1. While the strategic value of the Trans-Pacific Partnership is largely being sold by focusing on Asia and competition with China, there is a major strategic component in this hemisphere.

    • TPP renegotiates parts of NAFTA, a campaign promise of President Obama in 2008, though I doubt he or his supporters envisioned this agreement as the result of that promise. The administration is promoting the fact TPP includes labor and environmental standards that were not part of the original NAFTA agreement. Opponents question whether those standards will be enforced and if the labor standards are tough enough.
    • It brings three of the four Pacific Alliance countries into a broad multilateral trade agreement that includes the United States. That multilateral trade framework can play an important role in hemispheric integration.
    • It changes auto origin rules from 55% made in North America under NAFTA to 45% made in TPP, which means more cars finished in Japan can be sold in the North American market and more Chinese auto parts are likely to make it into North American supply chains. It is a potential (but only potential) blow to Mexico's auto industry, one of the strong sectors of the economy.
    • It will open up Japan's closed economy, a huge market that needs more than commodities, to increased goods and services from this hemisphere.
    • It creates potential avenues for our hemisphere to challenge labor and environmental violations in Asia that undercut this hemisphere's products. Once again, whether and how these provisions will be enforced is of concern.
    • TPP will place pressure on CAFTA country economies that were not included in the negotiations, as countries like Vietnam and Malaysia will now have similar or better access to US markets than Central America.

    All trade deals come with some good and some bad; they have winners and losers. This trade deal, with 12 countries and 30 chapters, requires analyzing and balancing costs and benefits across a variety of very different issues. I'm disappointed by analysts who can take such strong stands in favor or against without acknowledging that both sides have some reasonable points.

    As someone who is broadly in favor of increased trade and strong, enforceable trade agreements, one of the things certain analysts have to get over is the idea that "free trade" is something to be reflexively supported or opposed. This isn't a "free trade" agreement. It's a fairly complex trade agreement. Some barriers are knocked down (including taxes on many US exports to the participating Asian economies) while other barriers are strengthened (such as the provisions regarding pharmaceutical patents). Some barriers and regulations have a good reason for existing or being strengthened (new rules to fight overfishing or child labor, for example), while others are simply enshrining 21st century protectionism into a multilateral deal (DRM anti-circumvention rules). These are difficult policy issues made harder by the challenge of weighing them against each other across unrelated sectors.

    I've disliked how this agreement has been negotiated and the fact that I haven't been able to read it or participate along the way. The lack of public transparency in negotiations that might have been standard in the 20th century shouldn't be the norm for 21st century trade agreements. That is something I'd like to see changed in future negotiations. Given how this was negotiated without the public being able to read the details, the debate over TPP cannot be allowed to move from, "don't worry, there will be plenty of time to discuss the agreement once a final version is reached," to "we have to pass it because we spent so much effort negotiating and can't return to the table." The coming months are a chance for everyone else who didn't get to participate in the negotiations to weigh in.

    I find some of the strategic reasons for TPP compelling. We are competing globally with China and this hemisphere needs some enforceable trade rules to do so. But details matter. Once the final text is released, we all can read the agreement, analyze the details, and decide whether it should be passed or if the negotiators need to get back to work.
  2. Brazil President Rousseff announced a restructuring of her cabinet late last week (NYT, Reuters, Guardian, Bloomberg, WSJ). The number of cabinet ministers was reduced from 39 to 31. The president and all the remaining ministers will take a 10% pay cut. Another 3,000 government jobs, many of them political appointments, will be cut. Lula ally Jaques Wagner takes the Chief of Staff position. The PMDB gets one more cabinet post.

    This cabinet change was part serious and part symbolic. On the symbolism front, the cuts in salary and government jobs are symbolic cost savings measures that don't add up to much in terms of the size of the budget challenge the country faces. The cabinet ministries that were cut (or better said, merged into other ministries) were the small portfolios. Many of the people in key posts remained the same including the economic team, whose stability is seen as critical by international markets.

    More seriously, giving another cabinet ministry to the PMDB while also promoting a top Lula ally is an attempt to maintain a difficult balance between her two key coalition partners. The ministry given to the PMDB was Health, a position with real influence and a serious budget. The president needs to keep the PMDB from supporting impeachment without alienating her PT base, and this was her best attempt to prevent further defections from both sides. 

    This cabinet change was made less than a year in to Rousseff's second term, a sign of the crisis that she faces. Many presidents go years without making this level of restructuring. It looks a bit desperate, but with approval ratings below 10%, the appearance of looking desperate is not the largest problem for a politician.
  3. A year ago, I posted a summary of a Confidencial article about Wang Jing's businesses. Since then, there have been other good articles trying to unravel the secrecy behind the canal.

    Bloomberg today has a key detail on Wang that other media outlets are now following: He's lost a lot of money this year. Specifically, as the owner of 35% of Xinwei Telecom, his fortune has been wiped out in the Chinese stock market crash. Wang started the year with a net worth around US$7 billion. He is now worth about US$ 1 billion.

    I'm sure it's only a small part of Xinwei Telecom's financial problems, but it is worth noting that the company still hasn't made much progress on their promised network in Nicaragua, which was Wang's original foothold in the country. One of the reasons many people consider Wang a phantom businessman is that he signs deals like these and then doesn't complete them. It doesn't bode well for the canal.

    Of course, HKND says none of this matters and the canal project pushes forward. A recent event in Managua highlighted the environmental impact study as well as the fact 30,000 people will be displaced by the canal, though an independent NGO says that number could be as high as 100,000 people.

    Expropriations, displacements and environmental impact all matter (or at least should matter), but none of this happens without money. HKND still has not said how they will obtain the $50 billion required for this project and Wang and his Chinese business partners certainly have less money to contribute today.
  4. El Daily Post:
    Eni won rights to three fields off the coast of Tabasco. Argentinian companies Pan American Energy LLC and E&P Hidrocarburos y Servicios partnered for a bid to win another block off Tabasco’s coast. A consortium formed by Mexican billionaire Alberto Bailleres’ Petrobal S.A.P.I. de C.V. and Fieldwood Energy LLC of the United States won a third area with no contesting bids. Two other areas received no bids.
    It's an almost unanimous consensus that yesterday's oil bloc auction was a success for the Mexican government. After a poor showing in July, the government loosened its participation requirements and didn't keep the government's minimum participation rate a secret. Additionally, the blocs on offer were more lucrative, especially the first one.

    The bids made by Eni and PAE were very strong, well over what was expected. They suggested the two companies wanted to get a foothold in Mexico and were willing to give up some profits to make it happen.

    Still, several oil majors including Chevron and Shell stayed away. Is it the global oil environment or continued concerns about operating in Mexico? Probably some mix of both.
  5. BBC:
    Peru declared a 30-day state of emergency in the Apurimac region on Tuesday after four people were killed during anti-mining protests. The four were shot dead in clashes between police and protesters at the Chinese-owned Las Bambas mine project.
    1. The protesters are against the Humala government. None of the Peru's current leading presidential candidates represent these protesters either. There is a political space for an outsider candidate who represents the interests of the poor outside of Lima.

    2. When copper prices are higher, mining companies have more room to negotiate or provide programs to compensate local communities. With prices around the lowest levels since the 2008 crisis, many companies are operating on extremely tight margins or even at a loss. There aren't many options here.

    3. It's not at all surprising that the region is seeing more protests against Chinese-owned mines and projects. Chinese companies are increasing their presence, they face many of the same basic challenges as US, Canadian or European companies, and the Chinese aren't exactly known for their corporate social responsibility agenda. This protest alone is not a sign of an anti-China backlash. It's just a typical protest against a mining company in Peru that happens to be Chinese. 
  6. The UN launched its Sustainable Development Goals (SDGs) over the weekend, 17 development goals for 2030. Some have specific numerical targets while others are more vague, only calling for movement in the correct direction or not defining how they will be measured.

    In order to drill down beneath the general goal statements, let me point to seven of the sub-goals that are measurable (some more clearly than others) and will receive high levels of attention over the coming 15 years for Latin America and the Caribbean.

    1. Eliminate extreme poverty.
    2. Cut all levels of poverty in half from a 2015 baseline.
    3. End hunger and ensure access to food for all people year round.
    4. Ensure all girls and boys complete primary and secondary education.
    5. Universal access to clean drinking water.
    6. Significantly reduce all forms of violence.
    7. Significantly reduce corruption and bribery.

    Those are some bold and difficult goals. Yet, I like to believe in the next 15 years that Latin America and the Caribbean can accomplish some and come close on others.

    Success requires creating accurate and transparent measurements for these goals that can be audited. We can't measure if poverty is cut in half if we don't have a full picture on poverty. We can't measure if violence is reduced if we aren't measuring homicides, kidnappings and robberies correctly (including the cifra negra or unreported crime levels). Reducing corruption and bribery is the issue of the moment in Latin America, but it's not enough to say we know it when we see it; there needs to be a methodology for measuring corruption in order to make progress on it. On all the SDGs, we need to prevent governments from manipulating statistics to show progress, which means civil society will need to be active in measurements and in calling out governments that aren't being truthful.
  7. The hemisphere's highest profile political prisoner has a letter from his solitary confinement cell at the Ramo Verde prison published in the New York Times. Lopez writes, "we must first change the system by democratically removing the corrupt ruling party that governs us." The fact that Lopez has been confined for 18 months and retains this level of dignity and devotion to his cause is impressive.

    Lopez 1) calls on other governments to bilaterally raise democracy and human rights issues with Venezuela, 2) calls on the OAS to invoke the democratic charter to discuss the situation in Venezuela, 3) calls for international pressure on the Venezuelan government to allow OAS and EU election observers, and 4) demands the Venezuelan government release all 76 political prisoners and unblock opposition politicians from running for office.

  8. 1. The men shaking hand were two foes who have targeted each other for death in the past and who have both seen friends and subordinates killed and wounded due to the orders of each other. Santos has had to speak to the families of fallen soldiers and support wounded veterans. Santos gave the military orders that led to numerous FARC leaders' deaths including Raul Reyes and Alfonso Cano, making that handshake difficult for Timochenko. Don’t blame the two men if they didn’t look completely friendly during that photo op. Be amazed they even sat in the same room with each other.

    2. Pope Francis played a key role in reestablishing relations between the US and Cuban governments. Then, with the US able to participate in Colombia’s peace talks in Havana, the Pope once again stepped in and pushed the FARC and Colombian government forward to yesterday’s big announcement. Is there any way that man doesn’t win the Nobel Peace Prize?

    3. Raul Castro seemed happy, really happy, to be the man in the middle of yesterday’s event. He practically dragged Santos and Timochenko together for the handshake, clearly enjoying the moment far more than either of the two other men.

    4. If he were a better person, yesterday’s handshake would be part of Alvaro Uribe’s moment of triumph. The former president's military offensive (backed by the US and led in part by Santos as he was Defense Minister) created the conditions that forced the FARC to the negotiation table from a very weakened position. Unfortunately, Uribe wants no part of this peace deal. His opposition to the deal today is one of the key obstacles in completing it, so he loses whatever credit that he probably deserves.

    5. On the other hand, the Obama administration’s support of the process has been critical to its success. Specifically, Santos’s promise of no extradition to drug traffickers carries real weight when there is a US representative in the room during negotiations, even if the US won't agree on the record to it. More generally, the fact the Colombian military’s strongest backer is supporting the peace process has given Santos significant political capital in the middle of some tense moments within the government. It’s easy to imagine a different US president being less supportive or even opposed to this deal, so credit goes to the Obama administration for helping make this happen.

    6. I supported the Colombia government's peace agreement with the AUC and I support the agreement with the FARC. Balancing peace and justice often requires imperfect compromises, even impunity. It means shaking hands with murderers and letting some of them get away with far less punishment than they deserve. That is a hard truth, one that is politically unpalatable to many people, but necessary for reducing violence and improving the country. In spite of all the criticisms, the AUC agreement led to some significant and lasting improvements in the country’s security and I expect the same from this FARC agreement.

    7. I still worry about child soldiers, something I wrote about when these negotiations began. While the FARC promised to stop recruiting and using child soldiers, reports from Colombia suggest children between the ages of 12 and 16 continue to be used on the battlefield by the group. Demobilizing these children and reintegrating them in to civilian life is perhaps the biggest unaddressed challenge of these negotiations.

    8. Venezuela President Maduro has held his country's spoiler role in this peace process over the head of Santos for over a year. The reason Santos has been relatively passive regarding the abuses by Venezuelan military along the border and the reason he put up only a minimal fight earlier this week in Quito, is that he could not afford to have Venezuela use its influence to sink these negotiations with the FARC. Once the FARC negotiations and demobilization are complete, Venezuela is going to lose its trump card over the Colombian government and the bilateral situation will be very different.

    9. One key concern in the past two years has been whether the whole FARC would follow this peace agreement or if a segment of the criminal element of the FARC would remain on the battlefield for profit. We should have a better understanding of that as this moves closer to implementation, but the most recent reports suggest that this is going to demobilize the vast majority of the FARC membership in Colombia, with only a small portion (partially based in Venezuela) remaining outside the process.

    10. Yesterday’s agreement was not two equal groups agreeing to a truce. It was a legitimate government negotiating some politely phrased surrender terms from an insurgent group that no longer poses an existential threat, even if it can still do some economic and physical damage. Don’t believe the FARC or the Uribistas when they say otherwise about this agreement. The FARC went from a true insurgency threat to a group that negotiated their own dissolution in less than 15 years. The Colombian government went from a nearly failed state to a sovereign power in control of its territory. It’s an amazing shift from the late 1990’s.

    11. There are going to be setbacks in the coming six months. There will be moments that this peace agreement may be on the verge of falling apart. Don’t let it.
  9. Elisabeth Malkin has a great article in the New York Times about a garment factory in El Salvador that is hiring numerous former gang members.

    Yet, factories like this are clearly in the minority. Interviews and conversations I've had during trips to the Northern Triangle, including San Pedro Sula last week, have shown a deep apathy or even hatred by many citizens towards the futures of gang members. Gang members often say the only way out of the gang is jail, hospital or grave and many citizens are perfectly fine that those are the options the mareros have. My conversations reflect the polls that show significant public support for more military actions against gang violence.

    Most people are in favor of programs that prevent youth from joining gangs by offering education and job opportunities. But reintegrating former gang members into society and giving them jobs have some real political challenges. In a country where jobs are in short supply, why should a gang member get a job over an 18 year old who stayed in school? Giving government support and jobs to former gang members doesn't win many votes in Central America today.

    At the public policy level, the governments of the region are not going to shoot or jail their way out of the current spiral of violence. There isn't a military option for killing a large percentage of a country's youth. Even if the prisons weren't already overcrowded and serving as training grounds for criminals, imprisoning every gang member and drug dealer is not a great long-term option. El Salvador, Guatemala and Honduras need more businesses hiring former gang members if they want a chance at sustainably lowering their crime levels, and governments are going to need to support the businesses that do.

    The term "political will" is often thrown around in US policy circles for what is needed to take on the gang violence, organized crime and corruption in Central America. Yet, we shouldn't conflate political will only with the most militaristic policies. Political will is about tough decisions across the policy spectrum, not just about willingness to use force. There are plenty of Central American leaders over the past decade who have shown themselves willing to throw their military at the gang problem, but few if any who have had a strategic vision for what sustainable peace looks like and the political will to implement it. Political will in Central America is going to come from the leader who starts by defying public opinion but eventually moves the public towards supporting some form of sustainable reconciliation, rehabilitation and reintegration of gang members into society.
  10. The Miami Herald reports on Chile's engineering standards after the 8.3 earthquake last week. While several thousand people were left homeless, the earthquake only killed 11 people.

    The Washington Post provides a similar take on Mexico, 30 years after the 1985 earthquake that killed thousands of people in the capital. The building standards improved and the city regularly drills and prepares for a major earthquake.

    Building strong and resilient infrastructure matters. More important, it is a multi-decade process that must span political administrations and ideologies. The government today that invests in infrastructure that can survive a disaster is unlikely to get much credit one or two decades later when that disaster hits, but they deserve it.