Most US citizens don't realize it, but the US government has continued and even intensified its regime change agenda in Latin America and successfully helped reverse the so-called "pink tide" of left-of-center governments over the past ten years, says CEPR's Mark Weisbrot....TRNN
US Interventions in Latin America Continue and Intensify
Greg Wilpert interviews Mark Weisbrot, Co-Director of the Center for Economic and Policy Research in Washington, D.C.
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WHY LATIN AMERICA IS GOING NEOLIBERAL (Part 1)
Let me use Nicaragua as an example. President Daniel Ortega of Nicaragua used to be a Sandinista, and a member of the “pink tide,” but he is being forced to adopt more and more neoliberal policies, for reasons I will explain in a moment.
For instance, two weeks ago the Ortega government announced that Social Security benefits had to be cut, and employee (plus employer) contributions had to be increased, in order to “lower the deficit.”
This is quintessential neoliberalism. Nicaragua’s government creates its own currency out of thin air, and therefore has infinite money to pay Social Security benefits forever. There is no need for tax increases or benefit cuts.
In response to the announced cuts, the Nicaraguan masses erupted in demonstrations so furious that by the fourth day of protests (Sunday 22 April 2018) they forced President Ortega to reverse his neoliberal move.
Some people think that the Western Empire is setting up Nicaragua for a “color revolution.” However the announced cuts were Ortega’s choice.
Why? Why is Ortega adopting more and more neoliberal policies? The reason is that Nicaragua’s huge and growing trade deficit has put Nicaragua’s economy is severe peril. Nicaragua cannot get foreign currencies with which to buy imports.
In 2012 the Ortega government ran the IMF out of Nicaragua. Now, because of economic problems, the Ortega government has asked the IMF back.
In early February 2018 the Ortega government held a series of meetings with IMF representatives, who quietly offered to prop up the Ortega government by giving it loans, on the condition that Ortega went neoliberal, starting with “reducing the deficit” (i.e. starting with gratuitous tax increases, plus gratuitous cuts to Social Security).
Continued...
WHY LATIN AMERICA IS GOING NEOLIBERAL (Part 2 of 2)
The size of Nicaragua’s trade deficit suggests that Ortega has not managed the national economy well during his eleven years in office. It is true that Nicaragua does not have oil like Venezuela, and therefore has fewer things to export, but the trade deficit is out of control and getting worse. It is exploding. See the web site below, and click the one-year button...
https://tradingeconomics.com/nicaragua/current-account
Therefore, unless Ortega can somehow reduce Nicaragua’s trade deficit, or make Nicaragua more self-sufficient, he will be forced to go more and more neoliberal (whether he wants to or not) in order to get foreign currency. Otherwise Nicaragua will starve.
In a desperate quest for foreign currency, Ortega will be forced to take loans, and will be forced to privatize public assets. (That is, sell public assets to foreigners in exchange for foreign currency.) This will make Nicaragua return to having a vast gulf between rich and poor.
It’s depressing, but this is what Nicaragua faces. There would be no problem if Nicaragua had oil, or had a trade surplus, or had a national currency that was accepted worldwide like the U.S. dollar.
If oil prices continue to rise, then Venezuela might be able to offer some help to Nicaragua, but the Maduro government has his own problems.
When commodity prices were high (2000-2014) Brazil had so much foreign currency flowing in from abroad that Brazil started offering international loans in Brazil’s own currency (reals) and in foreign currency. Times were good, even though Brazil had a trade deficit. Many Latin American nations shifted left.
In 2011 the commodities super-cycle peaked. Things started to slip. By 2014 the Brazilian trade deficit became severe. By 2015 the Brazilian economy was deeply in debt (in foreign currency). By mid-2016 Brazil’s elites deposed President Dilma Rousseff in a coup, and imposed neoliberalism on the masses. This was partly because of the elites’ own greed, and partly because it was a condition of IMF loans to Brazil.
Also in 2016, oil prices took a nose dive. They are now rising, but the recovery has been slow. This hurt Venezuela and Ecuador.
CONCLUSION
The Western Empire could use U.S. dollars (created out of thin air) to help many countries, instead of reducing them to debt slaves and neoliberal hell holes.
However the Empire’s evil is only one reason for the “pink tide” retreat. Another reason is market factors like those I have described here.
This is why the corporate media outlets have lately reduced their lies about Latin American “dictators” and “human rights abuses.” Media lies are not necessary. Because of market forces, neoliberalism is now spreading nicely in Latin America.
If Nicarauga had oil they would be subject to a different kind of manipulation.
@ Noah Way...
Upon reflection, I agree with you. Venezuela, for example, has oil, yet Venezuela has economic problems because of what economists call the “Dutch disease” -- i.e. Venezuela’s economy is heavily concentrated on exporting oil.
Since Venezuela is not very diversified or self-sufficient, Venezuela must import most of its food and consumer goods. This is not a problem when oil prices are high, since Venezuela has no trouble getting enough foreign currency to buy imports with. But when oil prices fall, Venezuela faces shortages in imported consumer goods. These shortages, combined with rampant currency speculation, cause inflation.
Therefore it is not enough for a nation to have something to export (e.g. oil). A nation must also be somewhat self-sufficient, and its economy diversified, in order to avoid shortages and economic problems when the nation’s main exports fall in price.
The Maduro government (and the Chavez government before him) has tried to achieve some degree of economic diversification and national self-sufficiency, but it is not easy. People must be given incentives to move out of urban areas and start rural farms. This has been done to some extent, but not nearly enough to meet Venezuela’s needs. Societies have ingrained habits that are difficult to change.
Therefore you are correct. Even if Nicaragua had oil, Nicaragua would probably have the same problems as Venezuela has.
The key is economic diversification and national self-sufficiency.
The USA has very little self-sufficiency, and has the world’s largest trade deficit, but this is not a problem for the US government, since it can create infinite dollars out of thin air, and those dollars are accepted worldwide.
If U.S dollars ceased to be accepted outside U.S. borders, then the USA as we know it would instantly end.
“But when oil prices fall, Venezuela faces shortages”
F them...
F the oil prices? Or F the shortages?
F Matt.
MMT can apply in Venezuela, too. Their sovereign economy could print as much money as necessary to employ / build infrastructure / etc. (in theory, if foreign "interests" refrained from raping and pillaging them for profit).
Have a valuable natural resource just attracts thieves.
Noah Way- The Venezuelans did pretty much everything right, or at least tried to do everything right, to wean themselves off oil dependencey, diversify etc. But they didn't float their currency. Some have pointed out that the coup against Chavez came a few days after he did announce plans to float. But although he survived the coup, it never really happened. All this shows is how terribly, terribly important it is to float. Without it everything else comes to naught, all that effort just defeats itself.
The raping and pillaging is bad, sure. But the mind-control, getting peoples and nations to do the exact opposite of their interest because they "get things backwards" in what they ignore or dismiss as "abstract theory" is worse.
Have a valuable natural resource just attracts thieves
Called the "resource curse".
Seems to me there are perils in floating your currency, too.
But I'm not an economist (praise doG).
F Venezuela...
If karma is real they deserve 8 more years of this... that’s how long these OPEC sobs screwed us...
Neoliberalism is vulnerable since it isn't ethical, e.g. why can't citizens use their own Nation's fiat like the banks do?
But leftist solutions are even less ethical than neoliberalism, which at least appears just (but isn't on closer inspection of its fiat and credit creation systems) and thus can't stand against it.
“why can't citizens use their own Nation's fiat like the banks do?“
They can it’s called “a loan “...
“If oil prices continue to rise, then Venezuela might be able to offer some help to Nicaragua, ”
They have the lowest production costs in Western Hemisphere... ?????
“If U.S dollars ceased to be accepted outside U.S. borders, then the USA as we know it would instantly end.“
LOL that is actually the Trump policy that we Trump voters actually voted for and we are not going anywhere...
[1] “If karma is real they deserve 8 more years of this... that’s how long these OPEC sobs screwed us...”
Many Americans use oil burners to warm their houses during winter. For years Venezuela has provided free heating oil to those Americans. Perhaps you think this is a form of “screwing us.”
[2] “They have the lowest production costs in Western Hemisphere.”
Venezuela’s oil is very sulfurous and “heavy” (i.e. viscous from the presence of natural bitumen) and is therefore expensive to refine. In fact, special refineries are needed.
Oil prices started to plunge on 25 June 2014. By 18 Jan 2016 oil prices had fallen to $25.46 per barrel at a time when it cost Venezuela about $27.62 to produce a barrel of oil. Plus there is the cost of refining, shipping, and storing. So, Venezuela was in the hole financially.
Since then, oil prices have been rising, and are today at $75.72 per barrel. If oil rises above $100.00 per barrel (as appears very likely) then Venezuela’s economic problems will ease.
[3] “LOL that is actually the Trump policy that we Trump voters actually voted for and we are not going anywhere...”
Brilliant.
Meaningless gibberish, but brilliant.
They can it’s called “a loan “... Matt Franko
A bank credit IS NOT fiat but a mere liability for fiat.
Yeah keep dreaming that Trump as POTUS and associated POLICY changes are meaningless...
Wake me up when Treasury and the Fed under Trump intervene in Argentina...
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