s border that are pushing hard to join NATO, the Western military alliance. (The other state is Georgia, whose tensions with Russia erupted into a full-blown, if short-lived war this summer.)
Behind the spat: East-West tensions?
Now, depending on whom you talk to, Ukraine’s Westward leaning ambition may have nothing to do with why Russia cut gas supplies this year. As Konstantin Zatullin, the deputy chair of the Russian State Duma's commission on the Commonwealth of Independent States, told Fred, ‘Russia had no choice but to cut off their gas. Is there any place in the world where people receive energy supplies free of charge?’
Others, however, make a direct link between the two. According to Dmitri Furman, an expert with the Institute of European Studies in Moscow, “Gas is just one manifestation of our colossal irritation with Ukraine ... for having chosen to build a different political system and join the West.”
Part of Russia’s plan may be to discredit Ukraine as a viable political partner, so that Europe will be more inclined to strengthen ties with Russia and deny Ukraine NATO membership. "Europe should see that there's no alternative to working with Russia," Vyacheslav Igrunov, director of the independent Institute of Political and Humanitarian Studies in Moscow, told the Monitor last week.
Alternative energy routes
Now, there are alternative ways for Russia to get its gas to Europe without dealing with pesky ex-Soviet countries on its borders. The Nord Stream pipeline would link Russia and the EU via the Baltic Sea. Then the Blue Stream pipeline, already partially built, goes through the Black Sea with eventual plans to bring gas up through Eastern Europe.
Such plans are yet another thorn in the side for European efforts under way to build a pipeline that would lessen dependence on Russian energy supplies. Called Nabucco (not to be confused with the opera), it is an $8 billion project to bring gas from Central Asia to Austria via Turkey. Construction is scheduled to begin in 2010.
Perhaps those plans will make it necessary to stage this annual gas dispute. We’ll see.
Out of the mist: In-line skaters race in the streets of Chandigarh, India, during the 54th National School Games. (Ajay Verma/Reuters)
Cultural snapshot: Inline skating in misty India
Reporters on the Job: Finding banned novels in a Thai library
Check the Library: Given the tiny circulation of “Verisimilitude,” the banned novel that landed Australian Harry Nicolaides in a Thai jail, correspondent Simon Montlake wasn’t sure he could find a copy in Bangkok. “I wanted to read what exactly had got him into trouble. And Harry’s own diligence helped me. In 2005, he sent a copy of the book to the National Library of Thailand, the equivalent of the US Library of Congress,” says Simon.
Simon went there, expecting to find the book had been pulled from the shelves. “But to my surprise, it was there. I sat down and began reading, wondering if any of the library staff knew about the criminal case against the author. I doubt it, as Thai news media have ignored the case,” says Simon.
The book isn’t available for loan, but Simon photocopied the offending passage – 100 or so words – and some other sections that seemed relevant to the novel’s theme. “Then I put the book back on the shelves. It may still be there,” he says.
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