Wednesday, October 01, 2008

Argentina and Venezuela – Just Friends?

Guest Post by AIO

I want to write a bit about Venezuela and Argentina. No, not about the trial exactly, though I do have a couple thoughts there. (Besides the fact that Guido, showing up for his testimony, looked borderline svelte. His personal trainer is obviously good enough to make a fortune from future clients. Maybe Hugo should find out who it is?) I really can't say I understand why the Argentine government is SO up in arms about the whole thing, for two reasons. After all, the trial is all about the pressure the defendant - and the others who pled guilty - were putting on Guido to make him take the fall and keep embarrassing news from getting out. There's nothing that says anything they told him has to be true - you can pressure a person with lies as well as with the truth. And second, let's say they were telling the truth and the money really was going to go to Cristina's campaign. It didn't have to be a formal donation - and it's hard to believe that such a large quantity of cash would be properly donated, anyway. (Even Argentina must have some kind of campaign finance laws which either preclude that or require the source of donations to be made public.) Except at a very small local level, there's simply no way in this day and age that a candidate can know the source of all of their funds. I can name a number of similar examples, including in the U.S., of campaign donations that would have been refused at the get-go if they had but known. A mala fide campaign contribution does not a mala fide candidate make. There's simply no evidence to suggest that Cristina personally knew anything about this, and I'm not going to say she did. Of course, some of Shakespeare's words come to mind - "Methinks the lady doth protest too much" - but that would just be guessing, and I'll leave that to someone else. Why she has reacted the way she did, and continues to act that way (including having people close to her attack), could be ammunition for that argument.

I don't want to talk about bonds, either. Miguel has provided lots of details on those, and to me the only thing left to ask is will there be any more sales. It doesn't seem likely. On the Venezuelan side, with oil prices well off their record high, who knows if Hugo will have the cash available to buy more? But prices are still high, so he very much might, so the more compelling reason for me to say that the sales are over is the activity on the Argentine side. When the last billion worth was sold a couple of months ago, the reaction in Argentina was very strong against the usurious (14.87%, I think - what kind of friend treats a friend like that?) interest rate attached to the bonds. And since the Argies knew they weren't going to get a better deal anywhere else, they've been trying very hard since then to fix that. First, the announcement that they will pay their Paris Club debt. Then, that they will consider an offer on the bond holdouts, the folks who still hold debt paper from before the 2001/2 crisis and default. The first one doesn't surprise me much, but the second one sure did, and really sends a message of how seriously they're trying to find alternatives to Hugo, or at least just get that interest rate down to something tolerable. We'll have to wait and see just how seriously they approach these things (words and actions don't always correspond when your name is Kirchner), but for now, there is a clear message. If they do follow through, then there's no more need to rely on the Bank of Hugo.

But what do these two things mean for Venezuelan-Argentine relations? Are the Argentines mad at Hugo for embarrassing them, for getting Cristina into a situation she wasn't prepared for, and now feels backed into a corner? Will Hugo no longer bailing them out with a spare billion here, a spare billion there, mean Cristina has to quit making nice with him every time they meet? Like when Hugo nationalized Sidor, and she didn't raise much fuss even though the company was largely-owned by a major Argentine firm.

It's easy to say things will change - they certainly have already, on the surface. But beyond that, I don't see substantial differences on the horizon.

Why not? Well, look at what has been happening since. It makes some sense to for her to turn her back on the U.S. OR Venezuela, but certainly not both. The U.S. financial mess has come at a convenient time for her, because she's used it to lash out at George Bush. (Personally, I think U.S. Presidents get far too much blame when the economy goes bad - and credit for when things are good. The U.S. is most certainly NOT a centrally planned economy.) It must beat having to complain about political motivations behind the trial, because this way she can keep blaming Bush and not have to remind people about Guido and the suitcase. Turning towards the U.S. right now, if it was ever even considered as a real option, is certainly not happening. I've read that she's shunned possibilities at the UNGA to see George Bush (one was unavoidable, when they were seated at the same table for the dinner) and even Tom Shannon, whom she received so warmly in B.A. just recently.

She can only pick one, and it will be the one that causes the least pain. Domestically, Cristina would be hurt if she ever turned her back on Hugo, something that you can't say about George! She can paint ending bond sales as a shrewd financial move, one which will save the country a pile of cash - because it will (and is the reason why they should have done those things a LONG time ago, but no!). But there's too many people in Argentina who like Chavez for her to set herself against him and not lose significant political support. (Though there is at least some reason to think that said opinion may be dissipating.) And following the whole farm mess (which isn't really over yet, just off the front-burner for now), along with all the frustration released in support of the farmers, she really needs all of the political support she can get. Every move she seems to make - even her missteps, when you look at the intent behind them - seems designed to garner at least a few more domestic supporters, and/or shore up the ones she already (or still) has.

Maybe Hugo will still have enough cash for another purchase, and want the bonds to be able to purchase a little more goodwill from the ones lucky enough to get in on the deal in Venezuela. He could even want it bad enough that he makes an offer she can't refuse, with an interest rate lower than she could get elsewhere. In that case, Cristina will be glad she kept the doors open to Hugo - she'll mollify her local support, and save some money at the same time. It's hard to blame her for that.

And there's one more thing - both Hugo and Cristina seem to run things by the seat of their pants, reactively rather than proactively. (Maybe they could learn a thing or two from Bush's father about how to "stay the course"?) You can see that very clearly in both of their economic policies, where new measures are announced and instituted with little advance notice, and usually with little to no apparent thought for their long-term impacts. Many policies are implemented just to try to fix and smooth the problems of prior policies. Or, as one Argentine commentator noted, Cristina's description of the U.S. financial crisis as the "jazz effect" was a Freudian slip, given that jazz is all about improvisation - just like her political style.

Cristina offered up a great example her first week as President. Her first state visit was from the leader of Equatorial Guinea, a former Spanish colony in Africa which recently became a player in the oil business. She used their joint press conference to note that E.G. is basically a dictatorship and to say some lovely words about human rights. Didn't anyone tell her that her guest might not appreciate that, that maybe she could have said something after he left rather than when he was sitting right there? Didn't anyone tell her that, if that was her concern, maybe that shouldn't have been her first state visitor? She could have pleased her supporters at least as much by announcing that they had refused the visit on just those grounds, and given the same speech. (Though perhaps, without him there, it would have received less attention, and that's more important than the message? Naaaahhh...) An incredible lack of planning, foresight and common sense.

So just like the economics in Argentina, the politics are about the short view, muddling through trying to do what seems right just at the moment or trying to fix previous errors. Which means that, absent Hugo REALLY screwing something up, Cristina will make an effort to show that she's still on his side. She doesn't have much of a choice.


-The end-

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