What the Decriminalization/Legalization of Drugs Debate is Missing

The legalization of soft and hard drugs made headlines recently, yet this debate is still poorly framed. Two sitting presidents, Otto Perez Molina from Guatemala and Juan Manuel Santos from Colombia stated that head-on discussions at a regional and world level are past due and it is time now to re-assess a failed war on drugs, shifting towards decriminalization or legalization of soft and hard drugs. While Perez boldly favored legalization of drug consumption and legalization of production and transportation logistics in Central America, Santos tamely supported decriminalization of consumption of some drugs, like cocaine, but not of all. The president’s statements echoed those of leading Latin American authors Sergio Ramirez and Carlos Fuentes and that of the Latin American Commission of Drugs and Democracy, presided by former presidents Cesar Gaviria (Colombia), Fernando Henrique Cardoso (Brazil) and Ernesto Zedillo (Mexico).

This call for a debate about decriminalizing or legalizing drugs, soft and hard, is welcome. But these statements

Argentine Politics: Macri’s victory a blow to Cristina?

2011 is an electoral year for Argentina and the question is whether the widow president Cristina Fernandez de Kirchner’s approval ratings will remain at the current 45 percent to allow her to win her reelection bid next October 23. Argentines will go to the polls at least five times by year’s end to cast their votes in state primaries, national primaries, governor and state legislator elections, city and city legislators elections, presidential and mid-term congressional elections, and run-off elections for governors, the mayor of the city of Buenos Aires, and presidential elections.

This is certainly a busy electoral year. Each of the five elections is a stress test for kirchenerismo and Fernandez’s presidential bid. While the outcome of elections in the provinces of Tierra del Fuego, La Rioja, Misiones, Neuquén, Salta y Catamarca showed strong support for Fernandez de Kirchner’s candidates, the support Mauricio Macri received in the city of Buenos Aires in his reelection bid as mayor evidenced an expected and significant blow to Fernandez’s camp. True, voters in Buenos Aires do not behave like voters in the rest of Argentina and the comfortable victory by Macri’s party, Propuesta Republicana (PRO), over Danile Filmus last Sunday does not guarantee a strong performance by Cristina Fernandez’s competitors next October. A run-off election between Macri and Filmus is scheduled for June 31. However, PRO’s performance signals concerns for Cristina Fernadez’s kirchenerismo camp.

For one, PRO’s 20 percent vote difference in the Buenos Aires election with Daniel Filmus, Cristina’s pick for mayor running under the Frente para la Victoria (FPV) banner, shows PRO’s consolidation in one of Argentina’s most important political

Peruvian politics: a skin rash, not a deadly disease

Aids and terminal cancer are two different deceases that, if untreated, lead to death. Not in Peruvian politics. Two years ago, Mario Vargas Llosa argued that a presidential run-off scenario confronting the daughter of a corrupt autocrat serving a 25-year sentence for human-right abuses and a former golpista was unthinkable. If this scenario were to take place, Vargas Llosa argued, it would evidence the foolishness of the Peruvian electorate. That scenario, unimaginable for the Nobel laureate and champion of (classical) liberalism back in 2009, will take place this upcoming Sunday when Peruvians will choose between Keiko Fujimori and Ollanta Humala to fill in for President Alan García. But unlike aids and cancer, the two contesters are akin to a rash and a eczema. They could be the same thing and you can live with it.

Take the May 29 televised debate between Fujimori and Humala. In what was supposed to be an opportunity for each candidate to increase his or her voting support, given that most opinion polls showed a tie between the candidates, the two scripted and uncharismatic candidates presented their policy solutions on four broad subjects: poverty alleviation, public security and narco-trafficking, institutions and democracy, and economics and social inclusion. In each of their responses

Macro confidence and the scourge of corruption in Bogota and Colombia

Standard and Poor’s upgraded Colombia’s foreign denominated debt rating to investment grade last week. The rating agency’s decision boosts market confidence in Colombia amid responsible macroeconomic management. Good macro management should come hand in hand with eradicating corruption practices in public and private transactions, as the ongoing corruption scandals in Bogota and across the country belie. Otherwise, the continued pilfering of public monies threatens to become a fiscal burden and an obstacle for conducting business.

S&Ps’ decision, expected by Colombian policymakers and long-internalized by markets as a result of the agency’s 2010 upward outlook for Colombia, reflects the relative sound macroeconomic environment of the Andean country. Credit agencies downgraded Colombia’s rating twelve years ago after the country underwent a banking and mortgage crisis. Increased insecurity and alleged inability of the government to control its territory also contributed to the downgrade. But unlike Argentina, Ecuador, and Venezuela, Colombia has had a historical responsible macroeconomic management, a solid independent Central Bank, and a credible commitment to service its obligations.

The upgrade comes despite implementation of pending macroeconomic reforms. Although fiscal policy still is moderately inflexible thanks to numerous constitutionally mandated obligations,

Inclement weather brings a juicy Christmas gift to Hugo Chávez

Venezuela’s National Assembly will decide today whether to grant full legislative powers to President Hugo Chávez for a year starting in January 2011. The bill is almost certain to be approved by the Chavista-majority Assembly, curbing any possibility for new legislators to be inaugurated in January 2011 to effectively influence Venezuelan policy decisions. Legislative elections held last September granted over two thirds of seats and 52 percent of the popular vote to opposition candidates summoned in the umbrella political organization Mesa de Unidad Nacional. If approved as introduced earlier in the week, the Enabling Law would allow Chávez to enable an “adequate legal framework” to finishdismantling the country’s economy. Moreover, the law would effectively strip incoming opposition legislators of any decision-making power.

Weather conditions provided an excuse to call for the special powers. Torrential rains and mudslides throughout the country have left thousands of people homeless and hundreds dead. Over 130,000 people have been affected by inclement weather. The rains have caused extensive infrastructure damage: 250 roads are intransitable, dams have broken, and several bridges have been closed. This inclement weather prompted the current Assembly and Chavéz’s government itself to usher the Enabling Law in a lame duck session. Of course, inclement weather was caused by“capitalism’s irrationality” requiring Bolivarian-inspired legislation penned by the executive office to solve these problems. Chávez will have legislative power over a broad number of issues if the Enabling Law is approved today. The president will have power to legislate on the following subjects:

1. Any policy issues related to human needs and poverty derived from inclement weather conditions, as well as those derived from social conditions caused by the country’s environmental challenges
2. Infrastructure, transportation, and public services
3. Housing
4. Use of rural and urban land as well as organization of Venezuela’s territory. In other words, stripping mayors and governors (particularly those in the opposition) of their limited powers and more property expropriations
5. Public and private finance and taxation
6. Public security and judicial security
7. Security and defense
8. International cooperation
9. And if the previous eight categories don’t give Chavez enough power to legislate over almost all policy areas, he would also have the power to legislate over Venezuela’s socioeconomic framework.

Although many were dispossessed by inclement weather, including the opposition, Chavez will receive a juicy gift from the outgoing Assembly.

Royalties reform in Colombia

Increasing opposition to a constitutional reform that would change the regional distribution of oil and mining royalties is emerging in Colombia’s Congress as the bill makes its way through the legislature. Senator Juan Lozano, the president of Juan Manuel Santos’ Partido de la U, argued in a debate last night in the Senate that there should be a discussion on current tax benefits granted to extractive companies. Lozano’s statement echoed that of Senator Jorge Robledo from opposition party PDA. Robledo also argued that the bill seeks to centralize management of royalties in the hands of the national government  to cover its deficit.

Finance Minister Juan Carlos Echeverry highlighted that Colombia’s government does not plan to modify royalty rates and that the bill in discussion would contribute to a more equitable distribution of royalties among sub-national governments, both for producers and for non-producers. Echeverry clarified that the national budget will not benefit from any changes in the royalties regime. This is the second of eight debates. The debate was postponed late last night and will resume today. The government will continue to face strong opposition, in particular once the bill reaches the lower Chamber’s floor in the third and fourth debates and legislators are preparing to support candidates for local elections in 2011. Royalties are a significant component of the income of sub-national government. Colombia’s government expects to receive COP 8 trillion in oil and mining royalties this year.

Ecopetrol and PDVSA’s Orinoco joint exploration

Carlos Rodado, Colombian Mining and Energy Minister, announced possible joint exploration of the Orinoco basin by Colombia’s Ecopetrol and Venezuela’s PDVSA. According to Colombia’s leading think tank Fedesarrollo, in 2009 Colombia extracted 66.45 percent (425 thousand b/a) of its oil from the fields in its side of the basin, which accounts for 30 percent of the basin’s area with the remainder on Venezuelan territory. Rodado’s statement comes after high-level bilateral meetings that resumed diplomatic and trade relations between the two neighboring countries, stalled after political rifts grounded on evidence of Venezuela’s support and protection of Colombia’s FARC, a left-wing terrorist organization.

Will the joint exploration come to reality? Both companies are state-owned, however their management motivations are radically different. While Ecopetrol acts independently, PDVSA operates driven by political motivations fitting clearly into state-capitalism – where businesses’ drivers are “maximizing the state’s power and the leadership’s chances of survival”, as oppose to profit/growth maximization. Ecopetrol, a majority state-owned company, is a solid and well-governed company. Ecopetrol’s management independently decides about its investments based on project assessment without affecting Colombia’s fiscal position. The company is listed on the NYSE (EC) and, most recently, on the Toronto’s Stock Exchange. Ecopetrol’s share has performed positively, increasing value both in USD and COP, which has not been the case of other players such as Brazil’s Petrobras whose share has declined since January, according to Brooking’s Mauricio Cárdenas Santamaria.

PDVSA… well, is the opposite of Ecopetrol. The highly in-depth state owned company is crucial in Venezuela’s Hugo Chávez regime. Not surprisingly, the company’s CEO is also the head of the Ministry of Energy and Oil and one of PDV’s vice-presidents is Chavez’s brother. The company’s funds most of Venezuela’s “social” programs, which guarantee people’s support for Hugo Chávez.  PDVSA, more over, has unsuccessfully taken over several other nationalized companies in the sector.

Whether or not the joint exploration crystallizes, Ecopetrol should be wary of its business partner.