Fausta's Blog

American and Latin American Politics, Society, and Culture

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Brazil runs out of money to issue passports

Last year the Rio Olympics were 51% over budget, to the tune of $1.6 billion, the month before they opened. The 2014 World Cup $3 billion stadiums were becoming white elephants a year later.

Now Brazilian authorities have suspended the issuing of new passports because of a budget crisis:

The government said emergency funds for passports would be debated this week.

In a statement late on Tuesday, the federal police said the decision to stop issuing new passports “stems from a dearth of funds earmarked to the activities of migratory control and the issuance of travel documents”.

There’s a lot of finger-pointing, of course, and a long history corruption, and trying to look like a country with strong infrastructure, and whatever, but it all comes down to one thing: overspending.

Cross-posted at WoW! Magazine.

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Mexico: Unemployment at a 9-yr low

Good news for Mexico:

Unemployment in Mexico fell to its lowest level in nine years in October amid strong private-sector job growth that has supported consumption and helped keep the economy expanding.
. . .
The jobs numbers and an apparent stabilization of the balance of payments suggest the economy may not be performing as far below capacity as generally perceived, although an expected economic slowdown and uncertainty following the election of U.S. President-elect Donald Trump could begin to undermine a so-far resilient labor market, he added.

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Mexico: The Trump/peso index, part dos

I posted on Monday on the Trump/peso index, since a Mexican currency analyst found that the peso declines as Trump’s odds for POTUS rise. Yesterday the WSJ picked up the story:
Mexican Peso Recovers After Falling on Clinton News. Higher oil prices and less hawkish outlook for U.S. interest rates helped peso recover lost ground

The news of Mrs. Clinton’s health and comments from several U.S. Federal Reserve officials ahead of next week’s policy meeting contributed to the peso’s roller-coaster ride Monday.

Higher U.S. interest rates would make dollar investments relative more attractive, putting Fed moves among principal risks for the Mexican peso.

Silvio Canto posits,

Is the Mexican peso a poll about the U.S. election?  I don’t think so. It is a statement on concerns about the Mexican economy, such as low oil prices. It is also about exports and having a peso that helps Mexican exporters. That was the consensus of an economic summary that I read a few months ago.

Trump causing a weakening of the Mexico peso? I don’t think so and pray that it is not so. Mexico has been floating its peso since the late 1990s and it’s been good for both sides. Again, I saw a Mexican peso devaluation first hand and it was not fun, even if I went out that weekend and bought some nice business suits suddenly cheaper in dollars!

If Trump wins, it’ll be interesting to see if he’ll push for a renegotiation of the North American Free Trade Agreement, a point Peña Nieto agreed on.

Post re-edited to add missing HTML

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Ecuador: Correa was not pleased

Prof. Steve Hanke, who masterminded Ecuador’s dollarization several years ago before Rafael Correa came to power, recently visited the country. During his stay, Hanke criticized the electronic currency Correa is imposing on the country:
Ecuador’s Dollarization Architect Doubts Correa’s Pledge

With the country facing a record budget shortfall, a new currency may undermine confidence in the monetary system, said Steve Hanke, a professor of applied economics at Johns Hopkins University, who advised Ecuador on adopting the dollar in the late 1990s and early 2000s. His concerns were echoed by Ruth Arregui, a former general manager at the central bank, and the University of Georgia’s Myriam Quispe-Agnoli, who wrote about dollarization as an economist at the Federal Reserve Bank of Atlanta.

Correa was not amused and took to Twitter:

“Young people: avoid mediocrity like the plague. They bring us Steve Hanke to insult our intelligence . . .”

“. . . the “gringo Cavallo” (with apologies to Cavallo). His CV: advisor to Abdalá Bucaram, Carlos Menen [sic] and a number of former Soviet republics that . . .”

“. . . brutally embraced neoliberalism. His “pearls of wisdom”: “inflation would have been worse if it weren’t for dollarization.” That is, Colombia . . . .”

“. . . devalues when it feels like it.
It’s really embarrassing.
But this is just the beginning. Let’s strengthen the stomach.
To victory always!”

About that last tweet, I can’t say that I understand what, if anything, Colombia has to do with Ecuador’s new electronic currency, what Correa is embarrassed about, or what is “just the beginning.”
“A fortalecer el estómago” (Let’s strengthen the stomach) may (or may not) be the equivalent of “gird one’s loins,” but again, what about?

But I do know that ¡Hasta la victoria siempre! is the motto of the Cuban communists, and of Che Guevara.

Related:
Steve H. Hanke: ‘La dolarización funciona en Ecuador, pero el dinero electrónico no’

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Puerto Rico: What minimum salary laws wrought

Paul Kupiec and Ryan Nabil explain (emphasis added),

Appearing before the U.S. Congress in September 2011, Togiola Tulafona, the governor of American Samoa, testified that the mandatory minimum-wage increases created “the real possibility that American Samoa could be left substantially without a private-sector economic base except for some limited visitor industry and fisheries activities. American Samoa’s economic base would then essentially be based solely on federal-government expenditures in the territory.”

The law had a similar effect in Puerto Rico where the mandatory increases resulted in a minimum wage that was greater than 75 percent of the Puerto Rican median wage. And the results were predictably catastrophic for the economy.

Economic activity declined and Puerto Rican unemployment surged. Between 2007 and 2013, Puerto Rico’s GDP per capita declined by nearly 7 percent, while over the same period it was unchanged nationwide. As a result, many Puerto Ricans left for the U.S. mainland. The migration of young, mobile, working-age Puerto Ricans created an imbalance as the aged and less ambitious remained behind.

Puerto Rico’s labor force competes with other Caribbean-region labor forces,

Foreign investors were deterred by the high cost of hiring Puerto Rican workers. Labor costs in the Bahamas and Jamaica, two direct competitors for foreign investment, were half of those in Puerto Rico.

Tourists were reluctant to absorb the 30 percent premium for a Puerto Rican hotel room relative to other Caribbean destinations. Tourist arrivals in 2012 were identical to arrivals in 1992, while tourist visits over the same period doubled in the Dominican Republic and tripled in Cuba. Today, tourism contributes only 6 percent to Puerto Rico’s GDP compared with 27 percent in Jamaica and 16 percent in the Dominican Republic.

Yet another aspect of the disaster.

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Again, Puerto Rico should not get bankruptcy protection

This time it’s Mary O’Grady at the WSJ,
Just Say No to a Puerto Rico Bankruptcy. If the territory walks away from its debt, some states will want the same privilege. (emphasis added),

Can Puerto Rico make good on its debts? The sad truth is that, despite all the heated talk of a solvency crisis, no one knows because there are still no audited financial statements for fiscal year 2014 and thereafter. In a March 1 letter to Senate Finance Committee Chairman Orrin Hatch, Mr. Rosselló, a Democrat, noted that the commonwealth is more than 300 days past the filing deadline for 2014. “It is precisely in a time of crisis that greater transparency, discipline and independent analysis are required in order to properly diagnose the problems and produce sustainable solutions,” Mr. Rosselló wrote.

Failure to produce audited financials demonstrates bad faith, and not for the first time.

So, until these audited financial statements are performed and made public, and unless there’s a firm commitment to fiscal disciple, it’s not worth pursuing.

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