IDEALISM OR DIVERSION?

September has been a good month for Foreign Minister Héctor Timerman. On September 9, diplomacy obtained a victory at the UN General Assembly with regard to the “vulture” funds.

The UN General Assembly voted in favour of drafting an international legal framework for the restructuring of the sovereign debts of countries in financial difficulties. The initiative — which thanks to the efforts of the diplomats led by Timerman had the support of the non-aligned G77 + China group — is aimed squarely at the holdout/vulture funds.

The measure would essentially force them to submit to the decisions of the majority of creditors in sovereign debt restructurings, thus ending their power to blackmail an indebted country.

And last Friday, the United Nations Human Rights Council (HRC) voted along similar lines in Geneva. Thus, the Foreign Ministry was able to report that “the HRC passed the Resolution that condemns the vulture funds and requests they be investigated.”

On September 26 — and under the headline “Human Rights and Unilateral Coercive Measures” — the Council condemned “the continued unilateral implementation and enforcement by certain powers of such measures as tools of political or economic pressure against any country.”

The measure moved to “appoint, for a period of three years, a Special Rapporteur on the negative impact of unilateral coercive measures” with the instruction “to submit each year to the Human Rights Council and the General Assembly a report on the activities relating to his or her mandate.”

It was another victory for the minister, who can proudly claim that his efforts put the presidential words against the “vulture funds” at the General Assembly into action.

Timerman said he “has no doubts that this is a big success for Argentina’s foreign policy” because “we have managed to include the issue of vulture funds in the agendas of the General Assembly and the Human Rights Council, two highly significant instances in the United Nations.” He added that “this the first time in its history that it will focus and try to sort out matters regarding the international financial structure.”

Pessimists will be quick to remark that — even if the convention suggested by the General Assembly is ever approved — the process will take several years. And that, in any case, it is doubtful that the countries where the big financial centres are based would adhere to the measure.

As for the resolution voted by the HRC, pessimists will also point out to a similar one, voted by the Council 10 years ago, on 16 April 2004, which had an almost identical text. It condemned “the continued unilateral implementation and enforcement by certain powers of such measures as tools of political or economic pressure against any country.” The headline was identical: “Human rights and unilateral coercive measures.”

True, the old resolution specified “developing countries” and warned against “preventing these countries from exercising their right to decide of their own free will their own political, economic and social systems.” Instead of appointing a special rapporteur, it called on the existing ones to keep an eye and report on the use of unilateral coercive measures. But pessimists will argue that the old text encompasses the new one, so to call the recent vote a victory is a wild exaggeration. At least in terms of Argentina’s present — and pressing — national interests. And herein might be one of the reasons for the very frequent controversies about President Cristina Fernández Kirchner’s foreign policies.

As reported by this newspaper last Saturday, the government is more or less open about the fact that any progress on the vulture funds issue will benefit other countries from facing in the future the problems that Argentina is facing now. But that progress will not come in time to help Argentina. So what Timerman defines as a victory for Argentine foreign policy is a victory of principles and ethics that transcends the sphere of the country’s immediate national interests.

Students of International Relations will immediately define this kind of policies as “idealist” or “Wilsonian,” in honour of Woodrow Wilson the US president who, after World War I, strove to create the League of Nations in order to prevent the horror of wars. Predictably these values sound very positive. But they are likely to be challenged.

Some critics will immediately retort that “charity begins at home.” And that the idealism of the League of Nations failed miserably, giving way to the realpolitik of World War II. Moreover, they will quote theorists like Hans Morgenthau and practitioners like Henry Kissinger pointing out that a State’s survival depends on the defence of national interest, which should be the major — if not the only — concern.

According to this view, the government’s handling of the holdouts issue or of its relations with the United States is far from being in Argentina’s national interest. And that the efforts at the UN are — at best — a waste of political capital and resources. Or, at worst, an attempt to divert public attention from the real problems of recession, inflation and a couple of nasty etceteras.

@andresfederman

CREDITS: BUENOS AIRES HERALD

UNITED (?) KINGDOM

So Scotland remains as part of the United Kingdom. But the story is — by no means — over. The next chapter of this story will be written when the British government makes good the concessions it promised to the Scots in order to keep them within the fold.

And if the Scottish feel that the promises they have been made are thoroughly delivered and are not a mere exercise in window-dressing.

Moreover, it remains to be seen how Wales, Northern Ireland and — why not — England will react to the changes and their economic, social, institutional and political costs. A pessimist would go as far as saying that the United Kingdom remains “United” only for the time being.

Unfortunately, in the life of States the concept of “unity” is not linked only to a single flag or an anthem. There are serious constitutional, management and economic issues involved not to mention lifestyles and what the beneficiaries consider “rights” and those on the other side of the divide, privileges. And most, if not all, of these issues, carry costs and consequences, economic, social or political. Worse still, often both sides of any claim end up dissatisfied because they fail to find all their demands met completely.

In the particular case of the recent referendum, Prime Minister David Cameron as well as other political leaders like former Labour Prime Minister Gordon Brown made promises that could turn thorny at the time of delivery.

One example is that of the devolution of spending powers to the Scottish Parliament, which could trigger several issues, One of them is that it automatically will create inequality with — say — Wales. Then, there is the question about where will the money come from. And then, there will be the need to agree if the powers which are transferred really honour the campaign promises.

But there is more. The promises made to Scotland, and the way in which they are supposed to be implemented, are being divisive within the British political parties. Many members of the Conservative Party are less than happy with the promises which their Leader made in order to “buy” (say the angry Tories) a vote against independence. And the Labourites have their own grievances. The vast majority of Scottish MPs are either Labour or Scottish National Party. As a quid pro quo for devolution, Scottish MPs would lose their right to vote in Parliament about matters which concern exclusively England. So the Tories would have an absolute — guaranteed — majority on those votes.

There is already talk about changes to the British Constitution. For many admirers of that — unwritten — example of institutional excellence, the sole idea seems tantamount to the change of a civil Bible. Moreover, although “Britannia does not rule the waves” any more, there is some concern that the Scotland issue could a herald more international problems of similar nature. Spain’s Catalonia seems to be the most immediate. With the added problem that whilst the Scottish referendum took place in a situation of consensus, that does not seem to be the case between Barcelona and Madrid. So it remains to be seen how the issue is sorted out.

Many years ago, Europe was the continent of civil wars, with countries like France and Germany jumping at each other’s throats with certain frequency. Then came World War II.

The sheer horror of it, pushed for imaginative solutions. Which came by unifying European countries in common goals. First came the “European Coal and Steel Community” (ECSC). Although established as an economic alliance, the real objective of the ECSC was far more ambitious. In the words of one of its founding fathers, the aim of the Community was to “make war not only unthinkable but materially impossible.” The trick was to make supranationalism prevail — in some instances — over sovereignty. A bold thought for the times.

The experiment worked, and the new creature — with six European members — evolved first into the European Economic Community in 1957, and then (in 1993) into what we now know as the EU with a total membership of 28 member countries. The good news is that their interdependence has contributed to a peaceful Europe. The bad news is that separatist tensions in some of them seem to be very much at work.

@andresfederman

CREDITS: BUENOS AIRES HERALD

CFK & SOROS: A BENIGN VULTURE?

Tomorrow will mark the 22nd anniversary of what in all likelihood does not bring happy memories inside the Bank of England.

That day, market operators (or currency speculators, with the definition to be chosen by the reader) launched a powerful attack on the British currency.

At the end of the battle, the UK had been forced to devalue the pound sterling, the Bank of England had lost 3.4 billion pounds and the United Kingdom was forced to abandon the European Exchange Rate Mechanism.

The key protagonist in the Bank of England’s “black Wednesday” was George Soros. His profit is said to have reached one billion pounds. This is the same gentleman who has an appointment to meet President Cristina Kirchner next Monday, in New York, just before she delivers her speech at the UN General Assembly.

This will be the second time they meet. Last time — two years ago — the meeting took place in similar circumstances, just before the United Nations General Assembly. No details emerged about what was spoken about. Similarly, the agenda for next Monday’s meeting is being kept under wraps.

In many aspects, George Soros is Argentina-friendly. For starters, his Quantum Fund entered the Argentine debt restructuring process and is now suing against Judge Griesa’s decision to block the June 30 payment on the restructured bonds in order to favour the holdouts/vultures. In addition, he owns a 3.5-percent stake in YPF. The market values this partnership at U$S 450 million. Over and above these new developments, he used to be a serious landowner (larger than Benetton) but, apparently, has divested from that sector. And then, there is his participation in shopping centres and real estate through IRSA.

One possibility is that their agenda will be largely positive. They could discuss how to form a common front against Griesa and/or possible new investments in Argentina. Or even slightly more thorny issues like repatriation of dividends and other similar problems. But one wonders if the president and Soros will limit their discussions to the points they have in common or if they will include those that divide them.

The issue with this billionaire is that he does not limit his activities to making money or giving headaches to central bankers. The man, who has a PhD from the London School of Economics, is seriously committed to the advancement of more democratic, less corrupt societies where citizens can fully exercise their rights and use all their potential. And he is prepared to put part of his more than considerable assets where his mouth is. His Open Society Foundation bankrolls a wide universe of projects which range from financing civil society organizations (CSOs) in the pursuit of improving democracy to the orderly legalisation of marijuana. A Hungarian by birth, helping to improve democracy in the former Soviet bloc remains high on his list of priorities, in an area not limited to Hungary but that includes Russia as well.

And this is one of the problems. Buenos Aires and Moscow have been making quite a lot of noise about their good relationship. An Argentine trade delegation of some 120 businesspeople is also about to visit Russia, precisely at a time in which the EU and the US have imposed or are seriously considering imposing trade sanctions against Russia on account of the situation in Ukraine. A scenario — by the way — where Argentina supports Russia.

None of the above is likely to cut much ice next Monday with George Soros. In an interview he granted recently to The New York Review of Books and discussing Ukraine he said: “Effective sanctions would discourage the inflow of funds, whether in the form of direct investments or bank loans. Moreover, the US could release oil from its strategic reserve and allow its sale abroad. That could put the Russian economy in to deficit. The Russian economy is fragile enough to be vulnerable to smart sanctions.”

Add to the above, the fact that the Open Society Foundation helps a number of Russian CSOs that often fall foul of their government and you will realize that, predictably, George Soros is a bit of persona non grata with the Russians. Will that be discussed in the meeting? In fact, it would be quite interesting because there are very strong rumours that a number of high-ranking Cristinista officials and influential supporters are less than enthused by local CSOs (especially those which are critical of the government) being financed by foreign backers. The complaint is that financially strong donors use local CSOs to meddle in Argentine politics. And that they do that by empowering organizations which have not been legitimized by voters.

This could be a quite sensitive point of discussion. Especially because the name of the Open Society Foundation appears frequently in the list of donors for projects not always kind to the Argentine government. True, the sums are not as large as in other parts of the world. But nevertheless, they exist. And, finally, there is the Obama factor. Soros is a strong supporter. Rightly or wrongly, the Argentine president is convinced that the US Democrats are against her.

Will this be part of their dialogue? Clearly, the George Soros of this world play the international relations game on their own terms. They have immense power and do not need anybody’s help to gain access to heads of state. In a way, it is a new phenomena in the international political system. Only time will tell if it is a healthy development.

@andresfederman

CREDITS: BUENOS AIRES HERALD

VACA MUERTA DIPLOMACY

4111This time it’s not wheat, or beef or soybeans. The name of the new Argentine dream is shale oil and gas. Its surname is Vaca Muerta. And, as in the past, many heralded triumphantly that — finally — the time of Argentina’s well-deserved grandeur has come. While even more sober local and foreign experts have a very optimistic view, cynical pessimists point out to the difficulties ahead. And one definition says that a pessimist is nothing more than a well informed (or experienced?) optimist.

Fracking — the technique used to obtain the hydrocarbons by injecting high pressure water mixed with other elements — makes it possible for gas and oil to be obtained from certain geological formations. Vaca Muerta is one of them and is quite huge, given that it covers an area of approximately 30,000 square kilometres. The average depth of this particular formation is 2,900 metres. A technically — and thus financially — challenging project. But by no means daunting, given the amount of expertise and financing to be found out there, in the world.

What the cynical pessimists find really daunting is the kind of local troubles likely to be triggered by such a project in view of past experiences. A short — and of necessity incomplete — list would start with the difficulty in finding willing foreign investors. The optimist will immediate argue that the recent contract with Chevron proves that they are out there, ready, willing and able to come in. The pessimist will remind everybody that something might be amiss, given the fact that the government has kept some clauses of the contract under a shroud of secrecy.

Then the pessimists will point to other conflicts waiting to happen. Fracking has environmental effects. For starters, the great amounts of water it uses and the amount of carbon dioxide it releases. Inevitably, the environmentalists will oppose. Some will — albeit grudgingly — accept mitigating measures for the sake of the greater good of jobs and wealth for Argentina. The fundamentalists will close ranks and take extreme positions. We have seen this happen. Just ask our Uruguayan neighbours about Botnia and blocked bridges. True, in that case, there was political manipulation totally unrelated to the issue. Something that could repeat itself in the case of Vaca Muerta, especially if you think that the project involves a list of “Argentine irritants” which includes foreign investment — a normal target of choice — as well as power and financial relations between the federal government and the provinces and, possibly, politicians from opposition parties who could well use the project to make their competitors’ lives difficult. Especially because — to make matters worse — developments on Vaca Muerta coincide with a presidential election period (that for all intents and purposes has already started) and with what looks as a non-Queensbury political fight.

Now for the good news. Vaca Muerta is in its early days. It is not yet a hot, politicized issue. Perhaps it is not a dream to think that politicians might find a way to agree to keep it out of the electoral agenda. And, in an excess of idealism, they might agree to offer the electorate proof of maturity and — in parallel with political campaigning — create a cross-party setting in which to agree on a series of rules and policies which maximize the benefits and minimize the damages of the project. After all, other countries — like Australia — seem to be managing the balance quite well. In all likelihood, Argentina could benefit from such experiences. And friendly advice from them is likely to be available, at very low cost or no cost at all. And much less controversial than, say, advice on financial matters from the IMF. A win-win situation because a clear show of willingness to improve local standards and transparency in terms of the environmental game, might be as attractive to some as is financial predictability. Thus, no need for shrouded clauses. There are many out there willing to cooperate and Argentina should grab the chance.

Moreover, one of the cross-party decisions could be to leave the whole regulatory operation in the hands of expert civil servants who would do their job in line with the policy of the government of the day. After all — and quoting a local oil engineer — to fight cancer you get a medical specialist, not a shareholder of the clinic. The latter might set the price of the treatment service, but the actual medical practice needs a specialist.

So, with some luck, the country could go into the depths of Vaca Muerta with international support and respect. The final objective should be — to use the words of the Australian Centre for Sustainable Mining Practices — to ensure “recognizing that environmental accountability, social responsibility and commercial success are now inseparable concepts.” Too dreamy? perhaps. But to quote Raymond Aron, we have the duty of hope.

@andresfederman

CREDITS: BUENOS AIRES HERALD

GOOD AND BAD NEWS

Friday’s announcement that the G77 plus China are endorsing a debate on sovereign debt restructuring was good news for the government. As a matter of fact, Cristina and her team are more than entitled to take credit for a good international lobbying job. To make the news even sweeter, the International Capital Markets Association (ICMA) also issued a statement pointing out that there is a vacuum in the provisions for sovereign debt restructuring which — currently — place too much power in the hands of a minority of creditors.

Equally positive is the fact that, in the midst of their enthusiasm, when communicating the news, Kiciloff and Timerman included sobering remarks about the (sad) fact that whatever progress is made on this matter, namely an international convention setting the rules for debt restructuring, would not be applicable to Argentina’s current conflict with Judge Griesa and the holdouts/vultures.

The ministers managed to avoid the (very human) temptation to celebrate a success that is still in the making. And this qualifier applies to the possible future convention as well as to the case of Argentina’s own battle.

There are several reasons to moderate the optimism. First there is the UN. Although it represents the highest possible stage of civilization and relations between states, it is not the most efficient tool around. True it has a good list of successes in terms of international conventions. They range from UNCLOS (United Nations Convention on Law of the Sea) to ICCPED (International Convention for the Protection of All Persons from Enforced Disappearance). But — out of necessity — the negotiation processes are long and protracted. And, on occasions, the price of finally obtaining an agreement is to resign on matters that are important. In addition, there is the issue of getting the final result signed and ratified by each individual country. And the most powerful ones (that make the convention worthwhile) might tend to drag their feet. On this point, and at the risk of an unfair pre-judgment, there is the question about what the US position will be.

Side by side with some very worthy democratic values, there is a strong conservative core in the US political system. Witness Obama’s problems with issues like public health. And — closer to home — Judge Griesa might seem eccentric but — ideologically — he is by no means a “rara avis.”

There are countless examples of issues on which the American democracy has values which differ from those of, say, the Western European political systems. The existence of the death penalty or the political clout of the National Rifle Association are just two examples of this.

In fact, the US political context should also be taken into account when examining the Argentine case. The media is full of reports abut the close ties of the holdouts/vultures with the Republican Party. But the problem is not only conservatism. For better or worse, Judge Griesa’s rulings have been upheld all the way up to the Supreme Court. And however critical US politicians or commentators might be about the ruling, this is what counts the most. Not that they care for the plight of countries like Argentina less, but that they value their institutions more.

In addition, Argentina’s bilateral relationship with the US is not at its best. The president and some of her ministers have been openly critical of Obama’s government, not to mention his predecessors. This makes a good section of the Argentine electorate happy. And makes another significant section of the voters equally unhappy.

These conflicting visions are perhaps one of the best examples of the deep divide in Argentina’s political system. So — at the time of seeking support for the current confrontation with Griesa & Co — the government would be best advised to seek elsewhere. To make matters more complicated, the recent rapprochement with Russia and China, does not help. It might be the best option for Argentina’s national interest. But it does not earn brownie points in the US. The same can be said about Venezuela.

Government supporters get quite angry when the opposition claims that Argentina is “isolated from the world.” In fact some ministers’ narrative is focused on proving such assertion false. Perhaps things would be clearer if both government and opposition explain what they define as “world.” When government supporters refer to UNASUR, China or Russia they are absolutely right. But when the opposition refers to the US and a number of European countries, they also seem to have a point. The recent remarks from the German Finance Minister Wolfang Schäuble that Argentina has been — and continues to be — “an example of instability” underpin the views on Argentina’s isolation voiced by the opposition.

Unfortunately, the battle with the holdouts/vultures takes place in the US and — eventually — in Western Europe. A part of the world where G77 plus China do not cut much ice. So optimism about any future United Nations global regulations should be balanced by the less rosy prospects for the Argentine case in the near future

@andresfederman

CREDITS: BUENOS AIRES HERALD