Fausta's Blog

American and Latin American Politics, Society, and Culture

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Jeremayakovka, and the reality of draconian climate change policy

Jeremayakovka sent this article about what the impacts of draconian climate change policy mean to people: A CEO With A Spine

“Some wealthy elitists in our country,” he told the audience, “who cannot tell fact from fiction, can afford an Olympian detachment from the impacts of draconian climate change policy. For them, the jobs and dreams destroyed as a result will be nothing more than statistics and the cares of other people. These consequences are abstractions to them, but they are not to me, as I can name many of the thousands of the American citizens whose lives will be destroyed by these elitists’ ill-conceived ‘global goofiness’ campaigns.”

Mr. Murray was a coal miner in Ohio who survived two mining accidents and built funds from a mortgaged house into a private coal mining company with more than 3,000 employees. He expresses concern about the proposals in Congress that will ration the use of coal, warning of much worse adverse consequences to Americans than those experienced after the 1990 amendment of the Clean Air Act.

Mr. Murray told me that he had seen the effect of the drastic reductions in coal production, and the wrenching impact on hundreds of communities, as a result of that legislation. In Ohio alone, from 1990 to 2005, about 118 mines were shut down, costing more than 36,000 primary and secondary jobs. These impacted areas have spent years recovering, and some never will. He spoke of the families that broke up, many lost homes, and some were impoverished, because of legislation that the environmentalists call a “success.”

“I don’t need a computer graphic like in Gore’s movie, to learn about this havoc,” he told me, “I lived it and saw it firsthand.”

Global Warming’s Gray Area

Climate Change: Drowned out by an official prophecy of doom, one of our top hurricane forecasters says Al Gore “doesn’t know what he’s talking about.” And he was being charitable.

Jeremayakovka also has a terrific post about how he became an ex-Liberal, When In Sparta Do As A Spartan.

He comes out swinging. Go read it.

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Two very different articles on Latin America from this week

While we were all fretting about the Iranian hostages, bamboo, and Nancy Pelosi’s Hermes scarf, there were two very interesting articles on Latin America that are worth mentioning:

At Der Speigel, Peter H. Smith asks Are We Losing Latin America?

This question has been asked for over a century now, and Smith’s not particularly insightful in his opening paragraph:

A new populism is rising across Latin America and Cuba faces what could be a tough transition period. After years of neglect, it’s time for Europe and the United States to reengage a trans-Atlantic dialogue on Latin America.

For starters, while Smith accuses Pres. Bush of totally ignoring Latin America (an arguable point, to say the least), the EU’s not just ignoring but actively neglecting the region, as Smith himself admits

Europe has been unable to grant much time or attention to Latin America. In May 2006 a summit meeting of EU and Latin American heads of state produced elegant declarations that were elegant declarations devoid of meaningful content. Participants solemnly affirmed that “we reiterate our commitment to continue promoting and strengthening our strategic bi-regional association as agreed in previous summits…” As summarized by one prominent newspaper, “A paralyzed Europe collides with a divided Latin America.” The EU-Latin American summits were falling short of expectations. In recent years, the EU has undertaken few significant initiatives. The most notable activity resulted in FTAs with Mexico, in 1997, and Chile, in 2002. The 2006 summit also proclaimed the intention to negotiate a free trade agreement with Central America. In this case, as in the others, the principal goal would be to offset the preferential effects of bilateral FTAs with the United States. In the meantime, the much publicized idea of an FTA between the EU and Mercosur languished for lack of attention – and for lack of commitment on both sides. “To achieve success,” as one observer noted, “the negotiation needs fresh air.”

The EU’s reiterated commitments to continue promoting and strengthening anything and everything, are for the great part reactions to the USA’s bilateral free trade agreements with Latin American countries, among them,

  • the Caribbean Basin Initiative of 1983
  • the North American Free Trade Agreement (NAFTA) of 1992
  • other free trade agreements (FTAs) with:
    Colombia
    Peru
    Central American nations,
    Dominican Republic,
    Chile,

and of course, Brazil.

Smith ignores completely Brazil’s current negotiations with the USA both for bilateral trade and for extraterritorial alliances.

All of these are arguable points (not the least of which being that ignorance can be bliss), but the problem I have with Smith’s article is that it views American interests in the region as bad

because they threaten to prejudice European economic interests

What about Latin America’s economic interests?

Unfortunately the EU’s economic interests are predicated on more regulation, more tariffs, more taxes, and more bureaucracy. IF (yes, a big “IF”) the EU were serious about its own, and Latin America’s, economic interests they would concentrate on how to abolish all trade tariffs and farm subsidies.

Which they will never do.

The US and Brazil, by the way, are currently accelerating the process of the DOHA global trade talks which has everything to do with tariffs.

The other article on Latin America is Alvaro Vargas Llosa’s
Castro’s Enemy: The Ethanol Alliance. As I have mentioned previously, the ethanol produced in Brazil is subject to a 54-cents-a-gallon US tarriff. Vargas Llosa correctly states

If the United States wants to boost ethanol consumption and reduce oil-dependency, it needs to make a simple decision — eliminate its 54-cents-a-gallon tariff. Experts tell us that corn-based ethanol, the kind being produced in the United States, is eight times less efficient than Brazil’s sugarcane version of the biofuel. Alessandro Teixeira, Brazil’s point man for his country’s ethanol strategy, insists that “we are the world leader, and if people really want to benefit from our ethanol industry, they have to embrace it in practice, not in theory.” Precisely because corn is much less efficient than sugarcane, the U.S. has been able to replace only about 3 percent of its oil consumption despite a huge government biofuel program.

Vargas Llosa, however, is aware of the DOHA talks,

It is hard to see how the new ethanol alliance will boost the Doha Round of world trade talks, as some commentators are claiming. The principal stumbling block is the fact that developing countries are using American and European protectionism as an excuse to maintain their own barriers in areas such as services. The U.S. ethanol program already has caused an artificial rise in the price of cereals, giving new arguments to developing nations who want to blame the United States for impoverishing them.

Vargas Llosa ends with the real reason to worry about all this government intervention,

It makes me nervous when governments, rather than investors and consumers, decide what we should invest in and what we should consume. But if the ethanol partners want their grand schemes to have a chance at success, then they at least need to start by being consistent.

And that is the lesson of the day for all involved: Latin America, the EU, and the USA.

For more on Latin America and the USA, listen to last Monday’s podcast with Monica Showalter.
blog radio

(one side comment to the TCS article: Alvaro Vargas Llosa’s correct last name is Vargas Llosa, not Llosa)
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Brazil, up and coming in today’s Blog Talk Radio

Because of the latest version of the Iranian hostage crisis, Pres. Lula’s visit to the USA went mostly ignored. However, this was a very significant event.

I have stated several times on this blog that am certain that, once Brazil gets its economic act together, it will bring about a new era of prosperity to Latin America. Brazil is a leader in Latin America: when Brazil did away with its military dictatorship, the countries in Latin America followed.

Brazil has every potential to become an economic superstar: The country has the land mass and the population, it participates in the international banking system, it has manufacturing, natural resources, and entrepeneurship. And it’s making the right kind of economic reforms.

Look at this:

The good news on the Brazilian economy have gone mostly ignored, but they are very important: Brazil’s economy: Bigger than thought
An underestimated pay-off from economic reform

There are other reasons to think that Brazil is better off than generally realised. In a recent paper*, two IMF economists argue that official data “grossly underestimate” the growth of household income. Brazil’s economic opening in the early 1990s lowered prices and improved the quality and availability of goods, changes that were largely missed by the consumer-price index. Using data about what people actually consumed, the economists estimate that income per head grew 4 1/2%a year between 1987 and 2002 compared with the official figure of 1 1/2%, with the poor benefiting most. That makes Brazil look better; it makes economic reform look better, too.

As I mentioned in my conversation with The Gathering Storm that it is strategically important to have democratic, prosperous countries sorrounding declining countries like Venezuela.

Brazil and the USA share much in common, as this post in Publius Pundit explains,

The implications of this will be amazing. Huge Brazil and huge America are united in a common purpose to halt the rising and arrogant power of Hugo Chavez, whose oil fueled earnings are being used to intimidate other nations. Now Hugo is encircled by two big clouds, Brazil to his south and the U.S. to his north, both of whom are determined to develop their ethanol industries to reduce Chavez’s monopoly on energy. Ethanol is not a cure-all and won’t replace oil as an energy source, but it will widen the pool of available energies, and that’s important because right now, China’s and India’s rises have narrowed the margin of excess, making every drop that Chavez produces a critical one because there isn’t any extra. Hence. Chavez’s monopoly and power.

We have a threshold of opportunity to create free markets, and create wealth, by abolishing all farm subsidies and trade barriers with Latin American countries that are willing to provide property rights, democracy and the rule of law for their citizens.

The current trend in Washington is likely to approve serious barriers to expanding trade. This is a grievous mistake that will resonate not only in trade, but in national security, terrorism, immigration policy, and corruption in the USA.

Today at noon my Blog Talk Radio guest is Monica Showalter of Investor’s Business Daily. We’ll be talking about the UK and the Falklands, Brazil, Venezuela and Latin America.
blog radio
Don’t miss it!
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Other blogs posting on it
Silvio Canto

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Look who’s green with ethanol envy:

Castro hits out at US biofuel use

Cuban President Fidel Castro has strongly criticised the use of biofuels by the US, in his first article since undergoing surgery last year.

He said George W Bush’s support for the use of food crops in fuel production would cause 3bn deaths from hunger.

The article in the Granma newspaper did not mention Mr Castro’s health.

As the AP’s Anita Snow puts it,

The article is written in the same kind of apocalyptic style Castro typically adopts when discussing the impact of U.S. international policies on developing nations.

(Anita also added, “and there was no reason to doubt he was the author.” Val might disagree. But I digress.)

‘Fidel’ now tells us ethanol is sinister. Will the Left be repeating his line? You betcha.

For starters, Fidel is factually wrong:

As more and more corn grain is diverted to make ethanol, there have been public concerns about food shortages. However, ethanol made from cellulosic materials instead of corn grain, renders the food vs. fuel debate moot, according to research by a Michigan State University ethanol expert.

The findings, which are being presented by Bruce Dale today at the ACS meeting in Chicago show that,

“The evidence indicates that large-scale biofuel production will increase, not decrease, world food supplies by making animal feed production much more efficient,” Dale said.

But never mind that.

The real reason Fidel thinks ethanol is sinister is because it is a threat to his Communist Revolucion, be it in Cuba, in Venezuela, or elsewhere. As a Cuban minister recently said, “in order for the revolution to survive, it needs the poor”.

An ethanol boom in Latin America will create great wealth and prosperity, and is already attracting investment and trade in Central and South America and the Caribbean. As I mentioned in a recent post,

  • Sugarcane is grown in many countries throughout the region
  • Countries that do not produce sugarcane but have ethanol processing facilities are benefiting from being exempt of the onerous ethanol tariffs.
  • “An ethanol boom in Latin America would also attract investment to rural areas and create lots of jobs.That might help to reduce the steady northward stream of illegal immigrants. It would certainly burnish America’s image, and stem support for anti-American tub-thumpers such as Venezuela’s Hugo Chávez. He has won friends throughout the region by selling oil cheaply. By sharing technology and promoting investment in ethanol, America would also be reducing Latin America’s fuel bill. If it bought lots of ethanol from its neighbours, it would be providing them with a lucrative export of their own.”

And that wealth won’t be limited to Latin America: Just this week the World Bank is helping Brazil export ethanol technology to African countries such as Ghana, Angola (where Fidel tried to export his revolution by sending troops), and Mozambique.

On a more personal note, I’m sure Fidel must be particularly incensed that sugarcane is bringing wealth to the region, after he ruined the Cuban sugar industry.

As Fidel himself said,

The sinister idea of converting food into combustibles was definitively established as the economic line of foreign policy of the United States

And let’s do it right, by abolishing all farm subsidies and tariffs.

Previous post on here.

———————————————-

In a somewhat related topic, Alvaro Vargas Llosa explains
Why Perfect Totalitarianism Is Impossible:

The lesson of our time, a decade and a half after the fall of communism in Europe, is that the slow, almost geological, accumulation of little bits of heroism throughout society can bring down a totalitarian giant over time. These acts of heroism, both inside and outside the structure of power, constitute the best hope for countries in which governments continue to enslave millions of people today.

But even if these acts of silent heroism are not enough to cause all despots to come tumbling down, they are at least enough to keep the human spirit alive. That is a comforting thought.

Via Dr. Sanity, who today explores the economic interaction of humans.

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Ethanol and wealth creation

In The Economist, an article about ethanol, Fuel for friendship

Firms around the world are trying to make biofuel out of everything from trees to cooking oil. To make ethanol from corn or wheat, as Americans and Europeans tend to do, distillers must first convert the starch in those crops into sugars. But Brazilian distillers dispense with this expensive step, as they use sugarcane as a feedstock. So Brazil can produce ethanol for 22 cents a litre, compared with 30 cents a litre for corn-based ethanol, according to Icone, a Brazilian think-tank. That makes it cheaper than petrol, and therefore lucrative for farmers without subsidies.

U.S. sugar is too expensive to convert to fuel, thanks to a complicated system of tariffs and quotas that keeps the U.S. price of sugar artificially high, and the US can’t produce enough sugar to meet an increasing demand in ethanol. Those are two reasons why import it.

However, as I mentioned in yesterday’s Blog Talk Radio with WC of The Gathering Storm, the ethanol produced in Brazil is subject to a 54-cents-a-gallon US tarriff.

Since Brazil’s ethanol has too much water (and is quite similar to rum), the way to get around this tarriff is for Brazil to ship its ethanol to dehidration factories in one of two dozen Caribbean countries that are exempt from the tarriff, and then take it to the US by tanker where a gasline refiner makes it undrinkable and blends it with gasoline. The blended ethanol is then shipped to gas stations.

The lobbyists and the politicians are to blame for this tarrif:

The ethanol industry not only receives billions of dollars in subsidies each year, but governmental protection from international competitors as well.

But back to The Economist,

Brazil is not the only country in Latin America that sees great promise in ethanol. Colombia now has five distilleries amid the sugarcane fields of the Cauca Valley, which produce 360m litres a year. Two more are under construction elsewhere. These producers are guaranteed a market, since regulations oblige fuel merchants to mix ethanol into petrol. By 2009 the required blend will be 10% ethanol and will gradually rise to 25% thereafter. Costa Rica has a similar policy, and Panama is contemplating one.

Indeed, since sugarcane is grown throughout the region, most Latin American countries could benefit. A recent study from the Inter-American Development Bank argued that replacing 10% of Mexico’s petrol consumption with locally refined ethanol would save $2 billion a year and create 400,000 jobs. Several Caribbean governments hope that the ethanol boom could help revive their ailing sugarcane farms.

The greatest lure would be access to the American market. Various Central American, Caribbean and Andean countries can already send ethanol to America tariff-free, thanks to concessionary trade agreements. Maple, an American energy investment group, plans to spend $120m on an ethanol plant in Peru to take advantage of such a waiver. A pipeline running out into the nearby Pacific Ocean will deliver the plant’s output directly to tankers bound for America. Proponents of the project say it will create 3,200 jobs. If all goes well, exports could reach 120m litres a year by 2010, and perhaps as much as 400m in the more distant future.

The United States, for its part, has several reasons to encourage ethanol production in Latin America. For one thing, it will need seven times more of the stuff than it currently produces to meet Mr Bush’s 35 billion-gallon target. There simply is not enough spare land in America to grow adequate feedstock for such an amount, unless scientists find a way to make ethanol cheaply from abundant materials such as wood or grass. Although Mr Bush’s ultimate goal is energy independence, he would presumably prefer to be dependent on ethanol from friendly countries such as Brazil and Colombia than on oil from hostile places like Iran and Venezuela.

An ethanol boom in Latin America would also attract investment to rural areas and create lots of jobs. That might help to reduce the steady northward stream of illegal immigrants. It would certainly burnish America’s image, and stem support for anti-American tub-thumpers such as Venezuela’s Hugo Chávez. He has won friends throughout the region by selling oil cheaply. By sharing technology and promoting investment in ethanol, America would also be reducing Latin America’s fuel bill. If it bought lots of ethanol from its neighbours, it would be providing them with a lucrative export of their own.

Secretary of State Condoleezza Rice and her Brazilian counterpart signed an energy agreement making ethanol an internationally traded commodity.

This can be a first step that the US takes to unleash a new area of prosperity in Latin America. Let’s create free markets, and create wealth by abolishing all farm subsidies and trade barriers with Latin American countries that are willing to provide property rights, democracy and the rule of law for their citizens.

President Bush went to Brazil and will also visit Uruguay, Colombia, Guatemala, and Mexico. Robert Mayer has more thoughts on the subject.

Update: Bush promotes trade with Uruguay

Uruguay is keen to sign free trade deals with the US, even if it means leaving the Mercosur trade bloc.

————————————————–

In yesterday’s Blog Talk Radio show with WC of The Gathering Storm, I mentioned several books:
Journalists Plinio Apuleyo Mendoza, Carlos Alberto Montaner, and Alvaro V. Llosa’s

Peruvian economist Hernando de Soto has written several books that I highly recommend on the subject of property rights, rule of law, capital creation and free markets:

Later in the conversation we talked about Dinesh D’Souza and Robert Spencer, who I met at CPAC last week. Their books are:
Dinesh D’Souza

and
Robert Spencer

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