<a href=www.latintrade.com>LatinTrade May, 2003

Javier Corrales, associate professor of political science at Amherst College, begins his book with a troublesome fact: According to a survey by Latinobaró-metro in 2001, less than 5% of Latin Americans have a high level of confidence in political parties. In some countries, political parties are among the most discredited institutions, ranking well below the armed forces.

Even with those results, Corrales rails against the theory that political parties are coming to an end. He believes they continue to play a fundamental role in governing a country. He also maintains that political institutions do not reflect society’s sentiments but, rather, mold the preferences and attitudes of the population, serving as the architects of public opinion. At the same time, they are a channel of communication between citizens and the executive power, possibly the main conduit of communication.

The author looks at the period when free market reforms were implemented in Latin America and the role of political parties in that process. Several studies regarding that era focus on the conflict between the government and political opposition, or between the government and interest groups. But Corrales believes the most crucial relationship is between the executive branch and the ruling party. “If the president manages to get the ruling party to cooperate with the reform process, the state’s capacity to govern the economy will increase,” he writes. To prove his hypothesis, he dedicates a large portion of the book to two countries that launched free market reforms under similar conditions in 1989 yet yielded different results: Argentina and Venezuela.

That year, the newly elected governments of Carlos Andrés Pérez in Venezuela and Carlos Saúl Menem in Argentina initiated similar economic reforms. Both presidents belonged to populist political parties: Pérez to Acción Democratica (AD) and Menem to the Peronist Party (PJ). During his first term, Menem was able to rein in a huge fiscal deficit and eradicate the inflation that had plagued the government of his predecessor, Raúl Alfonsín. This miracle won him PJ approval for his privatization plans and deregulation even though the free market practices Menem implemented differed from the ideology of his own party. Menem knew it would be difficult to rule without the support of the Peronists. In 1990, he declared: “There will be no national unity if there is no unity within the party.”

In Venezuela, on the other hand, philosophical differences between Pérez and AD led to the country’s worst political crisis in 30 years, characterized by explosive popular protests, two coup attempts, changes in the cabinet, interruption of reforms, an increased crime rate and economic woes. Pérez was finally forced out by the Venezuelan legislature in 1993, replaced by another former president, Rafael Caldera, who sunk the economy further when he curtailed reforms then later tried to implement them again under Agenda Venezuela. Hugo Chávez, Caldera’s successor, has opted to attack the party system, depending instead on the military. The current crisis in Venezuela, according to Corrales, exemplifies the problems caused by the weakening role of parties in political life.

The author applies his theory to eight other Latin American countries, including Cuba. When Fidel Castro lost subsidies from Moscow at the beginning of the 1990s, he had to adopt market reforms, open the country to foreign investment, allow certain independent businesses and legalize the dollar. Many believed such reforms would make the system crumble as it broke the structure of privileges. But the Cuban leader maintained strong state participation in new capitalist corporations, restricted private activity and even controlled the hiring of staff in foreign companies, which allowed him to place the most loyal government supporters in the best jobs, thus consolidating his support. 

Presidents Without Parties revives the theory that political parties are indispensable in order to rule. As he concentrates on the relationship between ruling parties and the executive power, however, Corrales fails to place enough emphasis on current economic phenomenon present in the crisis in Venezuela and the disaster in Argentina. Nevertheless, in a period when traditional political parties are distrusted and there is a boom in popular or marginal institutions, this book addresses an important issue in the debate about the future of Latin America.

Author: Andrés Hernández Alende

05/05/2003 - Source: <a href=www.latintrade.com>LatinTrade-Latin American Newsletters

While President Lula da Silva has been thrashing out his tax and pension reforms, battling state governors, party radicals and union discontent (all covered in this issue), he has not shied away from presenting a grand 'development vision'.

Sharply critical of his predecessor Fernando Henrique Cardoso for concentrating on economic regeneration at the expense of any broader goals, Lula has pursued a vision that ironically bears some resemblance to that of the dictatorship: a more independent foreign policy breaking with traditional adherence to US-backed positions.

In Lula's vision, Brazil asserts its leadership in Latin America and embraces globalisation in so far as it benefits the country. Lula's strategy for moving Brazil away from merely reacting to the US hemispheric cue ball is to thrust the Mercosul trading bloc to the top of his foreign policy agenda and deepen integration with South American neighbours. He set himself the task of meeting every political leader in the region, something he will achieve soon when the leaders of French Guiana, Guyana and Suriname visit.

Earlier this month, he signed a 'strategic alliance' with Peruvian President Alejandro Toledo, which is a blueprint for a free trade agreement with the Andean Community, the regions' other big trading bloc. He met Venezuela's Hugo Chávez, who has expressed a keen interest in joining Mercosul, on 25 April and meets Bolivia's Gonzalo Sánchez de Lozada and his cabinet on 29 April.

Stengthening Mercosul is a strategic priority for Brazil: a ballast against US unilateralism. Lula has been working to shore up support within the bloc ahead of Free Trade Area of the Americas' talks with the US. He sent personal letters to his counterparts in Argentina, Paraguay and Uruguay calling for a joint position on services, government purchases and investment.

The problem for Lula is that Mercosul is the centrepiece of his vision and it looks precarious: the bloc's future depends upon the outcome of Argentina's presidential election and if a new leader eschews Mercosul for closer ties with the US (see page 8). Uruguayan President Jorge Batlle, fresh from visiting Washington, is pushing for 'no more delays' in trade talks between Mercosul and the US. He visits Lula on 10 May.

Brazil is frustrated with Mercosul's trade spats, the most recent example being Argentina's decision to levy a duty on Brazilian sugar. This belies any common stance on agriculture before the FTAA. Brazil could be forced to start talking bilateral trade with the US after all.

05/05/2003 - Source: <a href=www.latintrade.com>LatinTrade-BNamericas

Venezuela's largest steelmaker, Sidor, has introduced an energy saving plan in the face of possible power rationing on account of the currently low water levels in the Guri reservoir, the hydroelectric source for the Guayana region where the company is located. "We do not have a contingency plan as such to deal with rationing, what we do have is an energy savings policy," a company spokesperson told BNamericas. The steelmaker established last year an across-the-board program seeking savings in its operational and administrative areas. One of the first measures to be introduced was the use of scheduled maintenance shutdowns to detect and gauge opportunities to save electrical energy. This measure was extended to include availing of the unscheduled stoppages provoked by lack of materials during the general strike in Venezuela at the end of last year and early this year.

Industrial services management at Sidor estimate the energy savings plan will reduce consumption by 743 million KWH a year. By far the heaviest consumer of power at Sidor is the electric arc furnace steelmaking area, accounting for 75% of the total; followed by direct reduction, hot and cold rolling, ancillary services, maintenance and finally the administrative areas. Meanwhile other big consumers of hydroelectric power in the region who are dependent on the Guri reservoir are also taking measures to deal with the situation. Local aluminum maker CVG-Alcasa needs large quantities of power to operate efficiently. "As there could be problems with power supplies from the Raul Leoni hydroelectric power station which is fed by the Guri reservoir, and almost all our lines use electric power, we do have contingency plans and we are looking at measures to take," an Alcasa spokesperson said. The reservoir is located 90km up river from the confluence of the Caroni and Orinoco rivers in Bolivar state. Ciudad Guayana-based Sidor currently produces some 3.2Mt/y steel. The Amazonia consortium - made up of Latin American steel companies Sivensa (Venezuela), Siderar (Argentina), Usiminas (Brazil), Tamsa and Hylsamex (both Mexico) - controls 70% of the company and Venezuela's state heavy industry holding company CVG has the other 30%.

entrepreneur.com May 05, 2003 By Joshua Kurlantzick

Economic indicators aren't too optimistic, particularly for small companies. But if the past few years have taught us anything, it's that the news isn't all bad.

In March, as the U.S. military began its invasion of Iraq, many American businesses feared the impact of the battle on commerce. Yet they hoped a quick victory would provide a post-war boost to the economy. An end to the war, they hoped, would prompt exuberant and relieved consumers to open their wallets, depress the price of oil, lead to increased spending on domestic travel, and allow companies to more easily make plans for capital spending.

Unfortunately, it does not appear that a post-war boom is likely. In fact, many economists and businesspeople now worry that America actually is headed for another recession--one that could prove the final blow to many small companies already struggling from more than two years of economic weakness.

The signs are not good. A well-known index of economic indicators, the Conference Board report, fell in March; meanwhile, March's index by the Institute of Supply Management, the nation's leading forecaster of manufacturing activity, dropped below 50, signifying that the manufacturing sector is contracting, and employers eliminated more than 100,000 jobs in March, after slashing nearly 300,000 the month before. Overall, companies are hiring at their slowest pace in more than a year. "It does appear increasingly likely that we're headed for another recession," says Robert E. Scott, an economist at the Economic Policy Institute, a Washington, DC, think tank.

"It's one of the most difficult periods I've ever seen," concurs Al T. Lubrano, president of Technical Materials Inc., a Lincoln, Rhode Island, company that manufactures specialty metal products. "Where's the hope on the other end?"

Unlike in the past, economists say, this war has not--and will not--provide much stimulus for U.S. economic growth. "Despite the defense spending for the Iraq war, the amount of spending this time is still quite small, proportionally, compared to previous conflicts," says John Nye, an associate professor of economic history at Washington University in St. Louis, Missouri.

What's more, the end of the war in Iraq has not significantly reduced the uncertainty felt by many Americans--an uncertainty that keeps consumers from spending as much as possible and prevents businesses from making long-term plans. Although the price of oil has dropped, America still remains dependent on potentially unstable nations--Nigeria, Venezuela--for a considerable percentage of its petroleum.

Many U.S. businesses and consumers remain unconvinced that another war is not on the horizon. "The victory in Iraq hasn't resolved this uncertainty, because we don't know it will be the last conflict," says Joel Marks, executive director of the American Small Business Alliance, a Washington, DC, trade group. "Given the fact that we're continuing to fight against terrorism, we don't know that we won't have a conflict soon with Syria, or Iran, or North Korea."

Numbers Don't Lie Indeed, the Federal Reserve's weekly assessment of lending to businesses dropped throughout April, suggesting that most companies are holding off on new investments. As Craig Thomas, an economist at West Chester, Pennsylvania, forecasting organization Economy.com, notes: "Why would anyone want to invest in equipment [right now]? I just don't see it."

Meanwhile, housing construction fell in March, suggesting that American consumers, who are carrying higher levels of personal debt than they did during the 1991 Gulf War, also are becoming more cautious. In the past, the government was able to stimulate spending and growth by slashing interest rates, but the Federal Reserve has cut rates 12 times since 2000, to its current rate of 1.25 percent.

The arrival of SARS in North America has further heightened uncertainty. Already, Stephen Roach, chief economist at Morgan Stanley, has predicted that the world will fall into recession this year, in part because of SARS. "Right now, SARS is in Toronto, and we've seen how it's decimated the economy of that economically powerful city," says Marks. "Tomorrow it could be in Des Moines."

SARS, the possibility of future conflict and the continuing threat of terrorism also are complicating shipping logistics, cutting into companies' profits. For example, over the past six months, freight rates have risen by more than 30 percent for companies shipping through the Middle East, as marine insurance companies raised rates on shippers since the Iraq war by as much as 50 percent. In fact, according to marine insurance companies, shipping rates have been pushed to their highest level in years.

More expensive logistics, along with increased tension between Europe and the United States due to friction over the Iraq war, is putting a damper on global trade. "The pace of free trade expansion has slowed drastically," says Scott. "If we engage in more conflicts in the Middle East, that could further alienate Europe, which is already hurting economically, and damage trade." Indeed, unlike in the wake of the 1991 Gulf War, when Europe and Asia were growing and helped pull the American economy out of recession, today Europe and Japan are struggling on the verge of their own recessions.

America's burgeoning deficits--its national deficit and trade deficit with other nations--also are constraining the economy. The federal government will run a 2003 deficit of at least $200 billion, and states also are facing their biggest deficits in ages. Many states are taking almost laughably drastic measures: In Missouri, the governor has ordered every third lightbulb unscrewed in state buildings. At the same time, as the American trade deficit has grown, the U.S. has become increasingly dependent on foreign capital to finance growth. If that capital pulls out, it could shave as much as 10 percent of U.S. growth and drastically weaken the dollar, Scott says.

Small Companies Bracing Themselves As all these signs of economic weakness build, small companies have the most to lose. Thus far, small firms have largely been shut out of contracts for post-war reconstruction in Iraq, though the Bush administration has promised to share the wealth. And according to Marks, many small companies do not possess the kind of cash reserves to deal with another prolonged period of economic downturn, since banks have become more willing to turn away small clients than they have larger companies. "Small companies have spent down much of their cash already, in the previous recession, and they didn't have time to build it up again," Marks says. "There's numbness out there in the small-business community, wondering whether they can hold on to the cash they have and numbed by each economic shock."

Lubrano agrees. "I look at competitors in the field, and I see many of them are going bankrupt," he says.

Meanwhile, small companies rarely have the capital needed to create the redundant, alternative supply chain networks that can allow goods to bypass world hotspots and generally avoid logistical problems. And owners of small companies often are ill-prepared to deal with the effects of continued anxiety and uncertainty on their workers, since few have the kind of dedicated in-house counseling services large companies employ.

Small companies also usually are more reliant on obtaining business from other entrepreneurs. "Unlike bigger companies, small firms usually depend on getting paid by a large number of small clients, many of whom can't pay now," says Marks. "Small companies can't extend them the kind of credit they need to last until an upturn that big corporations could."

Always a Silver Lining But not all signs of the economic future are negative. In the immediate aftermath of American troops arriving in Baghdad, stock markets, which can be leading indicators of economic expansion, posted stronger gains than they had since September 11. What's more, since the beginning of the Iraq war, the price of oil has fallen by more than 25 percent. A decrease in the value of the dollar actually could help American entrepreneurs, as it would make them more competitive with companies from the developing world.

And despite high levels of debt, American consumers often prove willing to keep shopping. Corporate credit became slightly easier to obtain in March. The fact that companies have spent so little over the past three years ultimately will leave them with no option other than to increase business spending. Last week, Federal Reserve Board Chairman Alan Greenspan told Congress the economy is poised for growth even without further tax cuts--though the Bush administration continues to push for a $550 billion, 10-year tax-cut plan that may or may not stimulate the economy. (In February, a group of 10 Nobel Prize-winning economists concluded that the tax cuts would not have a significant short-term stimulus effect--some leading economists worry that further tax cuts could exacerbate federal and state deficits.)

Perhaps most important, small companies have internalized lessons from the 2000-2001 recession to prepare themselves for more economic turbulence. "Small companies that are around now are leaner than they were two years ago, and they've learned how to cut fat or adjust in other ways--merging with competitors, going into niche markets, renegotiating their contracts, conserving cash," says Marks. "Three years ago, two guys and an idea could raise capital; today those guys are living in their parents' basements."

"If you haven't already prepared for economic tough times, either by cutting all extraneous things or moving into niche markets where you can survive a downturn," says Lubrano, "after all we've been through the last few years, you have yourself to blame."

Forging Ahead Nothing's certain in today's economy, but it appears business owners aren't letting a potential recession stop them from seizing opportunities for growth, according to an OPEN Small Business Network 2003 Monitor from American Express. While the number of small businesses reporting that they foresaw growth opportunities for their companies in the next six months fell to 56 percent, down from 64 percent last fall, growth remains their number-one priority.

These business also plan to add jobs--35 percent of those surveyed indicated they would hire full- or part-time staff within the next six months. The reasons for the additional new-hires are varied, with 48 percent saying it's to help drive business volume increases; 34 percent, for new business ventures; and 10 percent, to fill a vacancy that's been open for a long time.

And there's more good news: While these companies position themselves for growth, they're also cutting costs, with 30 percent cutting back on expenses and 24 percent cutting back on personal spending. Fewer businesses (57 percent) are reporting cash-flow woes than they were in the fall (63 percent).

From: Jessica Rosenberg Date: Jueves, 08 de Mayo de 2003 02:48:51 p. To: jessica@obraweb.com   El Arca de Noé Ricardo Ball   Domingo, 4 de mayo de 2003   Aparte de nuestro gusto por las arepas, los venezolanos distamos mucho de ser un pueblo homogéneo. Tenemos gustos distintos y gracias a Dios, todavía gozamos de la libertad para escoger. El sistema democrático es un corolario de nuestro comportamiento.   Los argumentos a favor del candidato único son muchos, pero el más contundente parece ser que sin éste el presidente Chávez es imbatible. Desafortunadamente, si eso es así el ganar unas elecciones con el sólo propósito de sacar a Chávez del poder no es una solución duradera en el tiempo y asegura un retorno del mandatario al poder.   La experiencia en este país, las recientes elecciones primarias en Argentina y las ultimas encuestas en el Perú, nos demuestran la cantidad de ex presidentes en Latinoamérica que resucitan principalmente debido a que los gobiernos que los siguieron fueron incapaces de revertir las malas políticas impuestas por ellos. Como muchos somos nostálgicos por naturaleza, nos parece que el pasado fue mejor y caemos en el engaño de elegir líderes que en un momento fueron considerados como fracasados, pero que en vista de las nuevas realidades son investidos con aura de libertadores.   La Coordinadora Democrática ha sido una solución para enfrentar un problema coyuntural. Sin embargo ha sido el pueblo Venezolano quien ha dictado la pauta y los ha obligado en varias ocasiones a modificar sus planteamientos. Sin embargo, la Coordinadora Democrática no ha sido electa. Es una organización que acoge a todos los sectores descontentos de la realidad venezolana y que entre sus miembros distan mucho en estar de acuerdo en sus soluciones. El hecho de que muchos de sus integrantes hayan sido miembros de gobiernos anteriores no los descalifica ya que ellos y otros líderes que han emergido han hecho un extraordinario trabajo y han demostrado su capacidad individual de lograr la creación de un cuerpo que mal que bien ha canalizado el llamado de la oposición al cambio.   Sin embargo el hecho de que haya sido una pieza importante en esta época de protesta publica hacia el régimen, ello no implica que sean el vehículo que gobernará el destino de la nación. Si bien es importante la unificación de los factores de oposición para que el referéndum sea exitoso y lograr parar la onda expansiva de la Revolución Bolivariana, la solución no está en seleccionar a dedo un vehículo o una persona sino en lograr que la propia población se convenza y vote por el líder que desea.   Pareciera que en la medida en que existan más candidatos u opciones para la oposición, en esa medida se diluyen los votos lo cual evidenciaría un triunfo para el Presidente Chávez. Desafortunadamente si eso es así, habrá que respetar los resultados. Por eso es muy importante que la oposición y sus integrantes, del bando que sean, presenten sus respectivos proyectos económicos, políticos y sociales con suficiente antelación y darle la potestad al electorado de elegir el programa que más los convence. Ya sabemos cual es el camino que quiere tomar el Presidente Chávez. Pero aparte de sacarlo democráticamente del poder, la oposición no maneja de sus líderes ninguna información coherente sobre las políticas a seguir si acaso llega a tomar las riendas del poder y eso es algo que a muchos no los convence.   (*): Economista   email: ricardo_ball@hotmail.com   www.analitica.com