The Argentine Headache

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Argentina is on the brink of a financial crisis once again. Current leader Mauricio Macri’s loss to  left-wing opponent Alberto Fernandez in the primary election has caused a swarm of financial repercussions. The S&P Merval, Argentina’s main stock market plunged 48% on Monday. It was then second largest drop of any major stock index since 1950. The Argentine peso dropped 15% versus the US dollar on Monday as well. These losses extended on Tuesday. The wide margin of Macri’s loss is what triggered the financial earthquake. Investors were expecting him to be defeated, yet not to the extent that he was.

Now the future appears uncertain. The looming probability of a sovereign default on the country’s IMF loans is sending investors scrambling for cover. The emerging political scenario is causing concern around South America and beyond. Should the Peronists return to power, Argentina will once again be ruled by a leftist government. Brazil’s right-wing President Jair Bolsonaro is publicly warning of a possible Argentine refugee crisis affecting his country in the future. Brazil is already contending with waves of Venezuelan immigrants streaming into the northern region of the country, fleeing the economic and political crises in their homeland. The possibility of a second refugee crisis at Brazil’s southern border is unpalatable to say the least.

After the downturn in global markets yesterday stemming from global recession fears, it would appear that the Argentine headache will add to the increasing concerns among investors about the health of the global economy, as well as the growing influence that the geopolitical climate has on markets and national economies this summer.

Will Venezuela Become Another Libya?

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The past weekend’s violence on Venezuela’s borders with Colombia, and Brazil has prompted some analysts, and journalists to openly wonder if the time is coming for US military intervention in Venezuela. At first glance, this does appear to be a fair question to ask given the positions the Trump administration has taken on the Venezuelan crisis, and the Maduro regime. Venezuela is approaching the status of being a ‘Failed State.’ The economy is in ruins, citizens are fleeing the country by the tens of thousands, and just beneath the surface a civil war is brewing. As the pressure on Caracas rises, Maduro’s actions are becoming more violent, and less predictable. Citizens who openly defy him and attempt to bring relief supplies into the country are being targeted by paramilitary squads. This led to the bloodshed and violence over the weekend.

The US has a history of using the ‘Failed State’ argument to justify intervening militarily in the affairs of nation-states that were, for lack of a better term, about to go down the tubes and potentially take its neighbors down with them. Libya is the best recent example. The US spearheaded diplomatic efforts aimed at gaining UN authorization for NATO to intervene militarily in the First Libyan Civil War in 2011. The US also spearheaded the NATO military effort that came shortly afterward. President Obama took action to save the lives of innocent protesters, and other Libyan civilians who were being targeted by Libyan dictator Muammar al-Qaddafi. Along with terrorizing his own people, he also posed a threat to the progress of Arab Spring, which was sweeping away authoritarian regimes in the region at the time.

Obama’s intervention helped rip Qadaffi from power and for a short time Libya settled down. However, Qaddafi’s ouster eventually created a power vacuum in Libya that touched off a second, even deadlier civil war, and also led to the waves of Libyan refugees swamping Southern Europe.

Libya in 2011, and Venezuela of the present day share a number of similarities. Both fit the definition of a Failed State. Oil was unable to save the Qaddafi government from ruin, and it doesn’t seem to be of much help to Maduro’s regime either. Venezuela is fast becoming the pariah of South America, much in the same way Libya was treated by most of North Africa and the Middle East.

Despite these common traits, Venezuela is not Libya. Maduro doesn’t pose a threat -real or perceived- to the United States and the Western world. Venezuela is not being used as a base of operations by international terrorist groups. The Venezuelan military, while having a handful of advanced US and Russian aircraft and weapons in its inventory, is not a force capable of aggression beyond its borders. The humanitarian crisis that Maduro’s actions have created are a tragedy, but not strong enough to act as the platform for military intervention by the US, and other Western powers.

If change is going to come to Venezuela, it will have to come from within. The US, most of South America, and Europe are content with limiting their responses to recognizing Juan Guaido as the legitimate president of Venezuela, donating relief supplies to Venezuela’s impoverished citizens, and imposing economic sanctions on Maduro’s government. Unless something dramatic happens, this will not change.

Opposition Energized in Venezuela

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The opposition in Venezuela has finally emerged from the political wilderness. The National Assembly’s challenging the legitimacy of Nicolas Maduro’s government has rejuvenated opposition groups across Venezuela. These groups that are in direct opposition to Maduro are rallying around Juan Guaido, the president of the National Assembly, and the man who has assumed the powers and duties of the Acting President of Venezuela, giving the country two leaders claiming to be the rightful leader. Guaido is receiving recognition, and support from many nations, and international organizations in the Western Hemisphere. The United States is backing him, and the National Assembly-led opposition to Maduro. Brazil and Colombia are two of the Latin American countries that have recognized Guaido as Venezuela’s president.

Following violent protests across the nation last night, Venezuelan opponents to Maduro are preparing for a major march today. Even though the opposition is energized, and has the momentum, a Caracas Spring is not guaranteed. We’ve been down this road before with a series of violent, mass protests breaking out around Venezuela for days at a time. In the end nothing changed for the better. Maduro remained in power, and the opposition was fractured. This time around, the hope is that outcome is decidedly different.

The wild card is the Venezuelan military. Its support of Maduro has been steadfast and if it remains so, Maduro will stay in power. If Guaido’s call for the armed forces to disavow Maduroa is answered by even a handful of units, the situation in Venezuela could change immeasurably. At best, the military turns on Maduro completely, while the worst-case scenario would be a bona fide civil war breaking out.

Wednesday could very well end up being a critical day for Venezuela.

Saturday 25 August, 2018 Update: Venezuelan Migrant Crisis Is Exploding

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South American nations are tightening their border controls, and immigration restrictions as the exodus of refugees from Venezuela grows larger. Along with the economic crisis, and the ongoing political unrest around the country, the regime of President Nicolas Maduro now has to contend with regional tensions brought on by a migrant crisis. With chronic shortages of food and medicine now a seemingly permanent facet of daily life for Venezuelan citizens, tens of thousands are fleeing the country in the hopes of finding a better life elsewhere. These departures are not a new development. Since 2014 over two million citizens have left Venezuela.

Neighboring countries are having an increasingly difficult time accommodating them. In Brazil’s northern state of Rorima, violence has erupted when Brazilians attacked the ramshackle camps constructed by Venezuelan refugees, forcing them to flee back across the border. An attempt by Rorima to close the border was thrown out by a judge, leaving the situation unsettled and extremely volatile.  Ecuador, and Peru have taken steps designed to create breathing room, and buy time for a more permanent solution to be found. Both nations have revised their passport rules and border controls. Peru will no longer admit Venezuelans with only an identity card.  Ecuador, on the other hand, has opened a ‘humanitarian corridor’ from its northern border with Colombia to Peru. Venezuelans entering Ecuador will no longer need a passport, and the Ecuadorian government has provided buses for some of the thousands of Venezuelans heading south to find opportunities in Peru, Chile, and beyond.

The Venezuelan government took measures last week to stabilize the economy and eventually lure some citizens back. There is a new currency, the “sovereign bolivar”, which removed five zeroes from banknotes. It is backed by a cryptocurrency, the Petro, which is tied to oil prices. It’s unlikely that the “sovereign bolivar” and Petro will rescue Venezuela from further economic ruin. Oil production is declining, and the government is unable to pay its debts, or obtain more financing.

Until the economy begins to rebound significantly and the country is stabilized, Caracas should not expect the waves of Venezuelans who have left to change direction and return home. At the rate things are going, it will be a very long time before that happens.