Puerto Rico: A few thoughts on the economic crisis

July 1st, 2015

As you already know, Puerto Rico has run up enough debt to become the Greecespot of the Caribbean, which could have been averted, as former governor Luis Fortuño explained yesterday,

Fortuño was governor from 2008 to 2012, and lost since he insisted on doing what needed to be done. Listen to this 2011 interview with John Stossel,

The debt is only part of the problem,

and includes the staggering failure to adequately account for revenues and expenditures

which points to serious structural problems the current governor, Alejandro García Padilla, is not addressing, asking instead bondholders to “share the sacrifices.”

Here’s the situation as I see it:

It is not in García Padilla’s interest to improve the economy

García Padilla’s administration relies heavily on a large bureaucracy, and he knows his predecessor was voted out of office for trying to reduce it. Estimates show that the government of Puerto Rico has 160,000 employees too many. That’s enough of a voter base to keep him in office.

If the U.S. refills the ATM, García Padilla will claim credit for it; if the U.S. doesn’t, he has someone to blame.

And don’t forget that García Padilla and other commonwealth supporters lost miserably during the last plebiscite, when statehood won by approx. 60%. For as long as Puerto Rico remains in a financial swamp, García Padilla knows the question of statehood will be dismissed with “And They Want to Be a State?”
(Or as Ed Koch put it, “The People have spoken … and they must be punished.”)

Again, it is not in García Padilla’s interest to improve the economy.

What amnesty means to legal immigrants

July 1st, 2015

What amnesty means to legal immigrants: Amnesty and open borders activists will tell you “we’re a nation of immigrants,” which in their view justifies granting all the rights of citizenship to anyone arriving to the U.S. In fact, it’s a slap in the face.

Read my article here.

Up next: The King’s Spanish

July 1st, 2015

All this, and grammar, too.

King Felipe of Spain is visiting Mexico, with a new proposal:
The only Spanish language proficiency certificate for the whole planetSpain’s King Felipe presents new test for determining students’ levels, wherever they are

Of course I couldn’t resist the snark opportunity, and my first reaction was, Who died and made you king of the world?, which is not only snarky but also obnoxious, considering Felipe is king since Juan Carlos had to abdicate following allegations of corruption and a dead elephant.

The fact remains, however, that

There are 550 million Spanish speakers in the world, yet no international examination to certify proficiency in the language exists.

So I’m with Felipe and his Mrs., who

presided the presentation of Siele – the International Service for Evaluation of the Spanish Language.
. . .
The new certificate will be available on five continents, but the greatest effort will be focused, until 2018 at least, on three countries: Brazil, with 120 test centers, the United States with 100, and China with 60. More than 15 million people are currently studying Spanish in those three countries alone.

The Instituto Cervantes has more on SICELE (not Siele) here.

Siele? SICELE? We’ll find out soon enough.

Puerto Rico: Countdown to the Greecespot

June 30th, 2015

If you didn’t see this coming, you haven’t been paying attention.

From Drudge:

NEXT GREECE MAY BE IN USA…

Lurking debt threatens cities, states…

Reality hits San Juan streets amid Puerto Rico debt woes…

Businesses shuttered…

Residents living day to day…

Fallout Will Hit Florida…

Investors scramble to avoid losses…

Can’t say we didn’t see it coming: From the October 26, 2013 Economist, Puerto Rico
Greece in the Caribbean
Stuck with a real debt crisis in its back yard, America can learn from Europe’s Aegean follies

Like Greece, Puerto Rico is a chronically uncompetitive place locked in a currency union with a richer, more productive neighbour. The island’s economy is also dominated by a vast, inefficient near-Athenian public sector. And, as with Greece, there are fears that a chaotic default could precipitate a far bigger crisis by driving away investors, and pushing up borrowing costs in America’s near-$4-trillion market for state and local bonds.

I have yet to find any moves by the Puerto Rican government towards structural reforms that would stimulate economic growth, reduce bureaucracy (and the accompanying red tape), and foster a business-friendly environment. Instead, the governor tells bondholders to “share the sacrifices.”

Welcome to the Greecespot.

Brazil: Dilma wants U.S. investment

June 30th, 2015

Dilma Rousseff is visiting Pres. Obama today, and she’s saying she welcomes U.S. business . . . while keeping Brazil’s protectionism:

Brazil’s President Seeks Investment During U.S. VisitBusiness friendly environment is needed to attract investors and restore growth, Rousseff says

Her visit comes amid a widening investigation into alleged price-fixing and corruption surrounding government-controlled oil giant Petróleo Brasileiro SA, or Petrobras. Several Brazilian companies are being investigated in connection with the scandal. Some are cooperating with investigators; some have denied wrongdoing. Some of those executives who have made plea deals have alleged that Ms. Rousseff’s campaign received some of the illegal funds.

Her party created the Foro de Sao Paulo  (initially named Meeting of Left and Anti-imperialist Parties and Organizations of Latin America) in 1990.

UPDATE
Obama: We Have Common Values with Brazil; Similar History – “Similar history”?

Argentina: Buenos Aires closes Sunderland

June 30th, 2015

Apparently the city of Buenos Aires has solved all its problems and is now closing tango venues lacking fire sprinkler systems:

El gobierno porteño clausuró una de las milongas más famosas del mundo
La milonga conocida como Sunderland, y que ahora lleva el nombre de Malena, no pudo abrir sus puertas como lo hace desde principios del siglo pasado debido a una disposición del gobierno de Mauricio Macri.
[My translation:] Buenos Aires’s government shut down one of the world’s most famous milongas
The Sunderland milonga, now named Malena, could not open its doors as it had for nearly a century due to Mauricio Macri’s government ruling.
The restaurant and bar operations are not closed.

The venue also hosts basketball, soccer, rollerskating and martial arts activities. They won’t be able to resume until the fire sprinkler system is fully operative.

Last month the city also shut down the Sin Rumbo milonga.

I was at Sunderland on a Saturday night, where hundreds of older local couples dressed up to dance great tango. Here are Flaco Dany and Silvina showing how it’s done:

Venezuela’s moola from the mullah: Iran’s new $500million credit line

June 29th, 2015

Half a billion, “for peaceful purposes”:

Venezuela, Iran Sign Economic Cooperation Deals; Venezuela Signs $500M Credit Line With Iran

The agreements include pledges to cooperate in economic, financial, technological and scientific fields. Venezuela also signed a deal with Iran for a $500 million credit line to fund the development of joint projects and help Venezuela secure goods that Maduro said were “necessary for the Venezuelan people,” including drugs and surgical equipment, Reuters reported. The two nations also agreed to fund a joint research program in nanotechnology.
. . .
Iran’s Minister of Industry, Mines and Trade Mohammad Reza Nematzadeh reportedly said on Iranian television that the agreement was preliminary and would be reviewed by Iran’s finance ministry sometime in the future.

At El Nuevo Herald,

Reza Nematzadeh señaló que además de esta media docena de acuerdos la comitiva persa sostuvo conversaciones con otros ministerios y con el presidente del Banco Central de Venezuela, Nelson Merentes, quien, dijo, “estaba muy interesado para aumentar y profundizar” las relaciones bilaterales.

My translation: [Iran’s Minister of Industry, Mines and Trade Mohammad] Reza Nematzadeh indicated that, in addition to the half a dozen agreements, the Persian delegation held talks with other ministries and with Venezuela’s Central Bank president Nelson Marentes, who, he said “was very interested in increasing and deepening” bilateral relations.

At PressTV (emphasis added)

Moreover, Iran agreed to transfer its expertise to Venezuela in combating an “economic war” on the Latin American country, Maduro said, apparently referring to Iran’s experience in facing years of US-led sanctions.

The line of credit is part of a larger framework of six economic cooperation agreements with Venezuela.

Back in 2012, when Iran was banned from SWIFT banking transactions, which could have actually kept it out of much of the international markets and made the sanctions even more effective,Iran easily bypassed the problem with an alternative, rogue financial system it help set up with some South American countries, including Venezuela.

The system had already been set up by Iran in anticipation of the SWIFT ban.

For background information on Iran-Venezuela relations, if you can read Spanish, I highly recommend Emili Blasco’s Bumerán Chávez: Los fraudes que llevaron al colapso de Venezuela.

Puerto Rico: the Greece of the Caribbean UPDATED

June 29th, 2015

Puerto Rico joins other defaulting Caribbean spots, and goes from Pearl of the Caribbean to Greecespot.

Why the hey is this man smiling?

Governor: Puerto Rico near ‘death spiral’

Puerto Rico can no longer make payments on its $73 billion in debt, according to Governor Alejandro Garcia Padilla, who warns the island is perilously close to entering a “death spiral””The debt is not payable … there is no other option. This is not politics, this is math,” Garcia Padilla told the New York Times in an interview published Sunday evening. “But we have to make the economy grow. If not, we will be in a death spiral.”
. . .
Puerto Rico’s economy has been in hot water for years, due to government overspending, high energy costs and dependence on debt.

That’s an understatement; Puerto Rico has piled on more municipal bond debt per capita than any American state, however,

Puerto Rico, as a commonwealth, does not have the option of bankruptcy. A default on its debts would most likely leave the island, its creditors and its residents in a legal and financial limbo that, like the debt crisis in Greece, could take years to sort out.

Like Greece, instead of pension cuts and reducing the size of the government payroll, García Padilla wants to leave creditors holding the bag, or, as he put it, to “share the sacrifices.”

Meanwhile, Puerto Ricans are leaving in droves.

UPDATE
Commenter Kermit is really on the money:

A lot of Puerto Rico’s problems have to do with government screwing with the marketplace. While I don’t have particulars, the refining/petrochemical complex just west of Ponce ended up closing due the commonwealth owned utility company raising rates on industrial consumers rather than other customers back around 1980.

For those unaware, fully integrated refineries exist in a symbiotic relationship with petrochemical companies. There was a nice complex which included CARCO refinery (and its petrochemicals plant) along with PPG and Union Carbide, and a few others. PPG closed its olefins cracker when the government owned utility raised the rates for industrial consumers. It was no longer viable economically to operate the large electric motors required for the ethylene and propylene compressors. This initiated a domino effect. Union Carbide had to close it’s largest complex without the olefins feedstock, CARCO had to close its refinery without the economic advantage of sale of this naphtha and other product streams to adjacent petrochemical manufacturers.

In market research for a project involving removal and refurbishing of a refinery from Puerto Rico several years ago, I found that Puerto Rico has an excellent and hardworking skilled labor force, as well as excellent machine shop repair facilities.

Government owned business needs to privatize, also hip slick and cool new technology does NOT need to be utilized at the expense of rate payers. Economically feasible technology does.

The unsubsidized Carnival of Latin America and the Caribbean

June 29th, 2015

The week’s headlines in a sentence: While the Supreme Court ruled on Obamacare subsidies and gay marriage, the deadline for the Iran negotiations looms and terrorists are blowing up people and pipelines all over the place.

ARGENTINA
Contraband Economy Booming on the Argentina-Bolivia Border
High Inflation, Tariffs Fuel Thriving Black Market

The location of the judge is rather interesting: Argentine judge orders seizure of Falklands drillers’ assets

Lilian Herraez, a federal judge in Tierra del Fuego, ordered the seizure of $156 million in bank accounts, boats and other property, the government said on Saturday.

BOLIVIA
Pope sends video-message to Ecuador, Bolivia and Paraguay. The guy can’t stay away from socialist throwaway terminology:

“I want to be a witness of this joy of the Gospel and bring to you the tenderness and caress of God, our Father, especially to your children most in need, to the elderly, the sick, the imprisoned, the poor, to those who are victims of this throwaway culture,” he said.

BRAZIL
Brazil to Narrow Inflation Target Range
Brazil will narrow the inflation target range for its central bank starting in 2017, but the center point of the range will remain unchanged at 4.5%. The tolerance band will be cut to a range of 3% to 6%

Working Within the System to Disrupt Brazilian PoliticsRoberto Mangabeira Unger, a Harvard philosopher born in Brazil and raised in Manhattan, has settled into a career as an appointed public figure charged with fostering long-term thinking about Brazil.

CHILE
Chile’s Bachelet Hits New Low Approval Rating

COLOMBIA
Colombian army killed civilians to fake battlefield success, rights group saysA new report on “false-positive” killings looks into one of the darkest episodes of the country’s civil war.

FARC rebels kill four and rupture Colombian pipeline

CUBA
Cardinal SinsA Castro cleric brings disgrace.

Cuban artist pushes boundary between art and politics, and pays a price
What Tania Bruguera’s ordeal in Cuba says about the state of artistic expression “within the Revolution.”

Top Intelligence-Defense Lawmakers Introduce Cuban Military Transparency Act

Double surprise! Cruz and Rubio are “non-whites”!

State Dept: No Change in Iran, Cuba Human Rights, Despite Obama Overtures

ECUADOR
Galápagos Residents Decry Fiscal Milking of World Heritage SiteIsland Representative Resigns, Parts Ways with Correa over “Unconstitutional” Law

GUYANA
Guyana Assures Exxon Amid Venezuela Row
Guyana’s president has sought to reassure Exxon Mobil that a territory dispute with Venezuela won’t interfere with the company’s recent oil discovery off the coast of Guyana, one that Caracas claims as its own.

HAITI
A Haitian border town struggles with new rules in the Dominican RepublicThe Dominican’s new rules have Haitians nervously heading back to a homeland with fewer jobs.

HONDURAS
Thousands march in Honduras to demand resignation of president

Thousands of angry, torch-bearing Hondurans marched on Friday to call for the resignation of President Juan Hernandez and demand an independent probe into one of the worst corruption scandals in the country’s history.

JAMAICA
PM: Jamaica’s Economic, Industrial Climate In ‘Delicate Situation’

LATIN AMERICA
Interesting premise, but premature, Move over, China: Latin America may welcome India. The operative word is may.

MEXICO
Mexican President Undergoes Gallbladder Surgery
Mexican President Enrique Peña Nieto underwent surgery to have his gallbladder removed and was recovering satisfactorily at a military hospital, officials said.

HARDBALL: DONALD TRUMP BLASTS JORGE RAMOS’S CELL PHONE NUMBER TO 200,000 INSTAGRAM FOLLOWERS

NICARAGUA
Nicaragua’s Bizarre Plan to Bury the Panama CanalThe country’s Sandinista government has cut a deal with a reclusive Chinese businessman willing to spend $50 billion on a larger-than-life transport waterway. There are a few unanswered questions, starting with whether Nicaraguans really want it and how much priceless habitat would be wrecked. Traveling the proposed route by motorcycle, boat, and boots, the author hunts for answers.

PANAMA
Odebrecht Wins Contract to Renovate Panamanian City of Colon

Manuel Noriega apologises over military rule of PanamaJailed former dictator gives first interview since 1996 and asks for forgiveness over brutal reign – ‘I want to to close the cycle of the military era’

PERU
Peru’s support for Bolivian sea access claim creates tensions with Chile
Chilean President Bachelet cancels next week’s meeting with Peruvian leader Humala

PUERTO RICO
The perfect Summer portrait, A Sleeper Awakened With Color
Frederic Leighton’s “Flaming June” is on loan to the Frick Collection in New York for the next three months.

URUGUAY
‘Gourmet cannabis': Take a peek inside a Uruguay marijuana club , if you must. To paraphrase Dean Wormer, “fat, stoned and stupid is no way to go through life, son.”

VENEZUELA
MUD, the Sausage Fest

Gay marriage, at long last (but not here)

The week’s posts and podcast:
Colombia: FARC blows up oil pipeline

Bloody Friday: France, Tunisia, Kuwait terror attacks UPDATED
Morgenthau on the Iran-terror connection

Ecuador: Demonstrations against Correa

SCOTUS upholds Obamacare subsidies

Venezuela’s deadly colectivos

The other flag controversy: US Embassy in London flies the rainbow flag

Today’s WTH moment: Venezuelan vet arrested for smuggling heroin in puppies UPDATED

Mexico: EL GRAN HERMANO del cartel TE VIGILA

Venezuela: Next stop on the Obama administration’s “normalizing” with dictators?

Podcast: The flag controversy plus US-Latin America stories of the week



Sunday Joe

June 28th, 2015