Category Archives: Analysis

LATIN AMERICAN DONORS’ DEVELOPMENT COOPERATION POLICIES

Last February, the Development Policy Centre at Crawford School of Public Policy of ANU hold the 2014 Australasian Aid and International Development Policy Workshop. The event had more than 50 papers spread over some 19 plenary and panel sessions, session topics include: changing aid frameworks, labour mobility, disaster management, health and aid, fragile states and governance, and more.

ANCLAS Deputy Director Dr. Sean Burges and Carmen Robledo, ANCLAS Associate and PhD candidate at the School of Politics of International Relations of ANU represented ANCLAS in the event.

Dr. Burges participated in the  a plenary panel session – Making their mark: the BRICS and aid with the presentation titled “Brazil’s international development cooperation: old and new motivations”. To read an abstract of Dr. Bruges’ presentation visit the DevPolicy blog.

Ms. Carmen Robledo participated in a panel on donors studies. Her presentation focused on the motivations driving developing assistance policies in Latin America. To see the slides of Carmen’s presentation click here and to read an abstract of this presentation see her contribution on the DevPolicy blog.

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Filed under Analysis, Brazil, BRICS, Development, Foreign aid, Uncategorized

MEASURING WELL-BEING IN A CONTINENT OF CONTRASTS

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A few days ago, Forbes magazine released the 2014 list of World’s billionaires. Seven Latin American billionaires made the top 100, with Mexican telecom tycoon Carlos Slim, in the second spot. In total, there are almost 100 billionaires in the continent and their combined fortunes add up to US$500 billion.  But on the other hand,  Latin America is still home of 160 million of poor, equivalent to 35% of the population in the region (World Bank data), despite intense governmental efforts to reduce poverty.

Furthermore, the OECD in the report How’s life in 2013 noted that countries, such as Mexico and Chile are way below the OECD average of GDP per capita and gini coefficient. However, the report also mentions that despite economic difficulties faced by the population, Brazil, Mexico and Chile have higher spreads of life satisfaction. In fact, out of range from 1 to 10, Mexico scored 7.3, Brazil got 6.7 and Chile scored 6.5 just below the 6.6 OECD average score.

The How’s life in 2013 report shows a new approach to quantify and understand poverty. At first well-being of population was measured only on the basis of material resources reflected on the GDP per capita. In the early 1990s, the UNDP Human Development Index (HDI) incorporated health and education. Today, several countries are shifting to more comprehensive forms of measurement. This new methodology seems to take on board the approach based on capabilities (functionings) that Amartya Sen fiercely defended.

In 2008, Mexico started using this method in its poverty measurements and included six basic social rights in the Law for Social Development. Also, Colombia, El Salvador and the Brazilian state of Minas Gerais have included multidimensional approaches to measure poverty. These governments sought to a better assessment of the capabilities and potential of citizens.

But what exactly is a multidimensional approach of poverty? Poverty itself has several aspects. Poverty measurements should include elements that could cause or further increase the situation of deprivation populations. El Salvador, for instance, identified eight dimensions to be observed and addressed as part of its poverty measurements: employment, housing, education, security, recreation, health, nutrition and income. Colombia chose to evaluate social and health conditions by measuring the following five conditions: education, childhood and youth, labour, health and access to household utilities. While Mexico selected educational, access to healthcare, social security, housing quality, access to basic services and nourishment. In turn, based on these elements the Mexican government classified deprivation in three categories: 1) food insecurity (extreme poverty), 2) obstacles to development of capabilities (access to education and health) and 3) material deprivation (access to adequate housing and transport).

This trend is not unique to Latin America; Bhutan, Malaysia and some areas in China have also adopted it. The most commonly known is the Gross National Happiness Index of Bhutan that includes nine dimensions.

The importance of a multidimensional poverty approach is based in the fact that it highlights aspects that are lagging behind and that require intervention. In other words, by having measurements of different dimensions of deprivation, decision-makers are able to identify elements that need immediate attention of public policies. Policy-makers can also observe progress of social policies and can reassess the continuation or reformulation of current strategies.

While developing countries have made significant efforts to better understand and find solutions to address poverty, results are meager and governments still face enormous challenges. The multidimensional index is a photographic representation of the reality of poverty. To change the socio-economic landscape of the continent of contrasts, coordinated public and private efforts, along with civil society engagement, are in most need to eradicate poverty and reduce inequality.

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Filed under Analysis, Countries / Regions, Development, Macroeconomics, Uncategorized

AFTER THE FIRST YEAR….

ImageMexico’s President Enrique Peña Nieto (EPN) used his first state-of-the-nation address to present the achievements of the government during the first few months of his mandate. He praised the members of parliament for their support and diligent approval of the reforms that his administration launched. He emphasised the importance of setting the basis to end the inertia and transform Mexico in the great nation that it is. Peña Nieto and his supporters believe that Mexico has the potential to improve in few years the quality of life of all Mexicans.

The Mexican President enounced the outcomes and progress in each of the five axes of the National Plan for Development 2013-2018 (launched at the beginning of his term in office): 1) Mexico in peace; 2) social inclusion; 3) education with quality; 4) economic prosperity; and 5) Mexico as a responsible global actor.  Firstly, he highlighted the decrease on the number of murders, the improved coordination between the law enforcement agencies and the reform of the judicial system. Then, Peña Nieto described the results of social programs, especially the National Crusade against Hunger, the expansion of Oportunidades and the addition of scholarships in the program and the inclusion of gender perspective in all government programs. In terms of education, the Mexican President affirmed that the education reform will produce better facilities, better teachers, better access to computers, internet and teaching technologies and improved facilities for students.

Moreover, he pointed out that the constitutional reforms proposed by his government aim to improve productivity, promote economic growth and create jobs. The current administration considers that it is necessary to lay the legal and institutional foundations that will support the country’s sustainable growth in following decades. In this regard, the private sector commended the government’s actions and noted that benefits from macroeconomic stability are already showing; for instance, Mexico climbed to the 7th position as recipient of foreign direct investment (FDI), only in the first semester of 2013 Mexico received USD$24 million on FDI. The chair of COPARMEX (Mexican Patron’s Confederation) indicated that even when the government has promoted larger efforts against organised crime, it is still necessary to offer more certainty to investors.

Great speculation emerged after the announcement of the energy reform. PEMEX (Petróleos Mexicanos, state-owned oil company) is a symbol of pride and any discussion around it touches the deepest fibres of Mexican nationalism, but the company has become so obsolete and inefficient that its production is constantly decreasing. Without private investment PEMEX is incapable to exploit the rich oil and gas reserves that the country owns. Foreign companies warmly welcomed the reform, since it represents great investment opportunities; for the US, especially, could mean less dependency on OPEC countries supply and therefore less leverage for the cartel. But in the domestic realm, private foreign investment has brought a big debate; detractors believe that it will put the nation’s wealth in the hands of imperialists interests and only very few will see the benefits. Cuauhtémoc Cárdenas (leader of leftist party PRD) and Andrés Manuel López Obrador (AMLO, leader of leftist movement MORENA) have separately called for massive public protests against the reform.

Additionally to the energy sector, Mexico needs to reform the tax system. This will not only decrease the burden on PEMEX, but also will bring sounder fiscal policies, transparency and greater competitiveness to private companies. Among OECD members, Mexico is the country with the smallest proportion of tax collection (it is equivalent to only 10% of GDP, while the average is 25%). Additionally, Peña Nieto announced that in brief his government will submit to Congress a proposal to reform the financial system, which will intend to make funding cheaper and more accessible for micro, small and medium enterprises. This set of structural reforms is designed to create the conditions for a more competitive, productive and dynamic economic environment that attracts larger sums of foreign investment and encourages the creation of more jobs.

Finally, EPN mentioned that Mexico has promoted closer and deeper bonds with its neighbours. With the US, the Mexican government established an integral agenda with the aim to create the most productive region of the world. In the southern border, Mexico finalised a free trade agreement (TLC Unico) with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua and it is negotiating another one with Panama.  Although, Peña Nieto’s administration is promoting more exchanges with Asia-Pacifico and his government wants to encourage larger integration of the Pacific Alliance (Chile, Colombia, Mexico and Peru) and the TPP to take advantage of synergies across the Pacific, its closer neighbours are the main focus of its foreign policy.

Denise Dresser and Lorenzo Meyer, political analysts, commented that Peña Nieto had opened too many fronts with the series of constitutional reforms promoted in Congress. The analysts gave particular attention to the impact of the energy sector reform on PEMEX and CFE (state-owned enterprises for oil and electricity production and distribution), as well as, on the state revenue. It is still necessary to pass complementary bills and then to implement them all, which in reality will take quite a few years to produce results and to spill the benefits down to the masses. To sum up, Peña Nieto presented a large number of actions initiated by his government, but the results are still to be produced…. Will Peña Nieto’s have sufficient political leverage to achieve these objectives? Will the Pacto por Mexico coalition hold together for the next five years?  It seems that the honeymoon is over.

If you wish to consult the full state-of-the -nation document, please click here.

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by | September 4, 2013 · 10:47 am

PEÑA NIETO’S CHALLENGE: CRIMINAL CARTEL AND RULE OF LAW IN MEXICO

International Crisis Group (ICG) recently published a report on criminal cartels activity in Mexico and the government’s strategy against them. The document presents an analysis of the situation and revises the strategies implemented by previous PAN government and the challenges and opportunities to the current administration.

crimenThe report highlights the participation of the three main political parties in the Pacto por Mexico proposed by Peña Nieto’s administration. The pact allowed the government to pass several major reforms, but in this particular case, the three parties backed up the security plan launched by Peña Nieto. ICG notes that the former PAN administration implemented a strategy to “fight a war” but if Peña Nieto wishes to finish with the violence in Mexico, his government needs to include additional actions, such as institutional capacity building, reinforcing police and justice systems and improving social inclusion programs.

The violent situation in Mexico is not only a challenge for the country, but also for Mexico’s Northern neighbour. The report indicates that the violence escalated after the US legislative ban in assault weapons ended in 2004. Mexico is confronted to domestic pressure to finish with criminal activity and externally to stop the flow of narcotics. Furthermore, Mexico’s situation seems relevant for other countries around the globe facing similar circumstances.

To download full report click here.

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Filed under Analysis, Corruption, Mexico, Security

A change in Brazil’s economic policy consensus?

Former Brazilian finance minister Maílson de Nobréga has shared with O Estado de São Paulo the obvious, but not necessarily widely reported conclusion that there has been a substantial change in Brazil’s economic policy. The consensus economic policies in Brazil can be traced back to the Real Plan of Fernando Henrique Cardoso and focused squarely on controlling inflation. For the last eighteen years monetary policy from the Banco Central and governmental fiscal policy has been devoted to keeping inflation down at levels familiar to Australians, not the eye-watering 8,000% plus rates that were seen episodically in 1980s and early 1990s Brazil. Understandably, Brazilian policy makers have subsequently had a bit of a phobia about inflation. Dilma appears to have cracked through this fear.

The point made by Maílson is that the government is now focusing on influencing the value of the real, Brazil’s currency, and bringing down interest rates. If this means inflation might creep up a little bit, so be it. As Maílson notes, this is the first real change in Brazil’s core macroeconomic policy since 1994.

Three things are interesting about the changes brought in by Dilma.

First and perhaps foremost, the ease with which Dilma has quietly pushed this policy through points to a real change in how Brazilians and the country’s macroeconomic literati feel about their ability to control inflation. On one level this represents a healthy shift in thinking that opens up some potentially useful macroeconomic policy options. On another level there is some room for concern if the government gets too comfortable with letting inflation drift. What often gets forgotten is the serious damage that inflation does to the poor, of which Brazil still has many, who lack access to the financial instruments necessary to manage the economic stresses of rapidly rising prices. Killing inflation in Brazil has probably been at least as important as Bolsa Familia in tackling the country’s poverty rates — it allowed the bottom quintiles to  save, plan for the future, and crucially for the consumer boom, access credit.

The second interesting thing about Dilma’s policy changes is that it demonstrates a very clear recognition of just how much the over-valued real is damaging the country’s industrial base. Sure, the value of overall exports are soaring, but that has a lot to do with commodity prices. The pages of Folha, Estadão, and Valôr have been filled with stories of firms closing down in the face of cheap Chinese imports and, more recently, US markets closing in the face of a rising dollar. Dilma’s concern on this front is very real and very deep. Highly aggressive language about currency wars from her finance minister Guido Mantega was echoed by the president herself this week at the UN General Assembly opening.

The final interesting point is one that will be very welcome to Brazilian businesses struggling to find affordable credit in Brazil to finance new operations. A consistent complaint from firms has been the high domestic interest rates, which in turn helps push up the value of the real. Pushing rates down is part of a strategy of trying to stimulate the economy within the bounds of what the government is fiscally able to do — Dilma does not have as much money to play with as might appear from a survey of the country’s foreign currency reserves.

Debate in Brazil on this is vibrant is likely to heat up, which is a good thing given the very different economic scenario both in Brazil and internationally.

–Sean Burges

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Filed under Analysis, Brazil, Macroeconomics

Here we go again? Brazil and Turkey trying to defuse Iran?

O Estado de São Paulo is reporting that the Brazilian and Turkish foreign ministers are talking of relaunching the May 2010 Tehran declaration on nuclear fuel swaps in an effort to prevent an armed attack on Iran. For those who don’t remember, the reaction from the US was, at best, frigid, or to quote one US diplomat talking off the record at the time “Hilary was pissed”. The clever thing that Brazil’s Antonio Patriota and Turkey’s Ahmet Davutoglu have done this time is to pull in another player, namely Sweden’s Carl Bildt.

Reviving the 2010 deal is likely to be received poorly by the nuclear powers trying to pull Iran back from the proliferation brink. That Brazil is pushing such an idea on the margins of this year’s UN General Assembly should not come as a surprise — Brazilian president Dilma Rousseff was explicit in her address that the world has too many weapons of mass destruction and should work to get rid of them all and focus on hunger and poverty instead. While it is hard to argue with her point, we might also ask awkward questions for Brazil about diverting resources away from small arms and warplane manufacturing towards development-facilitating activities, two lucrative export industries for her country.

Dilma is less beholden the hard left of her Workers Party than Lula was — we need only look at how she stared down recent labour action in Brazil — but still needs to throw the odd bone to the Party old guard who have found memories of resisting the empire with their Iranian brothers in the 1970s. What probably matters more in this instance is Brazilian desires to squash anything that might create a precedent for unilateral or multilateral violation of sovereignty, a principle that is utterly sacrosanct for Brazilian foreign policy. After all, another key theme in Dilma’s address to open the UNGA was that the doctrine of “Responsibility to Protect” should be accompanied with a parallel “Responsibility While Protecting”. In practical terms this would likely leave those participating in any internationally sanctioned intervention in a country such as, say Syria, liable for collateral damage. Given the difficulty of getting those with the capability to actually undertake R2P actions to participate, the Brazilian coda, if accepted, would make the potential legal and political costs of such missions even more prohibitively high. And with no R2P being practiced another threat to sovereignty is defused.

All this cynical analysis aside, hopefully the world will get lucky and Sweden will find a way to work with the established team of Brazil and Turkey to rein in Iran’s nuclear ambitions and prevent another conflagration in the Middle East.

–Sean Burges

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Filed under Analysis, Brazil, Foreign Policy / Diplomacy, Security

Pointed analysis of Mercosur from former Uruguayan President Sanguinetti

Former Uruguayan president Julio Maria Sanguinetti (1985-1990, 1995-2000) has published a very insightful article about the state of Mercosur on the Infolatam.com site.

Sanguinetti starts with a quick review of the bloc, noting that the first eight years from 1991 to 1998 were marked by numerous successes, but when Brazil devalued the real in 1999, the institutional fragility of the bloc became clear. Dispute resolving systems were barely in place and didn’t work. Argentina then shifted to a highly protectionist trade policy within a common market. What little institutional and legal strength Mercosur retained took a serious blow with the opportunistic suspension of Paraguay earlier this year.

The Treaty of Ushuaia was implemented to vouchsafe the democratic nature of member-states after a nearly successful attempted 1996 coup in Paraguay. This is the mechanism that was used by Argentina and Brazil to suspend Paraguay and let Venezuela into the bloc. But, as Sanguinetti points out, the Treaty requires that extensive consultations with the questioned country take place before it is suspended. His problem with the procedures followed in Mendoza is that these consultations did not take place and that massive political pressure was used to silence Uruguayan objections to a clear violation of the Mercosur treaties by Argentina and Brazil.

As intrinsically distasteful as Lugo’s impeachment may have been, Sanguinetti reminds us that it took place through the constitutionally appropriate mechanisms in what amounted to a political trial. It should not have mattered that Lugo was seen as something of a friend by Dilma and Cristina.

A quick Google Translate rendition of Sanguinetti’s last paragraph is worth including for the non-Spanish reading:

“What happened in Mendoza is a setback in the process of regional integration and the international validity of the statutes and the recognition of their underlying principles. In the name of democracy, [Argentina and Brazil] have ignored all the values ​​that underpin it. There are no laws or principles. In the name of solidarity or political enmities, [they are] acting without the constraints of law. Neither has the principle of nonintervention been left standing. From now on, anything goes.”

What Sanguinetti is getting at is a much deeper systemic problem with inter-American affairs and a central remaining challenge to total democratic consolidation in the region. Elections are an important part of democracy, but their significance is limited when you have an attitude in the political class that because they are in charge they can do whatever they want.

The operating concept here is what Guillermo O’Donnell called ‘horizontal accountability‘, the idea that there are rules, procedures and institutions that restrain the arbitrary actions of the state in a clear and predictable manner. There are clear signs from Argentina and Brazil, let alone Paraguay, that elected leaders at all levels have not quite internalized the idea that in a fully consolidated democracy there is a system of checks and balances that restrain executive caprice. Indeed, the big story right now in Brazil is about the mensalão corruption scandal, which charges that political advisers around Lula were running a ‘cash retainer’ system to buy votes in congress to get the get governmental legislation through.

The short-shrift given to regulatory and legal restraints by some political actors is amplified when we turn to the international arena. The open secret in inter-American affairs is that most issues are settled through presidential diplomacy, hence the large number of regional summit meetings. Legal and institutional structures are not put in place to effectively govern bilateral and multilateral relations (for example, what is the institutional and juridical strength of CELAC and Unasur?), and when they are in place, they are either ignored or marginalized. This latter case is exactly what we see happening in Mercosur. We don’t have the bandwith to list all of the unresolved intra-Mercosur trade spats that have blithely ignored the bloc’s internal dispute resolution and juridical mechanisms. Suffice it to say that member-countries have had to either threaten or go to the WTO dispute body to get satisfaction. Sanguinetti’s point, which is particularly problematic for a small country like Uruguay, is that the legal frameworks for important groupings such as Mercosur have become just so much window dressing in the face of presidential want and desire in big countries such as Brazil.

There is also an important foreign policy point in Sanguinetti’s comments. Brazilian diplomats are very clear that the international sovereignty norm is sacrosanct — one state may not intervene in the internal affairs of another state. Yet, this is precisely what has happened in the Paraguayan case. Indeed, the deeper irony is that while the historical case was that the political right pushed hardest for regime change, the tide has now shifted and it is the left that has the most pronouncements and interventions for its neighbours. This has been particularly evident in the Brazilian case where the willingness of Brazilian presidents and presidential advisors to make direct intervention in the internal political developments of other regional countries has been rising since 2003.

Taken its totality, the critique leveled by Sanguinetti goes a long way to explaining why the increasingly technocratic and regulatory sound states of Chile, Peru, Colombia and Mexico have bound together to for the Pacific Alliance rather than tying themselves more tightly to the ever-more politicized groupings such as Mercosur and even the now predominantly political Unasur. Why to the expense and pain of negotiating and signing onto rules and norms when they are unlikely to have any impact?

–Sean Burges

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Filed under Analysis, Argentina, Brazil, Democracy, Foreign Policy / Diplomacy, MERCOSUR, Paraguay, Uruguay