1. The Democratic primary debate this week between Hillary Clinton and Bernie Sanders included a great exchange on immigration issues. Each candidate was correct in their criticism of the other.

    Bernie Sanders was correct to criticize Clinton’s push to deport Central America children while she was Secretary of State. He certainly grabbed the opportunity to go after Clinton’s poor choice of words about using deportation to “send a message” to the children and families who are fleeing violence. The NYT editorial board used the exchange to highlight Clinton’s mixed record on immigration issues and call on her to support legislation by Senator Reid to provide vulnerable migrant populations with proper legal representation.

    Clinton was correct to criticize Sander’s opposition to the 2007 comprehensive immigration reform package. The legislation was the best opportunity in the past decade to fix our broken system and help millions of hardworking and tax paying immigrants obtain legal status. Sanders tried to defend his record by pointing to a small minority of liberal groups that opposed the legislation. However, his defense simply reinforced the narrative that Sanders doesn’t get things done and too often lets ideological purity get in the way of pragmatic results that would have benefited millions.

    What’s great is that both of these candidates are generally correct on immigration. We’re nitpicking over details in these debates trying to show who has done better to protect migrant communities in the past and who will best build on the US history of being a nation of immigrants. But either of these candidates would do an excellent job improving US policy in the coming four years. Both candidates have made strong statements promising to protect the human rights of the most vulnerable populations coming across the US border. Having these candidates on record now will make it more difficult for them to back away from strong immigration reform in the general election and in office.

    Meanwhile, the Republican side has become a contest over who can be toughest against immigrants, with the racism and xenophobia of the Trump campaign pushing the other candidates to become more extreme.

    Immigration issues will be central to the general election because of the clear divide between the two parties. When the Democratic and Republican candidates meet on the debate stage in October and the immigration question comes up, the differences defined in these primary debates will play a key role in deciding the election.
  2. In terms of the threat of default, the Washington Post manages to summarize Venezuela's economic challenges in a single paragraph:
    The math behind these warnings is stark, as economist Ricardo Hausmann recently outlined in the Financial Times. At current oil prices, Venezuela will earn less than $18 billion from exports this year, while it owes $10 billion in payments on the $120 billion in debt it has racked up. That leaves $8 billion for imports, but even after contracting 20 percent, imports were $37 billion in 2015 — and Venezuela now imports most of its food. Even with a debt default that the markets expect, it’s hard to see where additional hard currency will come from: The country broke relations with the International Monetary Fund almost a decade ago, has no ability to obtain private loans and has nearly exhausted its liquid reserves. It already owes China, its latest benefactor, $50 billion.
    When you add those numbers up, it's clear that "magic" is the only way Venezuela avoids default this year. It's just a matter of whether they choose to default soon or are forced into it a few months later.

    I have a prediction over at GJOpen giving Venezuela a 24% chance of default prior to 1 March (my prediction is actually slightly higher, but there will be a 30 day grace period if they default on their sovereign bond payment in late February that might not be scored until after March). That is significantly higher than the current market estimate, but still less than 50%. They are very likely to default at some point this year.
  3. The FARC announced they will recruit no new combatants under the age of 18. The step is very welcome, but remember that half of the FARC's current combatants were recruited under the age of 18 and over 30% (and that is the low end of the estimates) are under 18 today.

    The old men you see negotiating the peace deal are not demographically representative of the FARC. When the group disarms and demobilizes, there will be thousands of teenagers who will need to be reintegrated with society who have little education and no work experience in a non-combat environment. They are also a largely rural population and many will likely expect to reintegrate in an urban setting.

    As I've written since the beginning of these peace talks, the question of demobilizing and reintegrating child combatants should be front and center on everyone's agenda, but unfortunately all the sides have been almost completely silent about the specific challenges.

    Also see my post last year when the FARC made a similar announcement.
  4. Venezuela is tens of billions behind in payments to various foreign companies who have provided food and other imported goods. The country owes China billions, much of which is being paid in oil. There is about $10 billion in payments due this year between sovereign debt and Pdvsa bonds. Wall Street only considers it an official default if they don't pay the bonds, which is highly likely to occur later this year, but to agree with economist Ricardo Hausmann, the fact is that Venezuela is already not paying on much of its obligations.

    In the past in Latin America, there has occasionally been support for strategic default by populists, usually from the political left, who believe that bankers and bondholders deserve to not be paid for the unethical way they have treated countries. Looking back at Argentina's default in the early 2000s, the Kirchners and their political allies certainly played up the narrative of default being both the proper economic strategy as well as the ethical thing to do as they fought the "vulture funds" who tried to profit from Argentina's loss.

    The interesting part of what we're about to see in Venezuela is that the populist and moral case for defaulting on unethical debt is about to be made by the right leaning side of the political spectrum. They will argue that the banks, bondholders and Chinese who have profited from the Venezuelan government's poor economic policies deserve to lose the money they have invested as the cost of propping up the Chavez and Maduro governments.

    Juan Nagel, writing in Foreign Policy:
    It is impossible to untangle the ethical implications of all of this. Lending Venezuela money is what business ethics professors talk about when they question “winning at someone else’s expense.” Losing money from investing in Venezuela is akin to losing it from, say, funding a company that engages in morally reprehensible acts. (Insert the name of your favorite evil corporate villain here).

    Investors in companies with “tainted profits” from, say, engaging in child labor or violating human rights should not get the world’s sympathy, nor should they be bailed out. Similarly, investors in Venezuelan debt have only their hubris to blame.
    Meanwhile, the Maduro government continues to insist it will pay Wall Street and China first and second, even at the expense of rising poverty and food scarcity in the country. That is not exactly the most revolutionary or socialist of policies.
  5. FT editorial:
    For the first time since the debt default in 2001, Argentina has a sensible government with whom those holdout investors can deal. Indeed, the US courts that handed them such a powerful weapon did so partly based on the unreasonableness of previous Argentine administrations. Those bond-holders, and the courts backing them, should recognise the change of approach by Buenos Aires and come to agreement around the current offer.

    Argentine economic policy in the past has varied from the hubristic to the comic. That, however, does not justify Argentina being held to ransom, particularly at a time when a new government wants to put economic policy on a solid and legitimate footing. Mr Macri is right to make this offer. The holdout creditors should accept it.
    I agree with the opinion of this editorial in many ways. Macri is doing his best to negotiate in good faith and offer an acceptable deal and it would be best for Argentina and international markets if everyone accepted the deal offered.

    At the same time, it's more than a little ironic that an editorial board that generally supports free markets is appealing to the idealistic good nature of the bond holders who are holding Argentina "ransom" without considering their individual incentives. The remaining holdouts are bond holders who have never been idealistic. They want to make the biggest profit possible and they are going to reject deals until they feel they have reached that goal.

    If the holdouts reject Macri's current offer, this situation may very well require some hardball, more economic and judicial force and less hopes for idealism. Having given a fair offer that is accepted by a large majority of bondholders, Macri's advisors would be well served to think of some outside the box ways to create economic incentives that will punish any small group of holdouts that think they can take hostages.
  6. Yesterday afternoon, Haiti President Martelly stepped down. Instead of passing the presidential sash to his successor, he handed it to the Senate president who will have it sent to a national museum for safekeeping.

    Prime Minister Evans Paul will run the country until the parliament names an interim president. That interim president will see the government through the election and inauguration, now scheduled for 24 April and 14 May, but obviously subject to change again.

    The deal for Haiti’s interim government is about the most fair that we are going to see given the extra-constitutional nature of everything going on. Had Martelly attempted to stay in power after his term was complete, it would have been an awful precedent for this hemisphere and deserving of invoking the Inter-American Democratic Charter. Though Martelly did hint at times he might stay on during the transition, his willingness to walk away from power at the appointed day and time yesterday is welcome and a small bit of positive news for Haiti.
  7. Many people initially mocked the recommendations by health officials in several countries for women in Zika areas to avoid pregnancy for the next six months to two years. The statements also raised some very legitimate and important questions about women's health issues, contraception access, abortion laws and sexual violence in the countries where Zika is increasing.

    However, in spite of the initial chorus of mocking and criticisms, the NYT reports today that some health experts are beginning to seriously consider the recommendation that women in areas with high incidence of Zika avoid pregnancies for the next year or two. That timeframe would allow Zika to run its course through the populations of the tropics and create a much higher level of individual and herd immunity. It also gives time to potentially develop a vaccine, though deployment of that vaccine will likely take longer, and allows countries to make additional progress on mosquito elimination. While the current research on Zika's effects on pregnant women remains unfinished, the difference of this timely recommendation could potentially be thousands of even tens of thousands of fewer babies born with birth defects in tropical areas.

    This is very challenging issue because this is a recommendation that must be made very soon for it to be effective, and most health officials are correctly hesitant to make any recommendations without convincing evidence. Convincing and statistically significant evidence on Zika's causal link to infant microcephaly probably won't be available for another few years. Though the correlation appears to be there, it could turn out to not be a true causal link. If global health officials make the recommendation to delay pregnancy and it turns out that the link is not what we currently guess it is, or it turns out there is a second order consequence that we currently aren't considering, the criticisms will be abundant.
  8. President Obama announced the United States will expand its assistance to Colombia next year. The $450 million, much of it coming under the renamed Peace Colombia initiative, is about 50% higher than previously budgeted. It will include consolidating security, expanding state presence and promoting justice for conflict victims. A separate fund of $33 million will go to landmine removal efforts.

    Separately, Colombia also announced an expansion of student exchanges and increased scientific research and cooperation to combat Zika and other mosquito-borne diseases.

    President Santos has expressed significant gratitude towards the US for its assistance to the country. Santos's visit to the US has led to a week of people praising Plan Colombia and offering their support for future initiatives. That's a successful trip.
  9. One day after I wrote that Argentina's Congress could stand in the way of a debt deal, the Peronist coalition broke. From Reuters:
    Argentina's main opposition party suffered a split on Wednesday after a dozen of its lawmakers quit, party leaders said, handing a boost to newly-elected President Mauricio Macri's hopes of pushing his legislative agenda through Congress....

    ...The shift in Congress could prove key when it returns from recess in March. Perhaps Macri's biggest challenge this year will be securing Congressional approval for any eventual deal with U.S. creditors suing the country over unpaid debt.
    This is one of those events that looks obvious in hindsight, but few people predicted.

    A political party that loses an election will often have a major internal feud and even a divide. A political system with inchoate parties like Argentina is even more susceptible to seeing these sorts of party divisions amid an election loss. It's not as if Peronism is a clearly defined ideology. It is a party with a political platform that has changed with the whims of its leadership over the decades, so there is little ideological reason for people to remain in the party if there aren't other political incentives.

    Of course the Peronist party is breaking apart now that they've lost the presidency and Kirchner is out of power. Of course a new president in his public opinion honeymoon is able to convince enough Peronists to defect in order to get his legislative agenda passed. It seems so obvious. But I dare you to find someone who predicted it and put that prediction in writing three months ago. I certainly did not.
  10. An article in Foreign Policy suggests “A Plan Colombia for Afghanistan.” The article refers specifically to providing Afghanistan more intelligence sharing, precision guided munitions for the  Air Force, and, implicitly, the level of success Colombia has seen in the past 15 years.

    The good news about writing a blog for for as long as I have is that I’ve already addressed a similar request for a Plan Colombia in Afghanistan at Plan Colombia's ten year mark. In 2011 I wrote:
    Over the past decade, there have been times the US has spent more in a day on its two wars than was spent in an entire year in Colombia. Additionally, Plan Colombia limited the number of troops and contractors in the country to less than 1,500 at any given time and the US was often well under the limits….

    ...Those limitations benefited Colombia. Having a smaller budget and a troop/contractor cap prevented the US from throwing excessive troops and resources at the problem, which often creates temporary success but also a level of dependency that make it hard to step away. The limitations on US assistance meant Colombia had to succeed on its own because the US was legislatively self-limited from imposing temporary "success" from the outside by ramping up troops or aid.
    The US spent about $50 billion in Afghanistan in 2015. That is about four times the amount spent in Colombia over its entire 15 year period. About 10,000 US troops remain in Afghanistan and at least 20,000 military contractors, far more than ever operated in Colombia.

    A Plan Colombia style package for Afghanistan would require significant cuts in terms of budget and personnel. It would probably be about $20-25 billion over the next ten years (not per year, that's total) and a hard limit of 2,500-3,000 military personnel plus contractors. And sure, that plan should include some intelligence sharing and precision guided munitions. Given how the fight in Afghanistan has gone in recent years, it's a proposal that should be on the table and debated (and some of the budget savings could go to Colombia and Central America), but I don’t think that’s what people mean when they suggest a Plan Colombia for Afghanistan.
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