Τετάρτη 27 Φεβρουαρίου 2019

A recipe from the past: the revival of intervention policy of the US in Latin America

Donald Trump's attitude towards Maduro's government may be a cause of concern because of its cynicism, but it is not a new event. American governments from the 20th century have a tradition of intervention in Latin America.


The historical background

South America is the soft underbelly of the United States. The intervention started in 1898-99 during the American-Spanish War with which the country conquered, among others, Cuba. In addition to this, business growth led American businesses abroad and more specifically, in South America,-  fruit trading companies were particularly active.

However, at the beginning of the 20th century, many Latin American countries experienced on their territory riots, revolutions and political instability. These events had a negative impact on US interests that were directly affected. At the same time, they favored the intervention of European powers. Thus, Theodore Roosevelt's government  launched a campaign to prevent the rise of influence of Europeans in the Western Hemisphere and to safeguard the interests of the American state. His policy called for military intervention where necessary.

Thus, a series of wars broke out which called "Banana Wars" due to US involvement in states that produced large quantities of bananas and to which American fruit companies had interests. In 1904, US soldiers landed in the Dominican Republic and after a series of war incidents took possession of it from 1916 to 1924. Nicaragua was placed under American rule in the period 1912-1933, and the same Haiti in the period 1915-1934. The US also intervened in Mexico during the period 1910-1917 to prevent the establishment of revolutionary political formations and the growth of the German influence.

A major turning point was made in 1933-34 with Franklin Roosevelt. Inaugurating the Good Neighbor Policy, he stopped the occupation of foreign lands and tried to improve Washington's relations with the Latin American states. His policy had a positive effect during the Second World War, when these countries either participated on the side of the Allies or remained neutral. However, they did not cause any problems in the US. 

The start of the Cold War would change the situation. The influence and power of the USSR had risen greatly to dangerous levels for US tolerance. Indeed, Moscow was attempting to expand communism around the world. The US had to react. Truman's government announcing the homonymous doctrine was aiming at curbing Soviet influence in Europe and Turkey. His successor, Dwight Eisenhower, with the homonymous doctrine, sought to repel communism in the Middle East in every way. South America, for the time being, was not a subject of primary interest.

But in the 1960s it became. Pro-communist forces began to appear affected by the dominance of the left-wing Fidel Castro's government in Cuba. Communism and the "long hand" of the USSR were established in the US's neighborhood. The new president, J. F. Kennedy, could not be a spectator. In 1961, the Kennedy Doctrine was adopted, which was a continuation of the Truman and Eisenhower doctrines, and aimed at limiting Soviet influence in the country's soft underbelly. He also set up the Alliance of Progress aimed at economic co-operation with states in the southern part of the American continent. In addition, the US government called on the governments of the countries to undertake economic and social reforms, while American financial aid rose sharply to theirs.

The Kennedy Doctrine, although it made the US position clear, was not enough. The Communist presence was not diminished with the Cold War being at its peak. The new President, Lindon Johnson, designed the homonymous doctrine to stop the spread of communist ideas in the Western Hemisphere. In relation to his predecessor, he was more dynamic, since in 1965 US forces intervened in the Dominican Republic, which was under the influence of a political crisis. The operation resulted in the establishment of a US-friendly government.

The next president, Richard Nixon, launched a new campaign of invasiveness. US interests were not safeguarded and "red" fear continued to exist. Nixon acted vigorously. The United States organized the "Condor" Operation from 1968 to 1989, which concerning the support of authoritarian regimes in the Latin American countries that could stifle local communist parties. Still, covert intelligence agencies' operations were funded against communist political factions. Part of this operation was also the overthrow of Socialist President Salvador Allende in Chile. Because he had important popular support and because of his ideology, he was an enemy of the United States. In  1970, in the elections, the American government supported his opponent, who lost them. Political demonstrations that took place failed. In 1973, a group of officers headed by Augusto Pinochet underwent a violent coup which ended with the fall of the government, the death of Allende and the imposition of a totalitarian military dictatorship.

The next presidents continued the operation, but other events attracted their attention. The culmination of interference came with the election of Ronald Reagan. With the homonymous doctrine he adopted, he escalated the Cold War in order to dissolve the USSR and eliminate communist factions throughout the world. Latin America could not be an exception. He continued the implementation of the "Condor" operation, supporting the anti-Communist faction of Contras in Nicaragua, who fought against the left-wing Sandinistas's government and other anti-communist forces in Guatemala and El Salvador, while he supported the political transition to states such as Brazil, Bolivia and others. At the same time, he did not hesitate to take a military action against the left government of Grenada in 1983 on the pretext of its good relations with Cuba. At the end of his term, the "Condor" Operation ceased, leaving tens of thousands dead and at least 400,000 political prisoners.


Trump and Latin America

During the first two post-Cold War decades, South America experienced major events, although American direct intervention was virtually nil. Above all, it was expressed through international financial institutions. Many states in the region suffered economic shocks and there was a political transition. New political forces, from those the United States tried to eliminate in the Cold War, claimed power and succeeded in most countries to take it democratically. In Argentina, Brazil, Bolivia, Ecuador, Chile, Paraguay and in others leftist or socialist governments were elected. The phenomenon concerned Washington, but the rise of international Islamic terrorism and the desire to topple unfriendly governments, especially in the Middle East, prevented US governments from actively intervening.

However, a gradual change began to take place from 2010 onwards. Leftist and socialist forces had exhausted their momentum and despite all efforts, in most cases, their performance was not good. This development has favored the United States, which support, friendly countries. A political transition is in process, and the IMF has returned to the region, especially in Argentina. Now most South American countries have right-wing, pro-Western leaderships. The only country in which the Americans have no presence nor is it an easy opponent is the rich in oil and mineral resources, Venezuela.

In recent months, the crisis that broke out in Venezuela, which appeared shortly after the death of Hugo Chavez and the assumption of the presidency by Nicolas Maduro, has caused international complications. The White House realizes that a first-class opportunity is given to overthrow the "chavism" and take the power  pro-American governments. Already, the US backs Maduro's political opponent, Juan Guaido, and has warned of a coup. At the same time, it has created a coalition of "willing" states with the countries of the region, but also with countries on the other side of the Atlantic, in order to legitimate Guaido and overthrow the present government. Also, Washington has imposed tariffs and sanctions, which makes it hard for the Venezuelans to live and exert strong pressure on  Maduro's government.

But why is Trump's government being so cynical? The answer lies in the fact that Trump wants to "clean up" the soft underbelly of his country, so that there is no other power to challenge the American hegemony. Secondly, exploitation of the country's wealthy resources by US multinational companies will stimulate the US economy and the energy sector. The stance of Trump is based on an old recipe, which has been drawn. The past is repeated as present. The US will make every effort to change the regime in Venezuela. When this is completed and their "southern neighborhood" is "clean," then the US government will also turn to meet the other challenges.

Σάββατο 16 Φεβρουαρίου 2019

The economic challenge of Syria


   
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The civil war raging for eight years in Syria has affected seriously the economy. The Syrian state's GDP has shrunk dramatically and while the Syrian Arab army restores the power of the Assad's regime internally, the need for the costly rebuild of the country arises. The Syrian government understands this and seeks to restore the economy.

Initially, internally the Syrian government aims to take advantage of the private initiative to make investments. It is no coincidence that it provides incentives to Syrian entrepreneurs to operate within the country. Also, with a range of other measures, it intends to strengthen the position of the Syrian pound by printing from the past year new currencies in order to channel them into the market. However, due to the non-definitive cessation of hostilities and the incomplete restoration of the sovereignty of the regime throughout the country, there is not much to be done by the government.


On the other hand, as far as economic diplomacy is concerned, the Syrian government's activity is remarkable. Initially, it strengthens its ties with Iran. In late January 2019, the Iranian vice-president met with the Syrian prime minister and signed 11 agreements and MoU's. Those involved Iranian investments in renewable energy, infrastructure, culture and housing, co-operation in the banking sector and broadly they established a long-term economic co-operation.


The Syrian side is also in contact with the Jordanian one. Jordan is interested in the reconstruction of Syria. The opportunities presented for investments in the construction sector are significant, while the raw materials produced in the country can be exported to the neighboring state. Also, via the port of Aqaba, Jordanian territory can act as a "gateway" for the introduction of various goods in Syria. Already, delegations from the two countries have met to arrange their future cooperation. Another important reason for the post-war reconstruction interest by the Jordanian government is that the budget will be lightened, since no funds will be channeled for the care of Syrian refugees.


An additional country that wants to help Syria and with which the Syrian regime has good relations is Belarus. The country's foreign minister has said he wants his country to help rebuild Syria and that it respects its territorial integrity. At the same time, in a meeting with the Syrian ambassador to Minsk, a bilateral political dialogue was decided.


An important development that demonstrates the success of Syrian economic diplomacy is also the fact that the UAE wishes to contribute on their turn to the rebuilding of the Arab state. It is not surprising that their embassy will re-open in Damascus, while a Syrian business delegation has had talks with other UAE businessmen for investments in agriculture, infrastructure and tourism sectors. Indeed, Syrian entrepreneurs are aware of the investment guarantees that the Assad’s regime gives. In addition, the Syrian interest is also centered on green development.



In conclusion
It is clear that the Syrian government towards the end of the conflict aims to establish good and cooperative relations with many countries in order to facilitate the difficult task of post-war reconstruction. The need for such actions is greater if it is taken into account that the West with EU and the US as “champions” is preparing to apply new sanctions that will totally hit the Arab country.

The measures, therefore, taken by the Syrian government also concern the internal matters and the economic diplomacy and so far have done well. There are many countries, including the BRICS, who seek to operate economically in the post-war Syrian territory.

Finally, on the question of whether Syria is a country offering investment opportunities, the answer is yes. However, the risk will be diminished in the near future that the end of the conflict, except for an  unpredictable event, is expected.   


Indicative Sources

Channel News Asia, Syria and Iran sign “strategic” economic agreement, 29 January 2019, https://www.channelnewsasia.com/news/world/syria-and-iran-sign--strategic--economic-agreement-11178330 (access: 10 February 2019).


Sarah Diaa, Gulf News, Syria in talks with UAE investors to rebuild economy after war, 2 January 2019, https://gulfnews.com/business/syria-in-talks-with-uae-investors-to-rebuild-economy-after-war-1.61560455  (access: 14 February 2019).


Belarusian Telegraph Agency, Belarus ready to help restore Syrian economy, 09 January 2019, https://eng.belta.by/politics/view/belarus-ready-to-help-restore-syrian-economy-117825-2019/  (access: 14 February 2019).

Samaha Nour, European Council on Foreign Relations, The economic war in Syria: why Europe risks losing, 11 February 2019, https://www.ecfr.eu/article/commentary_the_economic_war_on_syria_why_europe_risks_losing (access: 15 February 2019).

TheNational, Jordanians pin hopes on rebuilding opportunities in Syria, 11 February 2019,   https://www.thenational.ae/business/economy/jordanians-pin-hopes-on-rebuilding-opportunities-in-syria-1.825444 (access: 15 February 2019).

Maysam Bizaet, Al- Monitor, Race for reconstruction heats up as Syrian war winds down, 01 February 2019, https://www.al-monitor.com/pulse/originals/2019/02/iran-syria-cooperation-economic-agreements-trade-jahangiri.html (access: 15 February 2019).

Suleiman al- Khalidi, Angus McDowall, 02 October 2017, Reuters, Hard choices for Syrian industrialists in ruins of Aleppohttps://www.reuters.com/article/us-mideast-crisis-syria-economy-insight/hard-choices-for-syrian-industrialists-in-ruins-of-aleppo-idUSKCN1C71B8

Δευτέρα 11 Φεβρουαρίου 2019

Why are Middle Eastern economies struggling to diversify?

General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018 [File: Ahmed Jadallah/Reuters]
General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018 [File: Ahmed Jadallah/Reuters]
Note from the bloger: This article is not mine. It was published in Al-Jazeera by Adeel Malik. I simply present it. You can find the original source in the end of the text in order to redirect to Al- Jazeera's website.  
It is obvious, especially during the last five years, that the Middle- East's oil-rich countries should diversify their economies. Of course, oil and natural gas are prominent sources of income and are the "backbone" of the economic development of these countries. However, those states cannot depend their income only on oil and gas. The oil and gas reserves will be exhausted. So, it is important the rich Arab Muslim countries to develop and other means of economic development. This is a challenge due to serious reasons. Below, some of them are presented.  
Why have Middle East's oil-rich economies failed to diversify despite their tall promises and grandiose plans? The answer lies not in the absence of good technical plans or weak implementation, but in political incentives. If many other countries have been successfully able to diversify their economies it was not merely a result of good policies but the right political incentives of those who were in the driving seat.
An enabling political framework has been a common denominator in all successful diversification experiments. Botswana's experience underscores the role of stable political coalitions and favourable initial and external conditions. At its independence, Botswana inherited multiple constituencies representing divergent economic interests. This was complemented with the presence of political competition and stable coalitions. A third important factor was a favourable external environment. Botswana's membership in the South African Customs Union served as a positive inducement for sensible macroeconomic reform. Together, all these factors played a part in protecting the interests of non-resource sectors.
The Malaysian experience reinforces the same message. At Malaysia's independence, the Chinese community represented a powerful de facto economic force by virtue of their control of the Malaysian private sector. Their continued presence counter-balanced any tendencies for the natural resource sectors to grow at the expense of the private sector. In the political domain, the consociational agreement between the ethnic Malay and Chinese communities fostered a system of power sharing that protected the economic interests of Chinese businessmen. Bad macroeconomic policy - especially an overvalued exchange rate - was politically unacceptable to Chinese interests. It was both bad policy and bad politics. If domestic political economy was helpful, so was the country's insertion into the regional trade circuit, which created positive regional spillovers that supported private sector development.
Clearly, each case is different and must be analysed on its own merit. But politics provides a common thread across these accounts. And, this is where Arab economies are especially challenged. Saving a few cases, most countries in the region did not inherit strong and diverse economic constituencies that could have gained political voice after independence, and counterbalanced the dominance of the oil economy. An unfavourable external environment, resulting in negative spillovers from regional conflict and instability, served as another impediment to diversification. The Middle East thus lacked all three factors that facilitated economic diversification in other countries: strong political coalitions, diverse economic constituencies and positive neighbourhood effects. With this adverse legacy, is there any real hope for diversification? In this regard, I have the following three points to make:
  • Successful diversification requires a new political settlement that allows elites to concede greater space to the private sector;
  • Diversification is unlikely to succeed without a regional vision that fosters complementarities among Arab economies and creates a shared economic space to deal with emergent economic challenges common to all states;
  • Sustained economic change in the Middle East requires a wider set of concessions that go beyond domestic and regional political elites. It also requires a candid and constructive geopolitical discourse that reconsiders the trade-off between a narrow, short-term, vision of geostrategic stability and long-run development.
Let me briefly explain these in turn.
Given the primacy of the political, the debate on diversification must begin with a discussion of elite incentives and political concessions. If a closure of the economy benefits rent-seeking elites, what will persuade them to concede greater economic space? What concessions are needed from the ruling elite and what will persuade them to surrender their control of the economy and the associated rents? Perhaps, they need to be compensated for the loss of rents from a levelling of the economic field. After all, new growth strategies in emerging markets are built on a happy (even if fragile) coexistence of economics and politics.
The Chinese example serves to illustrate how economic reform can be aligned with the interests of political elites. The Chinese political experience is decidedly based on centralised authoritarian control. But the system allows a balancing of competing interests. It co-exists with considerable regional decentralisation where local leaders derive strength from patronage - just as in any other developing country - but are equally strongly incentivised to ensure economic growth in their localities. Economic growth yields clear political dividends for local elites. And bureaucrats face strong performance incentives. As a result, growth of the economy has become an integral component of the political objective function. 
Beyond the oft-cited example of China, Africa's recent success stories confirm the importance of elite incentives. Consider Ethiopia's recent economic transformation, which has placed it in the list of the 10 fastest growing economies of the world. Central to this growth experience has been the role of public investment in infrastructure and public enterprises, and the changing political orientation of state elites. The ruling political party managed to set up its own enterprises supported by specialised endowments geared towards promoting investment in underdeveloped regions. Although this model of party capitalism poses serious questions about market competition, it goes to shows that elites can favour an expansion of the economic pie when they are among its lead beneficiaries. This is, after all, a key point of North, Wallis and Weingast's treatise on Violence and Social Orders. Change often begins with small outcomes and processes that are compatible with elite incentives. But, what begin as privileges for insiders can ultimately become universal rights for everyone else.
In short, the idea is not to search for the ideal growth experience that will uniquely fit all Arab contexts. Rather, it is to emphasize that whichever growth strategy the Middle East embarks upon should consider and accommodate political incentives. And, elites have rarely surrendered their economic control unless it became essential for their survival. The so-called "Arab Spring" was a recent tapping on the doors of power. Unfortunately, rather than resulting in any genuine economic concession, what we have instead seen, is business as usual. The only concessions that came through were financial concessions in the guise of cheap loans, salary hikes and free bonuses. But such temporary appeasement without changing the underlying rules of the game is unlikely to work for too long. And, the rules remain rigged in the favour businessmen in and around the royal circle. In North Africa, crony capitalism is rearing its head again, and insider deals continue to thrive across much of the region. In this backdrop, economic diversification will be difficult, if not impossible, to realise without a new political settlement that caters for a future beyond oil and conflict. At the very minimum, the region needs a new discourse on economic reform that mobilises public support for two or three fundamental concessions that elites must surrender for long-term economic revival.
Let me turn to the second idea. The argument, in brief, is that national diversification plans that disregard regional linkages in development are doomed to fail. It is important to recognize that, in the Middle Eastern case, the questions of national and regional development are closely interwoven. While national initiatives can kick-start economic revival, it will be difficult to sustain without regional market access. Few countries have effectively diversified without expanded markets and deeper trade reforms that regional trade liberalisation affords. Turkey's recent economic success is built on a strategic cultivation of regional trade linkages. In Asia and Latin America, regional market connections offer an additional avenue for industrialisation through entry into global supply chains, which tend to conglomerate spatially. Arab countries are clearly disadvantaged in this regard. A larger coordinated effort is needed at the regional level to foster trade complementarities, establish regional public infrastructure, and relax trade barriers. Given the history of repeated failures at regional economic cooperation and the adverse security climate, this seems like a pipe dream. No matter how impractical, it will be difficult to sidestep the regional question in any new vision for Arab development. In political economy terms, the rationale for this is even stronger, since it is only through a regionally integrated merchant class that a stable constituency for economic and political reform will emerge. If the broader economic challenges faced by the Arab states are common, they also deserve a common response. Even if a cooperative solution does not serve the narrow factional interests of political elites, the Arab civil society must lend its weight behind the regional project.
This brings me to the role of geopolitics, the final element of my argument. In a region that has historically remained a hotbed of conflict and violence, it is difficult to conceive economic diversification in isolation from geopolitics. The powerful negative externalities emanating from regional instability have scaled back even the modest gains achieved on the economic front. Prior to the recent upsurge in violence, countries in the Levant had begun to witness falling trade costs and growing regional trade. These limited gains have been washed off by regional violence. Foreign military interventions in the guise of regime change have eroded state capacity, demolished public infrastructure and ripped apart the very social fabric of Arab societies. The region has been set back by decades.
If conflict retards development a genuine economic renaissance in the Arab world will also have geopolitical repercussions. Foreign powers have a deep economic, political and military footprint in the region. An economically independent Middle East can challenge the established patterns of external hegemony and undermine the prolonged legacy of divide and rule. In this milieu, structural economic change also requires a geopolitical concession from regional and global powers that have high stakes and influence in the Middle East. As the recent refugee crisis has shown, the spillovers from regional conflict are difficult to contain within Arab borders. This is an opportune moment to talk about concessions. A peaceful and prosperous social order is now of direct interest for the global community, especially Europe.
Foreign powers face a deep trade-off between narrow short-term strategic interests and long-term development. The human and economic cost of this policy trade-off is rising by the day. Yet an effective global response has been noticeably lacking. Since the start of the Arab Spring, economic development has been conspicuous by its absence in western policy discourse. There has been no grand vision for regional development on the part of multilateral institutions or Western governments. Initiatives such as Deauville Partnership and the Arab Partnership Fund were minuscule efforts both in size and significance, and simply substituted talk for action. On the other hand, we have seen a major escalation in the sales of military hardware to Arab states. Rather than using their "convening authority" to organize regional funding for a major development initiative, Western powers have instead sold billions of dollars in worth of arms to the GCC states since 2011.
In closing, economic diversification in the Middle East - far from being purely a technocratic affair - carries deep power implications, involving all three inter-locking spheres in the domestic, regional and geopolitical domains. By producing a greater number and variety of products, diversification not only increases the complexity of economic exchange but also risks generating independent constituencies whose political economy effects are neither neutral for domestic power structure nor for the prevailing geopolitical order. This calls for a more holistic understanding of the challenge of diversification.
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial stance. 

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