Category Archives: South American Economy

No Gas for You

Gasoline in Bolivia is cheap, with a liter running around 60 cents.  Not only is that a steal in comparison to U.S. and European prices, it’s a bargain compared to prices in neighboring countries like Argentina and Chile.  The government accomplishes this feat through heavy subsidization, leveraging its control of the nationalized gas industry.  Yet, as is the natural effect of subsidies, it’s a heavy drain on the public coffers.  And, as one might expect, it presents an attractive opportunity for folks to cross the border from Argentina or Chile and turn a profit.  I’m not sure what the total cost runs, but the Bolivian government felt it grave enough to announce a plan to scrap the subsidies in 2010.  That never happened, as the public launched a series of mass protests that forced the government to yield.

With this background in mind, I was only mildly surprised to hear that gas stations in at least some parts of Bolivia were refusing to sell gas to cars with foreign plates.  When I heard that was due to a new law, I became a bit more concerned.  There are a number of ways to combat the situation short of this drastic step, charging more to foreign motorists being the most obvious.

A quick search on Google cleared things up.  According to this report in La Razon, the “law” I was told about does not exist.  Here’s the real situation:  The law sets the price for cars with Bolivian plates at 3.7 Bolivianos per liter; cars with foreign plates must pay between 8.8 and 9 Bolivianos per liter.

So far so good, from my point of view.  So why are gas stations refusing to serve foreigners at the pump?  Essentially, there’s a bureaucratic hold-up.  The national gas company, YPFB, has yet to generate the necessary paperwork (basically, special receipts) to ensure that sales to foreign motorists are made at the elevated price.

So there you have it.  Not nearly as nefarious as I was led to believe.  Hopefully they’ll fix this little hiccup in a hurry, and foreign motorists will be on their way.  In the meantime, be sure to fill up and carry extra gas before you hit the border.

-NF

 

Who Says State-Owned Companies Can’t Compete with the Privates? Bolivia’s National Airline Bucks the Trend.

I’ve been fairly critical of the Morales administration over the last few months; despite that, I feel the government has done a number of inspiring things.  Giving poor families cash to keep their kids in school probably tops the list, but the government’s success with BoA, the state airline launched in 2009, also deserves mention.  The Washington Post has the write-up:

Bolivian airline a model operation

In just three years, Bolivia’s state airline has pushed aside private carriers, bucking an international trend toward privatisation while becoming the leader in domestic flights for a poor Andean country where flying remains a luxury.

Boliviana de Aviacion (BoA) has abolished first class and sells all seats for the same low prices, marketing the flights with a socialist stamp in keeping with President Evo Morales’ insistence that ‘all are equal’.

The story of how BoA has managed to fly high while governments elsewhere have been privatising or bailing out their state-run carriers reflects shrewd timing in filling a void in the market, as well as cut-rate fares that have attracted a growing clientele.

BoA now controls about half of Bolivia’s domestic air travel market. As its routes and earnings have grown, it has announced plans to expand its fleet by buying as many as six new Embraer 190 planes from Brazil.

‘BoA has been an interesting bet on the government’s part,’ said Armando Mendez, an analyst and former president of Bolivia’s Central Bank. ‘Little by little, it has captured more acceptance and it competes with the private company AeroSur.’

Mendez said BoA seems to be bringing healthy competition to Bolivia, where five airlines battle in a market of about 1.5 million passengers a year. The airline has successfully filled a gap left by the 2007 failure of Lloyd Aereo Boliviano, a former state-run company that went bankrupt after failed attempts to privatize it.

. . . .
BoA won over clients by offering two-for-one deals during its first year in 2009. Since then, it has kept fares low, and its main competitor AeroSur has accused BoA of unfair pricing tactics and subsidies.

While AeroSur charges about $US245 ($A236) for a round-trip adult ticket between the cities of La Paz and Santa Cruz this month, BoA charges about $US190 ($A183). It also offers discounts for the elderly and children.

Look Out Japan, Detroit, Here Comes Mexico

According to the Latin American Herald Tribune, “Mexico set a new auto production record of 2.55 million cars and light trucks in 2011, a 13.1 percent increase compared to the previous year.”  Where are all these cars going?   Although exports to Europe, the U.S., and Canada all saw growth, the biggest growth occurred in the Latin American market.  Exports to Latin American countries grew by more than 55%.  I must say that I’m not terribly surprised.  If my experience in Bolivia is any indication, new cars are flooding the streets at a break-neck pace.

-NF

Contradictions

We all have them.  Actions that are inconsistent with our words, changes in attitude that reveal we weren’t sincere in the first place, etc.  For some reason, though, it seems politicians are the masters of contradictions.  In the case of national leaders, I suppose it makes perfect sense — they are elected by groups of people with diverse and often inconsistent interests.  By trying to please all or most of their constituents, national leaders inevitably paint themselves into a corner.  Then, when it comes time to choose between standing by tough talk or “compromising” (i.e., acting in a contradictory way), politicians do what politicians do.

That’s a long wind-up to announce that I’m upset with Evo Morales and his government’s decision to build a highway through some of the most beautiful rainforest on earth.  I’ve heard a lot about this issue since I arrived in Cochabamba two weeks ago, but I confess that I’m still shaky on some of the details.  In a nutshell, Morales and his MAS administration have brokered a deal with Brazil to construct a highway from Villa Tunari to San Ignacio de Moxos.  The 306-kilometer highway, bankrolled by Brazil and managed by a Brazillian construction company, will cut through the heart of Isiboro Secure Indiginous Territory and National Park (TIPNIS), dividing communities, destroying habitat, and, as roads always do, paving the way for further development and destruction.

Beyond the ecological impact, two factors make this project extremely troubling: (1) the fact that the people living in TIPNIS were not properly consulted; and (2) the fact that this project comes on the heels of President Morales’s inspiring leadership at the World People’s Conference on Climate Change and the Rights of Mother Earth and in passing the Law of Mother Earth.

The people of TIPNIS make the case better than I can:

We report before Bolivia and before the world that our government is breaking the constitution, which they themselves put into law. Also the Environment Act, the Protected Areas Act and many other national laws and international commitments. They are trying to build this road, which would cause the greatest ecological destruction in the history of Bolivia, illegally without respect for the law or the rights of the indigenous peoples who inhabit it.

The road constitutes an attack on the life and culture of the Moxenos, Yurakaré and Chimanes peoples. It would also condemn to extinction the unique fauna and flora of the forest. The rivers, lakes and scenic beauty of the area would be irreparably affected. We ask President Morales that he is consistent with his speech and laws in defence of Mother Earth and the rights of indigenous peoples.

Some links on the issue for those interested in learning more:  here (positive coverage on the economic benefits), here (the full statement from TIPNIS), and here (an analysis from eco Amazonia).

-NF

Latin America Thrives in Financial Crisis

Well, “thrives” may not be entirely accurate, but the region is putting up some impressive numbers during these tough economic times.  My only hope is that this money–and I mean a lot of it–finds its way down to the poor.  Color me cynical, but I’m just not comforted by the notion that ”all boats rise” in flush economic times.  It always seems that the yachts ride high and dry while the dories are lucky to find themselves with a bit less water to bail.  As the New York Times points out, economic muscle can translate into political pull.  Here’s to hoping this occurs, and that those exercising power remember who they serve:  all the people.

-NF

ALBA Summit in Cochabamba: The Andean Block Stays the Course

The leftist Andean block–comprised of Venezuela, Bolivia, and Ecuador–is solidifying its commitment to internal trade and resistance to U.S. “imperialism.”  As the 7th Summit of the Bolivarian Alliance for the Americas concludes today in Cochabamba, Morales, Chavez, and Correa–along with the leaders of Cuba and Nicaragua and the ousted leader of Honduras, Manuel Zelaya–all look to be on the same page.  This alliance isn’t falling apart any time soon.

-NF

Hat tip: Latin American Herald Tribune

From Michigan to Mexico

Allow me to stray just a touch from the geographical boundaries of this blog.  We are seeing more and more U.S. law firms open offices in Latin America; Mexico just gained another.  According to this story from the National Law Journal, Detroit-based Miller, Canfield, Paddock & Stone is opening a branch in Monterrey.  That follows Jones Day’s decision earlier this year to open an office in Mexico City.  Apparently the instability from the drug wars isn’t quite the deterrent some would expect.   

-NF 

P.S. — See this related post on the largest referral markets for U.S. law firms.

Another Blow to Monroe

The Monroe Doctrine, named after the U.S. President who first announced the policy in 1823, has evolved over the years but nevertheless remained true to its central purpose–protecting U.S. interests throughout the Americas.  (History buffs, forgive the oversimplification.)  U.S. policymakers would probably say the doctrine is dead, but that’s a matter of perspective.  Certainly the doctrine informed U.S. policy towards Latin America during the Cold War and, at a minimum, the ghost of Monroe can be seen in U.S. policy to this day.  We still take a special interest in Latin America, almost assuming–largely due to geography–that we are entitled to a greater say in the region than the other nations of the world.   

The merits of the Monroe Doctrine can be debated all day long, but let’s put that to the side for now.  I mention the doctrine only to provide context to an article in today’s New York Times (http://www.nytimes.com/2009/04/16/world/16chinaloan.html?ref=global-home).  China is stepping up its influence in Latin America in a major way, seizing the opportunity provided by the financial crisis to fund projects and lend money when many nations in the region find themselves strapped for cash.  In the meantime, U.S. influence seems to be waning.  Expect the China question–and the future of Monroe–to loom in the background when Obama meets with Latin American leaders this weekend.

-N. Fromherz

Colombia and Venezuela Have “Relaunched Relations”

So said Hugo Chavez after a meeting with Colombia’s Alvaro Uribe on Tuesday.  Apart from rhetoric–which can be very important in international relations–the meeting yielded five agreements in the sectors of finance, trade, and energy. 

-N. Fromherz

Hat Tip: Latin American Herald Tribune (http://www.laht.com/article.asp?ArticleId=331820&CategoryId=10718)

Argentina Approves Plan for Earlier Congressional Elections

The current Congress approved President Kirchner’s plan to move up congressional elections by four months.  The thought, apparently, is that quicker elections will placate voters and lead to more effective government as Argentina struggles to come to grips with the global economic downturn.  With fresh bodies in Congress, chosen by an electorate whose primary concern is the economy, Kirchner feels Argentina will be better equipped to confront the recession in a coherent and unified manner. 

-N. Fromherz

Hat Tip: The New York Times (http://www.nytimes.com/2009/03/27/world/americas/27argentina.html?ref=americas)