Tag Archives: oil

Ecuador

As Lasso rises, Ecuador could be next leftist LatAm domino to fall

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Former vice president Lenín Moreno hopes to keep the Latin American left’s hopes alive with a victory in Ecuador on Sunday. (Facebook)

No one has more riding on the outcome of the April 2 presidential runoff in Ecuador than Julian Assange. 

The Wikileaks founder has been shacked up in the Ecuadorian embassy in London since 2012. Officially, Assange is evading an extradition to Sweden to stand trial for sexual assault charges. Ecuador’s outgoing president Rafael Correa granted Assange asylum five years ago, a populist move responding to the eccentric Australian native’s fears that he might ultimately be subjected to the grips of US extradition.

If one-time frontrunner Lenín Moreno, Correa’s former vice president, and the heir to Correa’s self-proclaimed ’21st century socialist’ Alianza PAIS movement, wins Sunday’s election, Assange can rest assured that Ecuador’s government will not revisit that arrangement anytime soon.

But if center-right insurgent Guillermo Lasso has his way, he will evict Assange from from Ecuador’s protections within 30 days of taking office.

Though Assange’s fate is drawing global headlines, Ecuador’s election represents a fascinating showdown between two very different policy views for the country’s future outcome — and a referendum on Correa’s decade-long rule. The result will hold deep consequences for the country, its rule of law, its electorate and Latin America generally.  A country of 16 million that, since 2000, has used the US dollar as its currency, Ecuador is today the eighth-largest economy in Latin America.

It’s the latest battleground in a series of contests in the mid-2010s that have generally brought setbacks to the populist left. A Lasso victory on Sunday could add pressure to Venezuela’s increasingly autocratic government, and boost conservative opposition hopes in Chile’s elections later this year and in Bolivia’s in 2019.

Guillermo Lasso narrowly forced his opponent into a runoff in what is now a clear referendum on Rafael Correa’s decade-long presidency. (Facebook)

Former bankers do not typically make great politicians, but Lasso narrowly forced a runoff by holding former vice president Lenín Moreno to just below 40% in first round on February 19.

That gives Lasso a head-on opportunity to face Moreno without dispersing multiple opposition forces within Ecuador. Third-placed candidate Cynthia Viteri, a former legislator and a social conservative, has endorsed Lasso. Fourth-placed Paco Moncayo, a leftist who served as Quito mayor from 2000 to 2009, has refused to endorse either of the two finalists — a snub to Correa and Moreno.

Viteri’s support and Moncayo’s ambivalence have both boosted Lasso’s runoff chances, though it may still not be enough — Lasso finished more than 11% behind Moreno in the first round. Indeed, most polls give Moreno a slight edge over Lasso, a longtime president of the Bank of Guayaquil whose political experience is negligible — he served briefly as ‘superminister for finance’ in 1999 during the scandal-plagued administration of Jamil Mahuad, sentenced to a 12-year prison sentence in 2014 for embezzlement. In 2012, Lasso formed a new opposition party, Creando Oportunidades (CREO, Creating Opportunities) to back his presidential ambitions in 2013. Lasso finished a humiliating second place (with just 22.7% of the vote) to Correa, who won a first-round victory with 57.2% support. But that race put Lasso in position to consolidate support as the chief opposition candidate this year.  Continue reading As Lasso rises, Ecuador could be next leftist LatAm domino to fall →

Iran, United States

One chart that explains Obama era Middle East policy

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BoA ChartChart credit to Bank of America.

Within a half-century, the most important fact of the Obama administration might well be that it presided over an energy boom that de-linked, for the first time in many decades, US dependence on Middle Eastern oil and foreign policy.USflagIran Flag Icon

No other fact more explains the deal, inked with the Islamic Republic of Iran, that brings Iran ever closer into the international community — and no other fact brings together so neatly the often contradictory aspects of US president Barack Obama’s policy in the Middle East today.

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RELATED: Winners and losers in the Iran nuclear deal

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With the exception of a small peak in the mid-1980s, when prices tanked after the oil shocks of the 1970s, US imports of foreign oil are lower than ever — and that’s a critical component to understanding Tuesday’s deal between the P5+1 and Iran. Thanks, in part, to the shale oil and fracking revolutions, US oil reserves are at their highest levels than at any point since 1975. Bank of America’s chart (pictured above) shows that US dependence on foreign oil — net imports as a percentage of consumption — dropped to 26.5% by the end of 2014.

Making sense of the Obama administration’s Mideast contradictions

One of the sharpest criticisms of the Obama administration is that it has no overweening strategy for the region. On the surface, the contradictions are legion. To take just three examples: Continue reading One chart that explains Obama era Middle East policy →

Scotland, United Kingdom

Scotland votes: Should it stay or should it go?

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Today, residents of Scotland, a region of 5.3 million people, will vote in referendum that’s been scheduled for 19 months, and that will ask one simple question:scotlandUnited Kingdom Flag Icon

Should Scotland be an independent country?

The answer could change the economic, social and cultural outcomes of the lives of both English and Scottish residents for generations to come.

With polls set to open shortly, Suffragio looks at ten policy (and other) issues that Scots are considering as they cast their ballots, either to become an independent state or to remain part of the United Kingdom. Continue reading Scotland votes: Should it stay or should it go? →

Venezuela

Chavismo is a continuity of — not a rupture from — the petrostate

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I tried to plumb deeper into the role of Petróleos de Venezuela, S.A. (PDVSA) before the election, and I argue in The Atlantic this morning that chavismo really marks more of a continuity with than a rupture from the petrostate clientelism that preceded Hugo Chávez — both in the 40 years of democracy in the late 20th century, as well as the era of military dictatorship that stretches back to the discovery of petroleum in Venezuela and its widespread export starting in 1918:Venezuela Flag Icon

Chavismo marked a rupture from this system in two ways. First, he diverted a larger share of Venezuela’s oil wealth to the poor than ever before — although the deployment of those funds was never incredibly efficient, nor was it without corruption. Secondly, he flattened the system through his own personality cult. PDVSA, the state oil company, has a stronger brand in Venezuela than the PSUV, the governing United Socialist Party. It was Chávez personally who doled out the gifts

It’s the second part that will make Maduro’s task especially difficult. Chávez would have been a hard act for anyone to follow, but Maduro is a bland apparatchik in contrast whose legitimacy, so long as he remains president, will forever be challenged by his narrow victory . He ran a largely defensive campaign, wrapping himself in Chávez’s legacy. Provided that his victory is upheld, it’s hardly a mandate forchavismo, let alone madurismo, but it’s not at all clear whether chavismo would ever actually work without Chávez, the personal embodiment of the latest iteration of Venezuela’s petro-state clientelism

That’s why, I argue further, Nicolás Maduro will have a very hard time maintaining the system Chávez developed, and why I think Venezuela is headed for more difficult times before it sees better times.

I argue that not only is Venezuela suffering from a sort of ‘Dutch disease’ on steroids, but that the petrostate mentality has skewed the relationship between the government and the governed:

As in oil-rich Middle Eastern countries, resource wealth skews the link between the state and its citizens… and the traditional link between government and voters is turned upside down: instead of an electorate of taxpayers holding its leaders accountable for good government, voters look support politicians who can offer the largest slice of Venezuela’s oil wealth. That’s why domestic subsidies make Venezuelan gasoline prices the world’s cheapest, at just six cents a gallon.

That was true before and during the Chávez era, and it will certainly be true after Chávez. What seemed like a relatively mature democratic system before Chávez was always institutionally weaker than it looked from the outside.

I also caution that the opposition will have to do much more than just win an election in order to break the vicious cycle of Venezuelan (mal)governance:

But if Maduro’s victory is somehow overturned and Capriles becomes Venezuela’s next president, he’ll need a lot more than a change in expectations to put Venezuela on a firmer footing. The opposition’s hopes are based on what Paul Krugman might call the “hada de confiaza” — a Venezuelan confidence fairy.

Venezuela

Venezuela’s economy is tumbling despite oil prices over $100/barrel

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I wrote a piece for The New Republic earlier today about the state of the Venezuelan economy and the difficult issues that await the next president, which for now looks like it will be Nicolás Maduro following Sunday’s landmark presidential election.Venezuela Flag Icon

I argued that although some of the economic reforms that Maduro could implement are relatively simple, he may well lack the charisma, the political capital (both within and outside the chavista camp) and the funds to pull Venezuela back from the brink of two devaluations in 2013, the threat of even higher double-digit inflation, increasing reliance on imports for basic staples, a crumbling oil infrastructure, an atrophied private sector and difficulty accessing international — and even Chinese — finance:

It’s now up to Maduro to sort all of this out in the background of a legitimacy crisis. Economically speaking, there are several options that could help. Venezuela could claw back some of its oil revenues by reducing subsidies to Cuba and the rest of the Caribbean basin. He could reverse the trend of ad hoc expropriations under Chávez that left the public sector bloated with bureaucrats, the private sector fearful, and the non-oil industry atrophied. He could direct more capital to be re-invested into PDVSA, the state-owned oil company, to boost oil production that’s fallen by up to a third in the past 15 years, and to develop refining capacity, especially in light of the ultra heavy crude oil that’s increasingly being drilled from the interior’s Orinoco Belt. Venezuelans believe cheap gas is virtually a constitutionally protected right, and an attempt to eliminate it pursuant to an IMF loan package in 1989 is widely seen as the catalyst for the deadly Caracazo riots later that year, but Maduro could gingerly begin to reduce the domestic subsidy that keeps Venezuela’s gasoline the cheapest in the world at about six cents per gallon.

United States, Venezuela

Growing U.S.-Venezuelan commercial ties won’t lead to diplomatic thaw if Maduro wins

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CARACAS, Venezuela — I reported earlier today in Deutsche Welle on the state of U.S.-Venezuelan bilateral relations, which aren’t exactly gangbusters, if you’ve been paying attention for the past 14 years.

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The bottom line is: don’t expect acting president Nicolás Maduro, if he wins, to transform the chilly relationship between the United States and Venezuela.

To me, however, the more interesting factor is the commercial ties between the two countries, already strong throughout the reign of the late president Hugo Chávez, but now growing ever faster as Venezuela’s economy sputters and becomes increasingly import-dependent:

Venezuela’s obvious top export is oil – and the United States is its top customer, and that’s been true during both the Bush and Obama administrations, even when relations were at their worst. The United States purchases up to 900,000 barrels of oil a day from Venezuela – it officially funds around 40 percent of Venezuela’s export receipts. Given the complex financial arrangements between China and Venezuela and Venezuela’s subsidies to Cuba and to the rest of Central America and the Caribbean, US demand for oil has directly funded Chávez’s government, despite the rhetoric against the supposedly evil, imperialist gringo empire.

But precisely because of Venezuela’s dependence on the oil industry, the other sectors of its economy have atrophied, especially under the business climate during the Chávez era, when domestic and foreign businesses alike were subjected to ad hoc expropriation. That’s made Venezuela increasingly reliant on imports of staples, such as food and even fresh produce. Venezuela is even starting to import refined oil products, in part due to a gasoline subsidy that keeps gas prices at the lowest level worldwide.

Obviously, U.S. policymakers would prefer that Henrique Capriles, the opposition candidate, wins the election. But given the incumbent advantages of the Maduro campaign, who has inherited the political infrastructure of his predecessor, Maduro’s election seems much likelier. If the Venezuelan economy does continue its downward spiral in the months and years to come, Maduro could well use anti-American rhetoric to deflect criticism from the failures of economic policy.

That means bilateral relations might get worse before they get better.

It’s uncertain whether that growing dependence would improve ties with the US – it’s easy to envision a fall in gas prices or a financial crisis result in even more brinksmanship in a Maduro administration as a distraction from harder budget choices.

Photo credit to Kevin Lees — Caracas, Venezuela, April 2013.