Double Handshake

Venezuela is in serious economic trouble. Production of oil – the backbone of the economy – dropped by 400,000 barrels/day last year due to reduced demand. “Indefinite” four-hour-per-week rolling blackouts have begun in big cities as hydroelectric dams have been hit hard by a drought. And then last week, Hugo Chávez announced last Friday he will devalue the country’s currency, the bolivar, for the first time since it was introduced in 2003.

The Venezuelan people are (rightly) afraid that even more serious inflation will set in. Many rushed out last week after the announcement to buy electronics and other durable goods that would hold their value. Merchants raise their prices as a result – the exact opposite effect a currency devaluation should have.

Chávez is not amused. “‘There is no reason for anybody to be raising prices,’ Chávez said Sunday on his national television show. He explained to listeners that the ‘bourgeois’ in Caracas society would plan price increases but that they would fail. ‘People, do not let them rob you,’ he said. ‘Denounce it,’” the Washington Post reported.

But if that approach doesn’t inspire a lot of confidence in the country’s stability, consider this idea:

A shipment of Chinese home appliances will be sold cheaply in Venezuelan government stores to stop speculation by retailers after the country’s currency was devalued last week, President Hugo Chavez said Wednesday.

“A boat is coming from China. It brings refrigerators, television sets and washing machines we’ll be selling at low prices, as we already do with food products in the Mercal chain,” Chavez said of the government-owned supermarkets opened in 2003.

A single appliance-laded boat from China? Well, that should do the trick for country of 28 million people.

Hugo Chavez is a blogger’s world leader. From last month:

Venezuela’s efforts to combat severe drought conditions may include President Hugo Chavez going airborne with scientists as they try to generate rain from clouds.

Chavez has said a team of Cuban scientists are in Venezuela to fly aircraft with special equipment designed to influence weather patterns, specifically to bring on much-needed precipitation.

“I’m going in a plane; any cloud that crosses me, I’ll zap it so that it rains,” Chavez said late Saturday, according to Reuters.

Brings to mind China’s cloud tinkering during the Olympics and Beijing’s most recent set of snowfalls. Not that Hu Jintao will be manning the cockpit anytime soon.

Image: Slate

We’re on something of a Venezuela binge of late; here’s one more noteworthy item. Al Jazeera aired a nice video on China’s impact in Venezuela last week. In it, Dima Khatib reports from Caracas on how the country now leads Latin America in Chinese investment dollars. A lion’s share of these investments are in energy procurement, but there are a few lesser-known industries as well. From the video:

This mobile phone, baptized the vergatario, or in colloquial Spanish, “the very best”*, is the first Venezuelan mobile and one the Bolivarian revolution’s latest inventions. It is assembled in a mixed Chinese-Venezuelan socialist company, where China contributes to Venezuela’s new model of industrial production by providing technology and parts, while Venezuela provides all the rest …

In another socialist factory, the first Bolivarian computer is being assembled. Venezuelans hope the technology and know-how will be transferred to them by the Chinese in the future.

This talk of “socialist” companies and factories is Khatib trying to capture the rhetoric of Venezuela’s Hugo Chavez himself, who’s fond of pretending his country and China have some kind of ideological connection. In reality, China’s interests in Venezuela (and “Bolivarian computers” for that matter) extend only as far as its own economic bottom line. That’s the brand of socialism China has been practicing for twenty years, whether Chavez recognizes it or not.

H/T: Latin American News Review

*Or male genitalia, apparently

Venezuela’s Hugo Chavez says he’s planning to shutdown two of his country’s best-known golf courses. Victims of the economic recession? Nah. Just the latest move in Chavez’s Great Socialist Revolution:

“Let’s leave this clear,” Mr. Chávez said during a live broadcast of his Sunday television program. “Golf is a bourgeois sport,” he said, repeating the word “bourgeois” as if he were swallowing castor oil. Then he went on, mocking the use of golf carts as a practice illustrating the sport’s laziness.

Let’s see, where have we heard this before?

Image: New York Times

“What we are doing hasn’t worked very well and in fact, if you look at the gains, particularly in Latin American, that Iran is making and China is making, it is quite disturbing … They are building very strong economic and political connections with a lot these leaders. I don’t think that is in our interests … I have to say that I don’t think – in today’s world that is a multipolar world where we are competing for attention and relationships with at least the Russians, the Chinese, the Iranians – that it is in our interests to turn our backs on countries in our own hemisphere.”

Words shared by Secretary of State Hillary Clinton at a town hall meeting in Washington last Friday. She went on to criticize the Bush administration’s failed attempts to isolate anti-US leaders in the region. To compensate, she said, this administration must engage with Latin American leaders – especially with ones we don’t like, like Venezuela’s Hugo Chavez and Bolivia’s Evo Morales – if the US wishes to remain a relevant power in the region.

Now, while I don’t think the above sound byte indicates anything as drastic as a New Cold War over the ideological future of Latin America, I do find the logic “quite disturbing.” A few thoughts:

I fully understand that it is precisely Secretary Clinton’s job to push her country’s political and economic agenda abroad, but I don’t think that makes foreign countries doing the same thing “disturbing.” We don’t hear much from the State Department when China, Russia and Iran make political and economic inroads in their respective neighboring countries. Although it was unsaid by Clinton (and feel free voice disagreement below), I think what is implied here is the chestnut about Latin America traditionally being in the US’s “sphere of influence.” The murky trio: China, Russia and Iran are suddenly on America’s doorstep, and we haven’t approved it.

First off, let me try to add a quick non-State Department perspective. There is no quicker way to raise the ire of someone in Latin America than to describe the region as “America’s backyard.” The paternalism implied by this Monroe Doctrine/Roosevelt Corollary-derived phrase really does not go over well. On top of this, despite the US’s enormous influence in region through decades of political and economic intervention, Latin America today is not the United States’ backyard anymore than Africa is the backyard of Europe. President Barack Obama kind of recognized this with his talk of a “new era” in relations between US and Latin America at the Summit of Americas last month, saying “there are no senior of junior partners in the Americas.”

If, then, the US follows Clinton’s calls for the US to re-engage with certain countries in Latin America (a great idea, as far as I’m concerned), it should NOT be in some kind of belief that doing so will prevent these countries from pursuing diplomatic, economic and, yes, military ties with China and other countries of the world. US negligence in Latin America during the Bush years did push countries toward China, but China was coming anyway. And its presence, however “disturbing,” is here to stay (and grow). The State Department returning to Caracas yelling “hi, remember us?” is not going to change that fact.

Clinton is right to point out that the US is “competing for attention and relationships” in Latin America, but this competition is not a zero-sum game. Just as fully developed nations across the planet seek to diversify their economic and diplomatic channels, Latin American countries are after the same thing.

Second point. I won’t pretend that I’m privy to anywhere near the intelligence info that Ms. Clinton is, but I feel confident enough to take issue with her line about “they are building very strong economic and political connections with a lot these leaders. I don’t think that is in our interests.”

Economically, yes, China’s rise in Latin America creates competition for US interests there. Yes, US companies must be fitter to survive in Latin America than before China arrived on the scene. Is competition a bad thing? Aren’t fostering adaptability and wealth creation (both in China and Latin America) ultimately positives for the US, in a global economy?

Politically, I think China’s presence in Latin America fundamentally differs from countries like Iran, who I peg as likely having a true anti-US agenda in Latin America. For all the “socialist solidarity” rhetoric between Beijing and Caracas (generally emanating from Caracas), the word “oil” appears in every news article I’ve read about China and Venezuela. China’s surging economic prominence in the region means a stronger political presence by default, I don’t see Hu Jintao staying up late into the night dreaming up ways to undermine the US’s presence in Latin America.

Image: CNN

So, Venezuelan president Hugo Chavez surprised Barack Obama with a copy of Eduardo Galeano’s 1971 book Open Veins of Latin America at the presidents’ meeting in Port-of-Spain, Trinidad. The book is a left-wing polemic about the exploitation and suppression of Latin America by foreign powers over the last 500 years. The “gift” is part political stunt – the copy given to Obama is in a language he neither reads nor speaks – to make things a bit uncomfortable for the high-flying Obama and remind him of his country’s role in “Five Centuries of the Pillage of a Continent.”

The gift is good timing for me, though. I finished Open Veins a few weeks ago and was planning to post some thoughts on it anyhow. As I read the book, I didn’t often think of Obama and the US as much as I thought of China, which stands to be the next country to seriously impact Latin America with its hunger for natural resources. China may have played zero role in the last 500 years of pillage in Latin America, but it may well be the leader in the next 500.

Written in the early 70s, Open Veins is Galeano’s account of how the Spanish, then English and finally Americans arrived in Latin America, stole the regions’ resources, exported its wealth, and drove its people to poverty and backwardness through their greed. Since Columbus’s arrival, Latin America’s natural resources have been a continual curse, a major reason for its stunted growth.

Galaeno doesn’t much distinguish between the Spanish conquistadors who once outright stole and enslaved from 20th-century US companies in Latin America that exploited the land and exported profits back home under the guise of free trade. The pillage has taken new forms, to be sure, but the pillage is still going on.

The US comes out looking terrible in Open Veins – a paternalistic superpower openly exploiting Latin American countries and meddling in their political affairs. Corporations like US Steel and Standard Fruit Company “invested” millions in smelting plants and banana plantations, which polluted the earth, condemned locals to dangerous and low-wage jobs, and exported a lion’s share of profits north of the Rio Grande. Development banks like the IMF and IADB are mostly US pawns used to force Latin American countries to re-structure their economies for greater US manipulation. America’s only interest in a growing middle class in Latin America is that it provides a market for US exports.

Galeano is a great writer, which comes through even in translation. There are memorable anecdotes and powerful passages, but, on the whole, I found the book dogmatic and shrill as he forced his agenda into the pages. This is not objective journalism (nor does it claim to be), but rather a kind of blood-boiling invective that tears down straw-men counter-arguments. Still, there is plenty to get incensed about; it’s a moving book. I can see why Hugo Chavez likes it so much.

But I also think he gave Open Veins to the wrong president; the book should have been in his suitcase for his trip to Beijing earlier this month. There were no awkward book exchanges on Chavez’s trip to Beijing, of course, only zesty Xinhua headlines, multi-billion dollar oil investment deals and smiling photos.

For one thing, Open Veins would simply be a great read for any stalwart Communist cadre, at least in theory. There’s anti-imperialism rhetoric, scathing criticisms of the US’s political meddling, a dash of revolutionary fervor and pleas for better labor conditions. But more importantly, if any foreign country needs a cautionary tale about the fine line between “pillage” and “commodities investment” of Latin America in the 21st century, it is China. You never know how long your welcome will last.

Times are good now because China’s buying helps shore up the region’s battered economies, and its investments come without preconditions. China also provides another major trading alternative to doing business with the US. But, everything’s not perfect. Latin America’s trade deficit with China is growing, new free trade agreements have yet to reveal how much (or little) they will benefit Latin economies, and some Chinese mining companies are already getting bad reputations for their labor and environmental policies.

While none of this yet put the country in the same league with the villians in Open Veins, Spain, England and the US’s legacy in Latin America are clearly ones that China must keep in the back of its mind. If China turns out to be as greedy and exploitative as its foreign predecessors, you can be sure it will become the subject of a similarly themed book in the coming years.

Despite the global recession, China is still looking to spend serious money on securing its supply of oil and other commodities. In South America, this is especially good news for Brazil and Venezuela, two of the Asian country’s biggest suppliers.

Today, it was announced that state-owned China Development Bank would loan US$10 billion dollars to Brazillian oil giant Petrobras to ensure a long-term supply the Asian country. The state-owned oil company had been looking for ways to finance its US$175 billion five-year investment plan. Petrobras also agreed to sell 100,000 barrels of oil this year to Sinopec, China’s largest oil company.

The deals were signed by Vice President Xi Jinping, who wrapped up his five-country South American tour in Brasilia. On Xi’s previous stop, in Venezuela, he inked a deal with Venezuelan President Hugo Chavez for China to add another US$6 billion to the countries’ joint-investment fund. The money, along with a number of other agreements, will go toward increasing oil exports to China. Chavez, whose political life is largely believed to depend on the price and sales volume of oil, seemed to be pleased. From the BBC:

Mr Chavez said the Venezuela-China alliance served “common interests” and that Venezuela was committed to being an oil supplier to China “for the next 500 years”.

The Brazil and Venezuela deals, combined with the US$25 billion oil deal it signed with Russia a few days ago, bring China’s oil investment total for the week to US$41 billion. Of course these are all long-term investments, strategically signed as oil and commodity prices are severely depressed. Yet, US$41 billion in a week? Now? Not in the coming months when oil prices hit bottom and China can land better terms on these massive deals? It’s got to make you wonder if Beijing is wheeling and dealing in oil behind a pair of rosy glasses.

Image: Treehugger

As mentioned before, a number of top-ranking Chinese officials are currently on goodwill tours in Latin America. Thus far, declarations for “strengthening cooperation” and “boosting friendships” abound. Vice President / President-in-waiting Xi Jinping is now in Venezuela, having already made his way through Mexico, Jamaica and Colombia. Yesterday, he addressed President Hugo Chavez and Venezuelan entrepreneurs and “welcomed” Latin America participation in the 2010 Shanghai Expo.

The global recession has cast a dark shadow on the Expo, which is wildly anticipated within China. Last week, rumors started that the US may skip the Expo entirely as organizers are struggling to raise the US$65 million needed for a pavilion. The UK has recently reshuffled its “Expo Task Force,” and has yet to break ground on its pavilion.

Of course, things are different for most Latin American countries. China has already told Colombia and others that it “would try its best to meet [their] needs including both financially and technologically (sic).” Other Latin American and Caribbean countries are building joint pavilions instead of individually. El Salvador and Costa Rica, for example, are part of a nine-country Expo bloc. Ten countries in the Caribbean have also banded together for a joint pavilion.

Still, there are vows of participation and then there are official contracts. Many of the countries above, including Venezuela as of last October, have yet to officially sign on the dotted line or appoint a commissioner general to oversee development.

Xi’s Expo “welcome” yesterday may have been less of a friendly gesture and more of a reminder that, recession or not, participation is still expected.

Image: showchina.org