As kichnerismo enters its ninth year, the populist economic model is beginning to fray. Price controls and contract abrogation have damaged foreign investment flows. Government expenditures increased last year by 40% while revenues were up by only 30%, according to Universidad Torcuato Di Tella economist Pablo Guidotti. “If the economy slows it will aggravate this fiscal weakness,” he told me in a telephone interview last week.
Normally deficits can be financed in the international capital markets. But Argentina has been cut off since 2001 because it is in default to the Paris Club governments and to private creditors. Mr. Guidotti says the central bank has been “printing” money to close the gap. Inflation estimates by other private-sector economists of over 21% in 2011 support his claim.
The central bank insists that annual inflation is only 10%, and it has used capital controls and market intervention to limit peso devaluation to a similar level. Markets know better. The truth is showing up in the drag on Argentine competitiveness in export markets, i.e., Argentine products are too expensive. It is clear that the peso will eventually face a much larger devaluation and Argentines therefore prefer to hold dollars. But experience tells them that holding dollars inside Argentina isn’t real protection, and tighter capital controls have increased fears of confiscation. This is why Mrs. Kirchner has employed sniffer dogs.
On the fiscal side trouble is also looming. Even with generous central bank accommodation, Mr. Guidotti says, fiscal accounts are “deteriorating.” The government has recognized this and announced that it will reduce subsidies in gas, electricity and water and will stop subsidizing the Buenos Aires subway. While the administration claims the utility cutbacks will only hit the wealthy, Mr. Guidotti says “it will affect almost everybody except the very poor,” who will have to apply for an exemption. Last week ticket prices on the subway in the capital went up by more than 100%. But by all accounts the belt tightening has only just begun.
Border: The helicopter crash Friday that killed Mexico’s top Cabinet official, Jose Francisco Blake, couldn’t have come at a worse time. Cartels are acquiring heavy arms to challenge the state and to move their war to the U.S.
In Mexico, Blake, the Interior Secretary, was the best hope of winning the war against the vicious cartels, who’ve killed as many as 86,000 people.
Blake, 45, had managed to crush the cartels and cut crime in his native Tijuana before he was asked to do the same for the country in the top Cabinet job in 2010.
He had some success — five of the top seven cartel capos were knocked off by the end of his watch.
But he’s the second interior secretary killed in a helicopter crash since 2008, and that leaves a great sense of uneasiness. Mexico’s currency fell on news of his death, the cause of which is still undetermined.
Chevron’s suit alleges that the named defendants, and certain non-party co-conspirators, have used the Ecuador lawsuit to threaten Chevron, mislead U.S. government officials, and harass and intimidate Chevron employees, all in order to extort a financial settlement from the company.
Seven police officers were arrested Friday for allegedly helping assassinate a Mexican mayor.
The arrests came a day after Edelmiro Cavazos, 38, the mayor of Santiago, was buried. His body—gagged, blindfolded, and showing signs of torture—had been found on the side of the road after he was kidnapped.
“They have confessed,” Alejandro Garza y Garza, the attorney general of Nuevo Leon state, said at a news conference.
Six of the arrested police officers, including Mr. Cavazos’s bodyguard, were displayed to reporters. A seventh police officer was detained later Friday.
Mr. Garza y Garza said other arrests were imminent as well.
An eyewitness said a group of at least 15 gunmen, dressed in the uniforms of a defunct Mexican police force, drove up to Mr. Cavazos’ Santiago home in a convoy of SUVs.
Adrian de la Garza, head of the Nuevo Leon State Investigations Agency, said four of the arrested officers had guarded the highway while a group of kidnappers including one of the arrested officers grabbed Mr. Cavazos.
The mayor’s bodyguard, Jose Alberto Rodriguez, who was also arrested, was allegedly grabbed with Mr. Cavazos by the kidnappers, but released unharmed shortly afterward.
During the news conference, Mr. Rodriguez said he was innocent.
The alleged involvement of so many local police in the kidnapping and killing of Mr. Cavazos goes to the heart of Mexico’s security problem, analysts say.
Corruption is deeply entrenched among Mexico’s more than 2,000 municipal and state police forces, as well as in its relatively small federal police force.
Perhaps Felipe Calderon ought to work on that, instead of coming to the USA to criticize us.
About the only good news on this is that at least the policemen were arrested.