Just Foreign Policy News
May 7, 2010
Will Obama Say Yes to Afghan Peace Talks?
On May 12, President Karzai is going to ask President Obama to back Afghan peace talks to end the war. Help us ask President Obama to say yes with an ad in the DC press.
https://www.justforeignpolicy.org/donate/peace-talks-ad
Background: A National Consensus in Afghanistan for Peace Talks
http://www.commondreams.org/view/2010/05/07-6
VIDEO: Urge Congress to End the War in Afghanistan
Just Foreign Policy has made a short video to help publicize the McGovern bill and the importance of a timetable for military withdrawal from Afghanistan.
https://www.justforeignpolicy.org/video/feingold-mcgovern
Current House McGovern co-sponsors: 82.
2 of 3 Illinois Democrats are now on the McGovern bill.
http://noescalation.org
Beverly Bell: The Urgency of Housing in Haiti
Haitian officials and international aid agencies have revealed no plan to permanently meet the housing needs of 1.3 million left displaced – one in nine citizens. Instead, rare public statements evidence conflicting strategies for limited, temporary initiatives.
http://www.commondreams.org/view/2010/05/07
Summary:
U.S./Top News
1) U.S. officials conceded to a Senate panel that not nearly enough trained Afghans are available to take control of key Taliban strongholds such as Marja, AP reports. [Unremarked is the contradiction between this admission and the US claim that it had a "government in a box" ready to deploy in Marja – JFP.] Sen. Lugar said he is concerned Afghanistan doesn’t have the economic potential of Iraq and that the US will support the Afghan military for decades. "I see a scenario down the trail that after arduous training exercises . . . the wherewithal to pay for all this simply is not there," Lugar said.
2) Some U.S. officials are using the attempted Times Square bombing to argue for increasing the number of Special Operations troops in Pakistan, the New York Times reports.
3) The would be Times Square bomber may be linked to groups that Pakistan doesn’t want to investigate because they are part of its policy of harassing India over the Kashmir dispute, the Washington Post reports.
4) The mayors of the three towns on Tokunoshima in Kagoshima Prefecture told Prime Minister Hatoyama they want no part of his proposal to move some U.S. Marine elements from Futenma in Okinawa to their island, Japan Times reports. The meeting was not the start of negotiations but an opportunity to show Hatoyama their opposition, the mayors said, handing the prime minister a petition signed by 26,000 people against relocating Futenma’s operations to Tokunoshima.
5) To get teen terror suspect Omar Khadr to cooperate, a former U.S. Army interrogator testified, he told the wounded Canadian a "fictitious" tale of an Afghan youth who was gang-raped in an American prison and died, the Miami Herald reports. "We’d tell him about this Afghan who gets sent to an American prison and there’s a bunch of big black guys and big Nazis," said the former interrogator. Khadr’s attorneys called Interrogator No. 1 to bolster Khadr’s claim that he was abused while in U.S. custody and their motion before a military judge that any confessions he made during his captivity should be considered coerced and not admissible.
6) The number of American soldiers seeking treatment for opiate abuse has skyrocketed over the past five years, Fox News reports. Pentagon statistics show the number of Army soldiers enrolled in Substance Abuse Program counseling for opiates has soared nearly 500 percent – from 89 in 2004 to 529 last year. The number showed a steady increase almost every year in that time frame – but it leaped 50 percent last year when the U.S. began surging troops into Afghanistan.
Israel/Palestine
7) The Israeli Defense Ministry is refusing on "security grounds" to reveal why Israel prohibits the import into Gaza of cilantro, jam, chocolate, french fries, dried fruit, notebooks, flowerpots and toys, Haaretz reports. "It is difficult to imagine how publishing a list of products, such as medications, foodstuffs and hygiene products, or revealing the procedures that determine this list, could harm state security," wrote attorney Tamar Feldman on behalf of the Israeli civil rights group Gisha, which has brought suit to reveal the information.
8) Evidence has emerged which appears to implicate Israel’s Gaza commander at the time in an attempt to obstruct the official investigation into Rachel Corrie’s death, The Independent reports. According to a military police investigator’s report which has now emerged, the "commander" of the D-9 bulldozer was giving testimony when an army colonel dispatched by Major-General Almog interrupted proceedings and cut short his evidence. The military police investigator wrote: "At 18:12 reserve Colonel Baruch Kirhatu entered the room and informed the witness that he should not convey anything and should not write anything and this at the order of the general of southern command."
Colombia
9) Polls increasingly show that Antanas Mockus might win the presidency in Colombia, the Washington Post reports. Mockus’s campaign managers say his administration would contrast sharply with what critics call the downside of Alvaro Uribe’s government: confrontation and scandal, including revelations that the secret police spied on opponents and helped hit men kill leftist activists.
Venezuela
10) Stories of Venezuela’s purported economic ruin are again making U.S. headlines, writes Mark Weisbrot in the Guardian. The Washington Post reports that Venezuela is "gripped by an economic crisis." One important fact is almost never mentioned: the government’s debt level, about 20% of GDP. Even as it was tripling real social spending per person, increasing access to healthcare and education, and loaning or giving billions of dollars to other Latin American countries, Venezuela was reducing its debt burden during the oil price run-up. Venezuela’s public debt fell from 47.5% of GDP in 2003 to 13.8% in 2008. In 2009, as the economy shrank, public debt picked up to 19.9% of GDP. Compare this to Greece, where public debt is 115% of GDP and currently projected to rise to 149% in 2013. (The EU average is about 79%.) Given the Venezuelan government’s very low public and foreign debt, the idea the country is facing an "economic crisis" is simply wrong.
Contents:
U.S./Top News
1) Too Few Afghans Ready To Take Over In Taliban Strongholds, Senate Panel Is Told
Associated Press, Friday, May 7, 2010; A04
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/06/AR2010050605842.html
Not nearly enough trained Afghans are available to take control of key Taliban strongholds such as Marja after the military has pushed out the enemy, U.S. officials told a Senate panel Thursday. "The number of those civilians . . . who are trained, capable, willing to go into [Taliban-controlled areas] does not match at all demand," David Sedney, a deputy assistant secretary of defense, told the Senate Foreign Relations Committee.
The assessment didn’t sit well with lawmakers. "You get the queasy feeling that maybe they either aren’t able to sustain it or they don’t really have the same desire that we as Americans do," Sen. Jim Risch (R-Idaho) said of the Afghans.
Sen. Richard G. Lugar of Indiana, the panel’s top Republican, said he is concerned that Afghanistan doesn’t have the economic potential of oil-rich Iraq and that the United States will support the Afghan military for decades. "I see a scenario down the trail that after arduous training exercises . . . the wherewithal to pay for all this simply is not there," Lugar said.
The hearing was the first devoted entirely to Marine operations in Marja, in southern Afghanistan, this year. The assault was widely regarded as a test of Obama’s strategy for empowering the Afghan government.
A week into the battle, Marja’s civilian chief was brought in to raise the Afghan flag, and Marja residents who had fled began to return. Since then, progress has been slower than U.S. officials had planned. NATO forces still run much of the area.
2) Debate On Expanded Presence In Pakistan
Mark Mazzetti and Mark Landler, New York Times, May 6, 2010
http://www.nytimes.com/2010/05/07/world/asia/07diplo.html
Washington – The evidence of ties between the man accused of being the Times Square bomber and Pakistani militants has intensified debate inside the Obama administration about expanding America’s military presence in Pakistan, with some officials making the case to increase the number of Special Operations troops working with Pakistani forces in the country’s western mountains.
The American military presence in Pakistan has already grown substantially over the past year, and now totals more than two hundred troops, part of a program to share intelligence with Pakistani Army and paramilitary troops and train them to battle militant groups.
But the failed bombing in Times Square, and evidence that the accused man, Faisal Shahzad, received training in a camp run by the Pakistani Taliban, has given support to those who want to expand the mission.
In particular, some inside the administration believe that the C.I.A. program of killing militants from the air is insufficient for preventing attacks on the West, and that an expanded training mission might raise confidence in Pakistan’s military enough to launch an offensive in the militant sanctuary of North Waziristan, in the tribal areas. "There is a growing sense that there will need to be more of a boots on the ground strategy," said one Obama administration official.
[…]
3) Possible role of Kashmir-focused groups may hinder Times Square terrorism probe
Karin Brulliard, Washington Post, Friday, May 7, 2010; A05
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/06/AR2010050606029.html
Karachi, Pakistan – Faisal Shahzad’s path from suburban Connecticut to bombmaking training in Pakistan’s mountains may have wound through a mosque on a ragged corner of this metropolis, Pakistani officials say. The suggestion highlights the nation’s complex militant web – but could also form an obstacle to a terrorism investigation spanning two continents.
A man who guided Shahzad from Karachi to the country’s northwest, Pakistani officials say, was arrested this week at the mosque, which is affiliated with Jaish-i-Muhammad. The al-Qaeda-linked group is one in a mosaic of domestic jihadist organizations that were created or cultivated by Pakistan’s intelligence services to antagonize Indian troops in the disputed region of Kashmir but have gone increasingly rogue.
U.S. officials say they are worried about these militant groups based in Punjab province, many of which are banned but still operate freely. The most prominent among them is Lashkar-i-Taiba, suspected in a deadly 2008 siege in Mumbai. The group has changed its legal name, but its leaders remain free.
Some elements in Pakistan’s security establishment continue to view such groups as assets against India, and Punjabi politicians court them for political support. It is uncertain whether Pakistan would take aggressive action against the organizations, even if they are found to be definitively connected to the Times Square bombing attempt.
"There’s never been any clampdown on any of these groups that were fighting in Kashmir. That’s not just Lashkar, it’s everyone," said Ahmed Rashid, who has written extensively on militants in Pakistan and Afghanistan. "That’s a problem."
[…]
4) Island mayors rebuff Hatoyama
Jun Hongo, Japan Times, May 7, 2010
http://search.japantimes.co.jp/cgi-bin/nn20100507x1.html
The mayors of the three towns on Tokunoshima in Kagoshima Prefecture told Prime Minister Yukio Hatoyama on Friday they want no part of his proposal to move some U.S. Marine elements from Futenma in Okinawa to their island. "We understand the difficult circumstances (of the relocation issue), but there is no way we will allow any construction" of U.S. military facilities on Tokunoshima, Isen Mayor Akira Okubo said when the three local leaders met with Hatoyama in Tokyo.
The first part of the meeting was open to reporters.
"We were there to relay the public’s opinion to the (central) government. I don’t think there is any need for us to set another meeting with the prime minister," Okubo later told reporters, with Amagi Mayor Kosuke Ohisa adding that further discussions would only end with the same conclusion.
The Democratic Party of Japan-led administration has been looking into the possibility of moving about 1,000 of the approximately 2,500 marines stationed at Futenma, and some of the drills conducted there, to Tokunoshima.
But with only three weeks until Hatoyama’s self-imposed deadline to settle the issue, the three mayors from Tokunoshima came to Tokyo to file their formal opposition.
The meeting was not the start of negotiations but an opportunity to show Hatoyama their opposition, the mayors said, handing the prime minister a petition signed by 26,000 people against relocating Futenma’s operations to Tokunoshima.
[…]
5) Interrogator told detainee Khadr of rape scenario
Carol Rosenberg, Miami Herald, Thu, May. 06, 2010
http://www.miamiherald.com/2010/05/06/1616825/interrogator-says-he-told-detainee.html
Guantanamo Bay Navy Base, Cuba – To get teen terror suspect Omar Khadr to cooperate, a former U.S. Army interrogator testified Thursday, he told the wounded Canadian a "fictitious" tale of an Afghan youth who was gang-raped in an American prison and died.
"We’d tell him about this Afghan who gets sent to an American prison and there’s a bunch of big black guys and big Nazis," said the former interrogator, who was since convicted of detainee abuse and was identified in court only as Interrogator No. 1.
Under Pentagon ground rules, reporters covering the hearing are not allowed to include the interrogator’s real name in their dispatches from Guantánamo. Canadian newspapers have published the name, however, and his testimony in other cases is available at the McClatchyDC.com website and elsewhere.
Interrogator No. 1 also gave an on-the-record interview with The Toronto Star in 2008 and his name was widely published in accounts of his court martial in September 2005.
The interrogators told Khadr that the Afghan – "a poor little kid . . . away from home, kind of isolated" – had been sent to the U.S. prison because the interrogators were disappointed with his truthfulness, Interrogator No. 1 said. When patriotic American prisoners discovered the Afghan was a Muslim, praying five times a day, they raped him in their rage over the Sept. 11, 2001, attacks, Interrogator No. 1 said Khadr, who was 15 and badly wounded at the time, was told.
Khadr’s attorneys called Interrogator No. 1 to bolster Khadr’s claim that he was abused while in U.S. custody and their motion before a military judge that any confessions he made during his captivity should be considered coerced and not admissible.
Khadr, now 23, had specifically claimed in an affidavit outlining abuse that he was threatened with rape. On Tuesday, a medic identified as Mr. M testified that he once found Khadr chained by his arms to the door of his cage-like cell, hooded and in tears. That too tracked allegations included in Khadr’s affidavit.
[…]
6) Number of Soldiers Seeking Opiate Abuse Treatment Skyrockets
Judson Berger, FOXNews, May 06, 2010
http://www.foxnews.com/politics/2010/05/06/number-troops-seeking-opiate-addiction-treatment-skyrockets/
The number of American soldiers seeking treatment for opiate abuse has skyrocketed over the past five years, at a time when the U.S. military has been surging forces into the heart of the world’s leading opium producer.
Pentagon statistics obtained by FoxNews.com show that the number of Army soldiers enrolled in Substance Abuse Program counseling for opiates has soared nearly 500 percent – from 89 in 2004 to 529 last year. The number showed a steady increase almost every year in that time frame – but it leaped 50 percent last year when the U.S. began surging troops into Afghanistan. Army troop levels in Afghanistan went from 14,000 as of the end of 2004 to 46,400 as of the end of 2009.
The Army did not break down the opiate-use data to show how many of the soldiers had been deployed to Afghanistan or what specific opiates they were using; opiate drugs include morphine, codeine and heroin.
Lt. Col. Christopher Garver, a U.S. Army spokesman, said the military has been monitoring the uptick and is "concerned about it." He said the numbers reflect use not only of heroin, but of prescription drugs, that the abuse may not be "directly correlated to previous deployments," and that the increase could reflect an increase in reporting abuse – not just drug use itself.
But the abundance and accessibility of heroin in Afghanistan surely account for part of the jump, said Lt. Col. Tony Shaffer, an Army Reserve officer who served in Afghanistan from 2003 to 2004.
[…]
Israel/Palestine
7) Why Won’t Israel Allow Gazans to Import Coriander?
In its response to a freedom-of-information suit last week, the state admitted that there is specific list of goods permissible for import to Strip.
Amira Hass, Haaretz, 07.05.10
http://www.haaretz.com/print-edition/news/why-won-t-israel-allow-gazans-to-import-coriander-1.288824
The Defense Ministry is refusing – on security grounds, it says – to reveal why Israel prohibits the import into the Gaza Strip of items such as cilantro, sage, jam, chocolate, french fries, dried fruit, fabrics, notebooks, empty flowerpots and toys, while allowing cinnamon, plastic buckets and combs.
But in its response to a freedom-of-information suit last week, the state did admit, for the first time, that there is specific list of permissible goods.
The suit, filed in the Tel Aviv administrative court by Gisha: Legal Center for Freedom of Movement, sought to clarify the criteria and procedures the authorities use to determine what goods to allow into Gaza. It was filed after Gazans began claiming that commercial interests inside Israel, and their lobbying power, were determining the permitted items.
In its response, the state "apologized to the court and the plaintiff for inaccuracies presented during oral arguments [in January], due to certain misunderstandings." The inaccuracy in question was its denial of the existence of written directives.
The response included two documents that the state termed drafts that are already being used in practice – one titled "Procedure for Permitting the Entry of Goods into Gaza" and one titled "Procedure for Tracking and Estimating Inventories in Gaza." The latter is supposed to warn of existing or likely shortages.
The state also submitted a third document, a "List of Critical Humanitarian Goods for the Population," whose existence it had previously denied. This list is periodically updated, it said.
A fourth document, called "Foodstuffs Consumption in Gaza – Red Lines," is a draft for internal use only, the state said, "and has never served as a basis for decision-making." Haaretz reporters Uri Blau and Yotam Feldman revealed the existence of this document in a June 2009 investigative report. It apparently determines the minimum nutritional needs of Gaza’s population, according to caloric intake and grams of food, parsed by age and gender.
The state seeks to deny Gisha’s suit on the grounds that revealing the first three documents would "harm national security and possibly even diplomatic relations." And since the fourth is not a basis for policy, there is no need to reveal it, the state argued.
Gisha filed its response with the court yesterday, in which it reiterated its demand for any documents that determine the goods transfer policy. "It is difficult to imagine how publishing a list of products, such as medications, foodstuffs and hygiene products, or revealing the procedures that determine this list, could harm state security," wrote attorney Tamar Feldman.
8) General ‘Tried to Cover Up Truth About Death of Rachel Corrie’
Israeli war hero accused of suppressing testimony that could reveal what really happened to Gaza activist
Ben Lynfield, The Independent, Friday, 7 May 2010
http://www.independent.co.uk/news/world/middle-east/general-tried-to-cover-up-truth-about-death-of-rachel-corrie-1965623.html
Seven years after the American activist Rachel Corrie was killed by an Israeli army bulldozer in Gaza, evidence has emerged which appears to implicate Israel’s Gaza commander at the time, in an attempt to obstruct the official investigation into her death.
The alleged intervention of Major-General Doron Almog, then head of Israel’s southern command, is documented in testimony taken by Israeli military police a day after Ms Corrie was killed on March 16, 2003. The hand written affidavit, seen by The Independent, was submitted as evidence during a civil law suit being pursued by the Corrie family against the state of Israel.
Ms Corrie, who was 23 when she died, was critically wounded when a bulldozer buried her with sandy soil near the border between Gaza and Egypt. The American, wearing a fluorescent orange jacket and carrying a megaphone, was among a group of volunteers from the anti-occupation International Solidarity Movement who over a period of three hours on that day had sought to block the demolition by Israel of Palestinian homes.
The Israeli military has maintained that its troops were not to blame for the killing of Ms Corrie and that the driver of the bulldozer had not seen her. It accused Ms Corrie and the ISM of behaviour that was "illegal, irresponsible and dangerous". Three days after Ms Corrie’s death, the US state department announced that the Israeli Prime Minister Ariel Sharon had promised the US President George Bush that the Israeli government would undertake a "thorough, credible and transparent investigation".
But according to a military police investigator’s report which has now emerged, the "commander" of the D-9 bulldozer was giving testimony when an army colonel dispatched by Major-General Almog interrupted proceedings and cut short his evidence. The military police investigator wrote: "At 18:12 reserve Colonel Baruch Kirhatu entered the room and informed the witness that he should not convey anything and should not write anything and this at the order of the general of southern command."
The commander was a reservist named Edward Valermov. He was in the bulldozer with its driver. In his testimony before he was ordered to stop, he told military police investigators that he had not seen Ms Corrie before she was wounded. Alice Coy, a former ISM volunteer activist who was near Ms Corrie during the incident said in an affidavit to the court that "to the best of my knowledge the bulldozer driver could see Rachel while pushing earth over her body."
Hussein Abu Hussein, a lawyer for the Corrie family, said Major-General Almog’s alleged intervention blocked the possible emergence of evidence that could have determined whether Mr Valermov’s assertion that he did not see Ms Corrie was reasonable. "Do I believe him? Of course not. There is no doubt this was manslaughter," Mr Abu Hussein said. "First of all we claim the state is responsible for the death of Rachel. And secondly we claim that the investigation was not professional."
[…]
Colombia
9) Politically astute outsider Mockus making ground in campaign for president of Colombia
Juan Forero, Washington Post, Friday, May 7, 2010; A14
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/06/AR2010050606284.html
Bucaramanga, Colombia – Colombians have long known Antanas Mockus for his antics, such as the time he mooned an auditorium full of rowdy students during his stint as a university president. And how he got married atop an elephant. Then there were the occasions during his two terms as Bogota mayor when he donned a spandex suit and became Super Citizen to lecture residents about civics.
Some have called him "a little strange," as Mockus acknowledged Thursday in an interview. Soon, Colombians may be calling him president.
Polls increasingly show that Mockus, who is the son of Lithuanian immigrants and whose trademark is an Amish-style beard, might just win the presidency in elections to succeed Alvaro Uribe, a U.S.-backed hard-liner who was prevented from running for a third term. A first round of voting takes place May 30, with a second scheduled next month if no candidate wins 50 percent.
Political analysts and commentators call Mockus’s rise a political phenomenon because he differs so markedly in style and substance from Uribe, who marshaled more than $6 billion in U.S. aid to batter the rebel forces that have plagued Colombia. That gave Uribe a 70 percent approval rating, and pundits predicted that his natural heir, former defense minister Juan Manuel Santos, would easily sweep to victory.
Mockus, a 58-year-old former mathematician, likes to say that he is not anti-Uribe but post-Uribe. He has said he would continue popular policies, such as the fight against armed groups, but also pledges to bring civility and transparency to government.
[…] Mockus’s running mate is a former mayor of Medellin, Sergio Fajardo, also a former mathematician. Two other former Bogota mayors, Luis Eduardo Garzon and Enrique Pealosa, campaign alongside them, hammering home the message that they offer technocratic competence and honesty.
Mockus’s campaign managers say his administration would contrast sharply with what critics call the downside of Uribe’s government: confrontation and scandal, including revelations that the secret police spied on opponents and helped hit men kill leftist activists.
Mockus, who heads the Green Party, has run a shoestring campaign, relying on students adept at getting the word out through Facebook and Twitter. "People in Colombia are tired of corruption, old-style politics, and Mockus and Fajardo are now trying to represent this new politics," Andres Pastrana, a former president, said in a recent interview.
[…] To his detractors, everything associated with Mockus smacks of naivete and optimism, like the sunflowers that are the symbol of his campaign. Those critics say that Colombia still faces serious threats from the Revolutionary Armed Forces of Colombia (FARC), its largest rebel group. "The FARC are waiting for Aug. 7 to have a big party," Andres Felipe Arias, a former Uribe ally, said, referring to the date of the presidential inauguration. "You do not confront the challenge of the guerrillas with mimes and sunflowers."
Mockus responds that he will continue to use the armed forces, which have received training and funding from Washington, to battle the rebels and drug-trafficking in the world’s biggest cocaine-producing country. "My philosophy is not to stop things unless there’s a sign of something being unproductive," he said.
As mayor of Bogota, a city of 8 million, he invested heavily in police and instituted new tactics, resulting in a dramatic drop in homicides and winning public praise from Uribe.
Mockus also refused to parcel out posts to supporters or meet with municipal officials and council members known for corruption. He raised taxes on the rich and instituted unpopular measures such as closing bars at 1 a.m. to cut down on drunken driving and violence. (It worked.)
What he said he cannot fathom, though, is obtaining results at any price. He referred to one scandal that has plagued the Uribe administration since 2008: the killing of peasants by army units looking to beef up combat death statistics and win favor with their superiors. "That is an act that reflected on the deterioration of the morals of a part of society," Mockus said.
Instead, he often speaks of the sanctity of life, leading followers in chants of "Life is sacred. Life is sacred." He said that Colombians, after years of war, must learn how to stop hating. "I don’t want to run a government laced with hate," he said. "The guerrillas may make me indignant, and I will fight them. But I will not hate them."
Venezuela
10) Venezuela is not Greece
Given the Venezuelan government’s low public and foreign debt, the idea the country is facing an ‘economic crisis’ is plain wrong
Mark Weisbrot, Guardian, Thursday 6 May 2010 18.00 BST
http://www.guardian.co.uk/commentisfree/cifamerica/2010/may/06/venezuela-greece-economic-crisis
With Venezuela’s economy having contracted last year (as did the vast majority of economies in the Western Hemisphere), the economy suffering from electricity shortages, and the value of domestic currency having recently fallen sharply in the parallel market, stories of Venezuela’s economic ruin are again making headlines.
The Washington Post, in a news article that reads more like an editorial, reports that Venezuela is "gripped by an economic crisis," and that "years of state interventions in the economy are taking a brutal toll on private business."
There is one important fact that is almost never mentioned in news articles about Venezuela, because it does not fit in with the narrative of a country that has spent wildly throughout the boom years, and will soon, like Greece, face its day of reckoning. That is the government’s debt level: currently about 20% of GDP. In other words, even as it was tripling real social spending per person, increasing access to healthcare and education, and loaning or giving billions of dollars to other Latin American countries, Venezuela was reducing its debt burden during the oil price run-up. Venezuela’s public debt fell from 47.5% of GDP in 2003 to 13.8% in 2008. In 2009, as the economy shrank, public debt picked up to 19.9% of GDP. Even if we include the debt of the state oil company, PDVSA, Venezuela’s public debt is 26% of GDP. The foreign part of this debt is less than half of the total.
Compare this to Greece, where public debt is 115% of GDP and currently projected to rise to 149% in 2013. (The European Union average is about 79%.)
Given the Venezuelan government’s very low public and foreign debt, the idea the country is facing an "economic crisis" is simply wrong. With oil at about $80 a barrel, Venezuela is running a sizeable current account surplus, and has a healthy level of reserves. Furthermore, the government can borrow internationally as necessary – last month China agreed to loan Venezuela $20bn in an advance payment for future oil deliveries.
Nonetheless, the country still faces significant economic challenges, some of which have been worsened by mistaken macroeconomic policy choices. The economy shrank by 3.3% last year. The international press has trouble understanding this, but the problem was that the government’s fiscal policy was too conservative – cutting spending as the economy slipped into recession. This was a mistake, but hopefully the government will reverse this quickly with its planned expansion of public investment this year, including $6bn for electricity generation.
The government’s biggest long-term economic mistake has been the maintenance of a fixed, overvalued exchange rate. Although the government devalued the currency in January, from 2.15 to 4.3 to the dollar for most official foreign exchange transactions, the currency is still overvalued. The parallel or black market rate is at more than seven to the dollar.
An overvalued currency – by making imports artificially cheap and the country’s exports more expensive – hurts Venezuela’s non-oil tradable goods’ sectors and prevents the economy from diversifying away from oil. Worse still, the country’s high inflation rate (28% over the last year, and averaging 21% annually over the last seven years) makes the currency more overvalued in real terms each year. (The press has misunderstood this problem, too – the inflation itself is too high, but the main damage it does to the economy is not from the price increases themselves but from causing an increasing overvaluation of the real exchange rate.)
But Venezuela is not in the situation of Greece – or even Portugal, Ireland, or Spain. Or Latvia or Estonia. The first four countries are stuck with an overvalued currency – for them, the euro – and implementing pro-cyclical fiscal policies (eg deficit reduction) that are deepening their recessions and/or slowing their recovery. They do not have any control over monetary policy, which rests with the European Central Bank. The latter two countries are in a similar situation for as long as they keep their currencies pegged to the euro, and have lost output six to eight times that of Venezuela over the last two years.
By contrast, Venezuela controls its own foreign exchange, monetary, and fiscal policies. It can use expansionary fiscal and monetary policy to stimulate the economy, and also exchange rate policy – by letting the currency float. A managed, or "dirty" float – in which the government does not set a target exchange rate but intervenes when necessary to preserve exchange rate stability – would suit the Venezuelan economy much better than the current fixed rate. The government could manage the exchange rate at a competitive level, and not have to waste so many dollars, as it does currently, trying to narrow the gap between the parallel and the official rate. Although there were (as usual, exaggerated) predictions that inflation would skyrocket with the most recent devaluation, it did not – possibly because most foreign exchange transactions take place through the parallel market anyway.
Venezuela is well situated to resolve its current macroeconomic problems and pursue a robust economic expansion, as it had from 2003-2008. The country is not facing a crisis, but rather a policy choice.
–
Robert Naiman
Just Foreign Policy
www.justforeignpolicy.org
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