OPTIONS MIGHT BE NEEDED

Macri heads to Davos summit as major BRIC partners exhibit economic clouds ahead

Neither supporters nor detractors are surprised by President Mauricio Macri’s planned attendance of the World Economic Forum in Davos later this month. Both sides will agree that his views have many points of contact with the free market credo of the meeting, which was not the case for his two predecessors that made a point of giving Davos a miss.

However, it would be wrong to place too much emphasis on the politics of Davos. The last Argentine president to attend the summit was Eduardo Duhalde back in 2003, and his visit had less to do with political affinities (possibly not too strong) than with the main purpose of delivering the message that Argentina had put the 2001 crisis behind. Duhalde tried then to emphasize that the country was, once again, an attractive option for investors. Today’s Argentina is a far cry from 2003, but foreign investment remains a top priority.

There is something else which is likely to be among the Government’s priorities — having more options in terms of international partnerships, something which was clearly explained by Foreign Minister Susana Malcorra. To this end, the government is working hard in repairing the bridges with the EU and the US, but — at the same time — it continues sending friendly messages to the partners it inherited from the Kirchner presidencies. In short, speaking about options, the more the better, which seems a wise decision in view of the not-too-optimistic forecasts for 2016.

A very recent World Bank report expressed concern about this year’s global economy. Much of the concern is focussed on the performance of the biggest emerging economies, namely Brazil, Russia, India, China and South Africa. Should these five countries, also known by the acronym BRICS, suffer a slowdown in their economies, the impact on the rest of the emerging markets would be immediate. And this, in turn, would have negative consequences on the financial markets, creating the conditions for “a perfect storm.” Cristina Fernández de Kirchner invested heavily in the partnership with the biggest emerging economies, particularly Brazil, China and Russia. But, currently, the particular circumstances of each of these countries make the partnerships less promising than years ago. This does not mean that they are over, but it clearly makes the search of more options quite advisable. Davos seems a good place to find such options.

Brazil is one of the obvious priorities in terms of partnerships. Nevertheless, things are not looking good for the big neighbour. Its economy is expected to shrink by eight percent in 2016. And the price of the country’s commodity exports has dropped by 41 percent in the last four years. As a result, two credit rating agencies have drastically dropped Brazil’s debt issues to the lowest category, leading to “junk” bonds. In addition to its economic woes, Brazil is in the midst of a serious political crisis triggered by mega-corruption scandals and general dissatisfaction. Meanwhile, Dilma Rousseff’s approval rating in the opinion polls reaches a meagre 12 percent.

None of this means that Argentina’s partnership with Brazil is over, but it does hint at a likely drop in its bilateral trade and investment.

China is another one of Argentina’s important partners which also seems to be in trouble. Last week, the Chinese stock exchange suffered another dramatic drop, which had an immediate impact on the rest of the world’s markets. Additionally, more devaluations of the Yuan are expected. The international financial institutions are keeping a careful eye on China. Especially because many observers agree that the most worrying aspect of it economy is not what is known but what is not known. They do not trust China’s data about its growth rate which, they argue, has been exaggerated. Again, a partnership with question marks.

Soon after being sworn in, President Macri had a phone conversation with Russia’s Putin. They exchanged commitments of continued cooperation. But Russia has big problems of its own. First and foremost, the drop in the price of oil is hitting the Russian economy very hard. In spite of this, Vladimir Putin seems determined to restore Russia to its old glory, which may be making matters worse. Part of this determination shows in the country’s current conflicts, Crimea being the best example. The US sanctions in terms of food exports are a big problem for Moscow and the same can be said of the sanctions imposed by the EU. All this could affect Russia’s value as a partner.

At this point, this writer would like to correct a mistake which slipped into the column published on January 4. Unlike the US, the EU sanctions do not include an embargo on food exports to Russia as reported. Instead, the EU’s sanctions include the ban on imports of products originating in Crimea into the EU as well as exports of certain goods and technologies to Crimean companies.

@andresfederman

CREDITS: BUENOS AIRES HERALD

OLD AND NEW FRIENDS

New approaches to Uruguay and the US, but signs of a continuation of policy with Russia

This week, President Mauricio Macri is scheduled to visit his Uruguayan counterpart, Tabaré Vázquez, which is mostly seen as a new start for the bilateral relationship. During the Kirchners’ governments, the link had soured. This was due to a number of reasons ranging from the Botnia pulp mills to the way in which Argentine trade and monetary policies had a negative collateral impact on Uruguay. Many argue that — in spite of ideological affinities — the lack of a good interpersonal chemistry at presidential level added to the problem.

By contrast, Macri’s visit to Montevideo is a friendly gesture, which takes place at a time when Uruguay becomes a beneficiary of the reversal of Argentina’s monetary and trade policies, while the Argentine president seems to be in favour of Mercosur exploring trade options in the Pacific. Which was a long standing demand of Uruguay, one that was frowned upon by the bigger partners in the bloc.

This is not the only change in the country’s foreign policy. At last month’s Mercosur summit, Macri voiced harsh words about the human rights record of Venezuela’s Maduro. Once again, that meant a far cry from the previous presidents’ policy and a friendly gesture to Maduro’s critics both in the US and the EU.

None of this should come as a surprise. Both the president and his foreign minister made it abundantly clear that the US and Europe are now topping the list of friendly partnerships to be cultivated. Critics and supporters of the Kirchner governments agreed in defining this as a return to Argentina’s traditional foreign policies. On both sides, some went as far as announcing a return to Guido Di Tella’s times of “carnal relations” with the US.

It might be the case that both sides are failing to see the full picture.

While it is true that, for better or worse, Argentina’s foreign policy is in a process of change, it is also true that the “old times” are not there anymore, because the world has changed. In addition, Argentina now has long term agreements with China and Russia which are not easy to ignore, regardless of the changes in the choice of foreign partners.

In fact, Foreign Minister Malcorra acknowledged this quite clearly. True, she stressed that the Argentine government’s interest is a rapprochement with the EU and the US as she also dismissed ideology as the main factor at the time of making foreign policy decisions.

There are those who might argue that, in some cases — China being the best example — the foreign minister is making virtue out of necessity. Argentina has entered long-term agreements with Beijing. Some would like to walk away from them. Even if — I repeat, if — they are right and such a move is desirable, it would not be so easy. While it could be possible to walk away from financial arrangements by returning the money borrowed from China’s Central Bank, the same cannot be said of agreements related to long-term infrastructure projects. Besides, of course, of the fact that it would be difficult to justify discontinuing projects of this kind without very solid reasons. Moreover, it is unlikely that the new partners in the game would demand such a thing.

There is, however, what may be considered an unfortunate exception, namely the agreement that allowed China to install an aerospace base in Neuquén. The terms of this deal appear to include access restriction for Argentine authorities. And the fact is that all of China’s aerospace activities are under military control. It is difficult to imagine the EU, let alone the US, happy with a military controlled Chinese aerospace base in South America, even if it is, at least officially, solely a “scientific” project.

The Cold War may be over forever but geopolitical tensions between the big powers persist. A current example is the fact that China is insisting on asserting its rights over the South China Sea, which is likely to increase tensions with the US and its allies in the region. Last November, US B-52 bombers flew over the area, triggering Chinese anger as the US insisted on its right to make such flights over international waters. So, on this one, the foreign minister might have an unwelcome source of concern, especially if one of the two sides — the existing China partner or the new US one — demands explicit political support. Fortunately such demand is, at this time, purely hypothetical.

That is not the case with Russia. The EU and the US imposed an embargo on food exports to Moscow as a sanction for its policy on Crimea. On the other side, Argentina specifically rejected the sanctions and continued — or perhaps increased — its food exports to Russia. This was very clearly Cristina Fernández de Kirchner’s political decision, and Macri seems ready to pursue a similar strategy.

On December 16, the Argentine president and Malcorra had a phone conversation with Putin. According to the information provided by the president’s office, they agreed that Argentina would continue to be “a reliable supplier of food products” for Russia, which implies that Argentina will continue with the policy of not joining the EU and US in their sanctions policy. This, in turn, diminishes the desired impact of the sanctions. Not an insurmountable confrontation for Argentina, but clearly not an ideal signal of good will towards a new (or renewed) partner.

In all likelihood, the process of changing Argentina’s foreign policy is going to have easy moments like this week’s meeting with Uruguay. But Malcorra is also likely to have some more cumbersome moments which, as she well knows, come with the territory.

@andresfederman

CREDITS: BUENOS AIRES HERALD

FOREIGN POLICY: WHAT NEXT?

Regional integration high up the agenda for next president

Next Sunday’s presidential elections will trigger the curiosity of a significant number of foreign observers. They include journalists (both correspondents and special envoys), diplomats posted in Buenos Aires and businesspeople, mainly from the financial world but also from other sectors of the economy.

Their interest is not merely academic. Foreign policy decisions impose themselves as a significant segment of the next government’s agenda, and they include a wide range of issues with many different short-, medium- and long-term implications. Negotiations with the holdouts/“vultures” have long ago ceased to be merely financial affairs. They now have serious political implications. Regional integration —and more specifically the Mercosur — is another item waiting for a policy which materializes into action. And there is a long list of other items, including relations with Russia and China and their impact on Argentina’s links with its more traditional partners. They all raise questions about the “next steps.”

Many of those questions can be linked to the need to assess the influence of the Peronist tradition in Argentine foreign policy. It is indistinct if Juan Domingo Perón’s heirs are in government or in opposition. In the latter case, they will have enough nuisance power so as to make the government’s life difficult. And, in any case, two of the three leading candidates, Daniel Scioli and Sergio Massa, have very strong links to Peronism. As for the third one, Mauricio Macri, his party has a not insignificant Peronist component. Moreover, two of the most relevant PRO foreign policy spokespeople — Diego Guelar and Fulvio Pompeo — come from the Peronist camp.

But defining Peronist foreign policies are far from easy. Since the return of democracy, some Argentine Peronists, like Carlos Menem, have aligned the country with the United States, without any doubts or regrets. Menem went as far as contributing to US military actions in the Middle East, sending a war ship to Iraq. Cristina Fernández de Kirchner went the other way. She made a point of entering, with quite significant fanfare, a strategic alliance with Russia’s Vladimir Putin who — despite the fact that the Cold War ended long ago — is definitely not on Washington’s list of favourite leaders.

Looking back into the origins of Peronism, the father of the creature was a true — and very able — pragmatist. His “Third Position” narrative — “We are far from both imperialisms” (sic) — was normally combined with moves which placed Argentina alternately near one or the other, according to the needs of the moment. During his first two presidencies he rejected US pressure to join in fighting the Korean war, whilst, at the same time, accepting Washington’s continental defence policies, by adhering to the Act of Chapultepec in 1945 and the Inter-American Treaty of Reciprocal Assistance (Rio Treaty) in 1947.

Perón’s third — and very short — presidency was also a display of pragmatism in action. The foreign policy programme published on 12 October 1973, the day he was sworn in, talks of “adapting to the international situation, favouring political realism rather than ideology.”

However, neither Menem nor CFK seemed to share Perón’s pragmatism.

A certain consensus

There seems to be a certain consensus on some foreign policy issues, amongst the three main candidates. They have all made noises about negotiating with the holdout/“vultures.” Likewise, all three have spoken about rebuilding relations with traditional partners — in other words, the European Union (EU) and the US.

In Scioli’s case the noises are less audible and combined with signs adhering to the more Kirchnerite policies. These signs have included a short visit to Cuba, as well as images showing himself in the company of interlocutors like Bolivia’s Evo Morales, Uruguay’s “Pepe” Mujica and Brazil’s Dilma Rouseff .

It remains to be seen — if and when Scioli becomes president — if such gestures were targeted at a general audience or were merely a signal to the diehard Cristina supporters who still, albeit more silently, accuse him of being a right-winger in disguise. Which brings up the question of CFK and her close followers’ reactions to the different foreign policy changes which will inevitably start to emerge under a new president.

One can reasonably expect that, if the new policies are implemented by Macri or Massa, they will meet with opposition from CFK.

But what will happen in the case of a Scioli presidency moving away from existing foreign policy? How far will CFK go in her opposition? And how many of the more traditional Justicialist Party (PJ) leaders will align with her?

@andresfederman

CREDITS: BUENOS AIRES HERALD

THE TRUMP CARD

Argentina’s relationship with the US moves into spotlight

Once again, Argentina and the United States are embroiled in deep controversy, one which still seems to be escalating. The issue is serious enough so as to have prompted President Cristina Fernández de Kirchner to bring it up at the recent United Nations General Assembly. She did, however, avoid naming names. But it was obvious that the president was referring to the missing former spymaster, Antonio Stiuso, who is rumoured to have taken refuge in the US.

CFK’s supporters had the chance — once again — to celebrate the president’s anti-imperialist courage. Her detractors though were quick to point out that it is not “the done thing,”discussing these kinds of issues in a forum like the UN.

Thrilling as spy adventures may be, the importance of each specific case should not be overstated. There are the obvious exceptions. The famous Cambridge spy ring led by Kim Philby is a case in point. The tragic case of the Rosenbergs who were executed in the United States during the Cold War is another. But otherwise, governments normally prefer to deal with espionage issues relatively quietly. Spies are, after all, a fact of life. As is dealing with adversaries, ideally through quiet negotiations rather than noisy scandals.

CFK’s public criticism of US President Barack Obama is not new and in the past, has taken in a variety of issues. Earlier this year, on April 11, at the Summit of the Americas which took place in Panama City, she ridiculed Obama’s decision to declare Venezuela a national security threat to the US. And a few days later, at the opening of a Honda manufacturing facility, she picked up on a comment from the US president — regarding the fact that he preferred looking toward the future rather than back at the past, at history — to remind him about the nuclear bombs dropped by the US over Hiroshima and Nagasaki toward the end of World War II.

Government supporters feel comfortable with these unilateral skirmishes — the US very rarely gets involved in replying — and celebrate the anti-imperialistic stance and rhetoric of their leader. Opponents feel equally comfortable criticizing the government and complaining about the shift of alliances away from the US and the European Union to Russia and China.

Interestingly enough, a recent opinion survey about the confidence that the people from different countries have in the president of the US seems to reflect this. It was carried out the by US-based Pew Research Center and it covered 40 countries. The key question was: “Tell me how much confidence you have in each leader to do the right thing regarding world affairs.” The responses included “a lot of confidence,” “some confidence,” “not too much confidence,” and “no confidence at all.” But the report conflates the four options to two. “Confidence” combines the answers of those who chose “a lot of confidence” and “some confidence,” while “no confidence” tallies up the totals of “not too much confidence” and “no confidence at all.”

Only 40 percent of Argentines were “confident.” Six countries returned lower levels of trust: Lebanon (36 percent) , Venezuela (26 percent), the Palestinian Territories (15 percent), Pakistan (14 percent), Jordan (14 percent) and Russia (11 percent). By contrast, 94 percent of people in the Philippines trusted the US president, as did 88 percent of South Koreans and 83 percent of French citizens.

One thing that CFK’s critics need to accept is that either she is very good at detecting the Argentine mood, or — alternatively — she is a very persuasive leader.

In 2008, at the end of former US president George W. Bush’s time in the White House, a similar Pew survey showed that only seven percent of Argentines trusted him.

But, when Obama won the November elections, CFK’s congratulatory letter said, amongst other welcoming phrases: “The period that starts today in your country, above all else, is a great milestone in one of the most impassioned odysseys in history, the struggle against discrimination and for equality of opportunities.”

At the end of 2009, Obama’s presidency was welcomed — 60 percent of Argentines said they had confidence in the US leader.

But things change.

Four years later, in September, 2013, after a G20 meeting, CFK shot from the hip, accusing Obama of practising “fictional multilateralism.” Obama had failed the Argentine president by refusing to support her position on the holdouts/“vulture funds.”

In addition he refused to place the question of military action against Syria in the hands of the UN. Trust in the US president reflected this — only 44 percent of Argentines then said they trusted him.

In a few weeks time, Argentina will have a new president. And exactly one year later, in November, 2016, the US will hold its own presidential election. However, though the confrontations between CFK and Obama have made things difficult, there is no guarantee that the change of presidents will make things better.

Many pundits are convinced that the time for the Republicans has arrived. And that the US is entering a new conservative mood. True, this might not be a problem. In fact, some of the candidates with good chances in the Argentine election could be on the same ideological wavelength as many Republicans.

But in terms of candidacies, we are not talking about “many Republicans.” One of the candidates is ahead of all the rest in eight out of nine opinion polls within the GOP.

His name is Donald Trump and he is famous because it is said that his personal wealth will allow him to finance his campaign without the need for donors. Unfortunately, his other claim to fame is his determination to expel hundreds of thousands of Mexican immigrants back home.

The foreign affairs advisers of the next Argentine president would be well advised to start thinking hard and fast about how to manage Donald Trump sitting in the White House.

One year goes by very quickly.

@andresfederman

CREDITS: BUENOS AIRES HERALD

BRICS OR BRICSA?

CFK’s desire to join the group, in vain or in vanity?

At an event which took place on September 10, President Cristina Fernández de Kirchner voiced — once again — her hopes that Argentina can join Brazil, Russia, India, China and South Africa as part of the BRICS. This rather loose association of emerging countries triggers — among many Kirchnerites — a vision of a strong alliance that will challenge the existing international economic order.

A further proof of the importance that CFK assigns to joining the BRICS, is that she made a public display of handing the job of advocating for Argentina’s admittance into the group to former Brazilian president Luiz Inácio Lula da Silva, who was visiting the country and present at last week’s event. In her speech, CFK told Lula that she hoped that BRICS acronym would turn into BRICSA, marking Argentina’s membership of the club.

However, although it might be seen as an exercise in nitpicking, it is worth noting some objections to CFK’s initiative.

BRICSA NO WAY

Last year, Russia invited the Argentine president to attend the BRICS’ summit that took place in Brazil. This triggered the expectation that Argentina would be invited to join the group. But it turned out that it was a mere invitation to visit the club and not a membership offer. At the time, Putin’s initiative seemed to have created some discomfort amongst Russia’s partners (Brazil?) because — in the end — the guest list was hastily expanded to include other UNASUR guests. In addition, CFK did not have the satisfaction of seeing the issue of holdout/vulture funds, which was the main focus of her speech, reflected in the meeting’s closing statement. Many saw this as a bit of a dismissive gesture in terms of summit etiquette.

Last year's speculations (illusions?) about a possible invitation to Argentina to join the club were politely but clearly rejected by several BRICS representatives, including Putin himself. The message of this year’s summit was quite similar.

The Russian Deputy Foreign Minister Sergei Ryabkov, told the press that “BRICS is not an organization, it is a collection of countries that are united by national interests. We think that the current format is an optimal one … After South Africa became participating state, the leaders decided to declare a moratorium for accepting new members.” True, he did include in his statement the line “we do not exclude anything. What will happen should be driven by national interest.” However, this last phrase seems to be an expression of diplomatic politeness more than a statement about the near future.

In fact, the original BRICS were born as BRIC, because they did not include South Africa. The four founding members, Brazil, Russia, India and China have a number of things in common. Possibly the most relevant ones are these countries’ large populations and the fact that — together — they account for a significant proportion of the world’s GDP. But, say many commentators, there was something missing. Only four of the five continents were represented. Africa was absent. And this encouraged the inclusion of South Africa in 2010.

South Africa — like Argentina — is not in the big league in terms of GDP or population. Its membership derived from the political need of having all five continents represented.

CFK’s illusions

Unfortunately for Argentina, the Latin American place is already covered by Brazil. Accepting Argentina into the club would force the BRICS to include four more members, one from each non-Latin American continent. Whilst four big partners plus a South African “smaller brother” make the group relatively easy to manage, ten members of different size in terms of both GDP and population would complicate — and perhaps paralyze — the group. This is perhaps the main reason that thwarts CFK’s illusions.

But this is not the only reason that makes the president’s push rather useless and untimely. There is also a local politics angle.

The president is almost at the end of her mandate. And joining the BRICS or, for that matter, any other international group or organization seems to be a decision that should be left for the next president to make. True, Daniel Scioli has a very good chance to be elected as Cristina’s successor and he is the FPV candidate, which she blessed. But, even if Scioli is totally in agreement with her views, she is undermining his future presidential authority by making commitments in his name.

If joining the BRICS is such an FPV priority, then it would have been a better idea to allow Scioli to voice the request to Lula, especially because he happened to be present at the event. In fact it might have provided Scioli with a good opportunity to publicize what he plans to do when he becomes president. Moreover, this might have offered him a competitive advantage given the fact that clear definitions are conspicuously absent from the messages of the three main presidential

candidates.

CREDITS: BUENOS AIRES HERALD

PUZZLES FOR THE NEWCOMER

Relationships will be far from simple and straightforward for the new administration

Frequently, foreign policy is not a key agenda issue at election time, and the forthcoming presidential elections are no exception. However, foreign policy advisers to the three key candidates have offered some clues in several talks and press interviews. There seems to be a confluence of opinion with regard to rapprochement with the United States (US) and the European Union (EU). However, there also seems to be agreement among the advisers about protecting current relations with China as well as Russia.

And while it’s true that there are differences in the level of priority that each candidate assigns to these objectives, in all cases they are at the top of their agendas. And they all ascribe great importance to the relationship with Brazil in particular.

This is very good news, especially given the politicians’ harsh controversies about the national agenda, partly due to the needs of political campaigning but mainly reflecting the profound rift in Argentina’s society. Continuity, predictability and rational players are always a welcome asset in foreign policy.

The bad news for those that will sit inside the Casa Rosada and the Palacio San Martín after 10 December, is that existing and, perhaps, future close relations with the above named countries will be far from simple or straightforward.

Close to home, Brazil, our next door neighbour, is stomaching an explosive mix. The country’s very poor economic performance of late, which is widening its deficit gap, combined with the saga of the corruption scandals — in which a number of government officials and lawmakers are involved — has resulted in a dramatic drop in the president’s public-approval rating. She is also weathering strong political pressures from different — and often opposing — sectors ranging from the São Paulo industrialist lobby, to citizens indignant with corruption, in addition to the social pressures derived from increasing unemployment.

It is in this context that Argentina has to reach agreements on bilateral trade, as well as the way in which Buenos Aires and Brasilia will go about negotiating on the EU and Mercosur fronts. Whilst everybody agrees that both foreign ministries have very adept officials, the fact is that both governments might be forced, in the near future, to prioritize their own internal interlocutors at the time of negotiating with each other. This sort of scenario can be very frustrating for all parties involved.

The China question

Overseas, China, has recently been in the news because of the weakness of its financial markets. But this is only part of the problem, and perhaps the least significant part. The way in which China commemorated the recent Victory Day holiday (against the Japanese), with a very impressive military parade, is sending out the clear signal that — despite the headlines in the global press — its aspirations of being a major power remain intact. Moreover, some observers have voiced suspicions about the possibility that the excessive fall of the Chinese currency was self-inflicted and perhaps a deliberate move aimed at showing off its ability to be a financial nuisance.

As I’ve stated previously in this column, China’s real objective is to increase pressure on the IMF in order for the Yuan to be admitted as part of that organization’s basket of currencies. The SDR, which stands for Special Drawing Rights, now includes the US dollar, the Euro, the Swiss Franc, the Japanese Yen and the Pound Sterling. The IMF says that it will only accept China into that club when the Yuan is traded on the free market, without any government intervention. This looks unlikely to happen very soon.

In addition, China continues to confront the US through quite unsubtle gestures. The guest list for the Victory Day military parade was a roll-call of heads of state that are unfriendly toward the US. Predictably, Russia’s Vladimir Putin and Venezuela’s Nicolás Maduro were quite prominent guests. They are also part of this country’s current circle of friends. Less prominent was Argentina’s Amado Boudou. Please note that it is up to the reader to decipher whatever message may be gleaned from this last reference.

Another Chinese gesture is the recent opening of a Yuan clearing bank in South Africa, thus giving Beijing a somewhat privileged position. This happens at the same time when Nelson Mandela’s original party, the African National Congress (ANC), has increased the volume of its anti-US rhetoric. Next month, the ANC is expected to issue a foreign policy statement blaming Washington for about everything which was and is going wrong in the world, from the Tiananmen massacre in Beijing 26 years ago to the current conflict involving Russia in Kiev.

Argentina’s foreign policy after 10 December will be to pursue a double objective of rapprochement with the West and maintaining and strengthening ties with the East, all set against this very complicated background. While relations with Brazil do not imply geopolitical choices between two sides, current and planned ties with the different players definitely does.

Optimists will call this scenario a challenge for the new administration. Pessimists (or realists?) will call it bad news. Make your choice.

CREDITS: BUENOS AIRES HERALD

CHINESE STRINGS

Whatever happens at the polls, some ties won’t break

In the last 12 years, first Néstor Kirchner and then Cristina Fernández de Kirchner have introduced drastic changes in Argentina’s foreign policy alignments.

It is quite noticeable how China and Russia have replaced the US and Europe as Argentina’s non-regional partners of choice — and the way in which this country has strengthened its ties with countries like Ecuador and Venezuela. All this is reflected in the formal political statements, in the narrative and — quite clearly — in Argentina’s trade, investment and financial relations.

There is a general agreement on the fact that China is not longer a communist state. But there is also a consensus that it would be equally wrong to say it is a capitalist state comparable to the US or the EU countries. It is also quite clear that, even if the cold war is something of the past, China — as well as, but not always together with Russia — competes in geopolitical terms with the US and its European partners. And that such state of affairs is very noticeable in Latin America.

China’s LatAm role

One of the most significant elements in this scenario is the new role currently played by Beijing in the region’s finances. In addition to its financial involvement in Brazil, China is nowadays the largest source of funding for Venezuela, Ecuador, and Argentina. And Chinese developmental banks’ investments in Latin America are larger than those of the World Bank and the Inter-American Development Bank.

Last week, Venezuela’s government triumphantly announced that it had obtained a new loan from the Chinese government. It was possibly the only piece of good news for Caracas, at a time when the country is facing a new crisis of violent demonstrations and lootings. However, the news on the loan was not too surprising — especially because the Chinese lender expects to be paid back in oil and not in cash.

Commodities exchange

A good percentage of the Chinese financing in Latin America is linked directly or indirectly to other deals that have to do with commodities — oil from Venezuela, agricultural exports from Argentina — or, as it happens like in Ecuador, with projects in which there is a significant involvement of Chinese companies.

Consequently, countries like Venezuela, Ecuador or Argentina are likely to have an easier life at the time of negotiating finances. Which, when combined with trade or investment, offer more room for flexibility. The more elements there are on the negotiating table, the easier it is to exchange concessions. Much more so if politics are part of the equation.

Financial negotiations with China often have an even more important advantage for these three Latin American countries, which share unorthodox economic policies that are often anathema for bankers. The latter’s priority is profit, and, therefore, they need to satisfy their boards, shareholders, auditors and regulatory authorities. By contrast, state negotiators are held accountable by political masters and their objectives. And these will often prioritize the political over the financial gains involved in a loan or a joint venture.

Future foreign policy

This has worked well for both China and Argentina during the Kirchners’ presidencies. So the question is what will happen after December 10.

Opinion polls suggest that the only two real competitors are the FPV’s Daniel Scioli or — through the intricacies of a two-round election — PRO’s Mauricio Macri.

In the last few months, Scioli has kept busy making clear his alignment with CFK’s policies. He was so successful that the purists within FPV who rejected him as a right-of-centre infiltrator shifted their narrative to a warm support. The fact that his vice-presidential candidate is Carlos Zannini —who is considered to be one of the government’s key strategists — has likely helped.

Scioli’s competitor Mauricio Macri has also been busy explaining that he agrees with, and will not drastically change, some of the basic tenets of this government’s policies. He mentioned social benefits and nationalizations. But he did not include foreign policy in that list.

In any case, drastic changes in Argentina’s international alignments would not be easy. True, it is relatively easy to change the rhetoric, or the statements in international organizations which a nation-state endorses. It is less easy to move away from financial commitments or trade patterns.

Argentina would need to find new lenders and new clients for its exports. None of this happens at short notice. So, whatever happens in the presidential election, Argentina’s ties with China are likely to remain strong for the foreseeable future.

@andresfederman

CREDITS: BUENOS AIRES HERALD

HELLAS’ DEFIANCE

Athens’ foreign policy reflects its economic worries

H.A.L. Fisher’s History of Europe published in the early 1930s became a classic on the subject. Even more so, the first sentence: “We Europeans are the children of Hellas.” Which comes to mind when watching the current crisis between Greece and its EU partners as well as the IMF over a bailout for the country’s debt crisis. At the time of writing this, it is still an open-ended affair. But a temporary exclusion from the euro is one of the — unprecedented — options being considered.

The EU has one of the most sophisticated and all-embracing institutional and political mechanisms to be found in the international scene.

Even more so when you add to that, the particular provisions of the EU member states that joined the Euro and are part of the Eurogroup. So some observers say that it is difficult to believe that it is not able to cope with the Greek crisis. And argue that the real problem is to be found elsewhere. Politics — they say — is the burning issue.

The Tsipras effect

They remark that Hellas has challenged its EU children. And Hellas will now have to pay the price of its defiance, which has to do with something new,and quite unprecedented in the EU political mainstream. Namely, a Prime Minister like Alexis Tsipras.

His party, Syriza, is not your usual, moderate, centre-left European Social Democratic political creature. Tspiras and his party have a clearly left-of-centre tradition which shows in the policies they implement.

Although Greece’s current debt problems and bailout negotiations are not new, Tsipras’ way of dealing with them is far from traditional. When he was inaugurated in early 2015, debt was — of necessity — at the top of his priorities. But the negotiations were far from easy.

So when, on June 25, the European Commission, the IMF and the European Central Bank put forward their list of bailout conditions, the Greek government decided to submit them to a referendum, which was called for last Sunday.

Tsipras and his party clearly pushed for a ‘no’ vote.

Which was the overwhelming 61 percent result that was celebrated not only on Athens’s streets but also with congratulatory messages from some foreign leaders. Cristina Kirchner was one of them.

If the Greek government was trying to use the referendum to strengthen its negotiating position, it clearly failed.

So much so that less than one week later it put forward to Parliament a number of laws implementing all the European conditions. The bad news came when it became clear that the roles had reversed and Europe had become the reluctant negotiator.

Conflicting agenda

The language being used by both sides is quite revealing about the different — and conflicting — political agendas.

The European negotiators plainly say that they do not trust the other side. And that a bailout should be backed by adequate guarantees that the Greek government will comply with its commitments.

The Syriza politicians argue that the “Northern European elites” and the bankers, which have “complete control” of Europe, want to get rid of them and their prime minister. And they might have a point.

Hellas’ defiance of its EU children goes beyond economic policies. In fact, Tsipras’ foreign policy does not make many EU leaders happy.

‘dead end policies’

In the six months that his party has been in government, Greece has made a number of friendly gesture towards Russia.

It condemned the EU sanctions imposed on Moscow over the Ukraine issue. Just before visiting Russia the Prime Minister said that economic sanctions are “dead end policies.” And the government is courting Gazprom — the Russian hydrocarbons company — investment in Greece. Which seems quite logical if one takes into account the fact that Russia supplies the country’s oil.

To add to the EU’s worries, Greece is also increasing its ties with China. Like in the case of Russia — but with better chances given the latter’s deteriorated finances — investment is being sought. In addition — and this might be the most sensitive point — there are rumours about Greece trying to sell its government bonds to Tehran.

Interestingly enough, people in Montevideo who do not like CFK’s government are quick to associate Argentina with Greece. They jokingly point out to Axel Kiciloff’s tie-less dress code, shared with the Greek prime Minister. But when the joke is over, they remark that Greece seems to be seeking the same partners as Argentina and Venezuela. And they do not mean it as a compliment.

@andresfederman

CREDITS: BUENOS AIRES HERALD

FOREIGN POLICY AFTER DECEMBER 10

It won’t be plain sailing for the winners of the next elections

What will be the shape of Argentina’s foreign policy under a new presidency? Most pundits agreed, even before last Saturday, that there are only two candidates with serious chances in the next Presidential elections: Mauricio Macri and Daniel Scioli.

Macri’s message is quite straight and clear. He espouses market-friendly policies and a tougher line against crime. And, on foreign policy, a return to the traditional international partnerships with the EU and the US.

As for Scioli, he is (was?) considered to be a moderate politician and people imagined him to be more market-friendly than the national government. The same could be said about his foreign policy. So much so that, at some stage, there even was speculation that President Cristina Fernández de Kirchner was not in favour of him being the Victory Front’s (FpV) candidate.

However, last week brought significant surprises.

The candidacies being put forward by the “Cristinistas,” from Carlos Zannini for the vice-presidency to some of the hard-liners nominated for the seats in Congress, predict a continuity of current policies should the FpV win the elections.

And the national government’s foreign policy leaves no doubt about preferences, sympathies and alignments. Last week, this daily reported Economy Minister Axel Kicillof as saying that ties between Buenos Aires and Moscow were “a fact, not a wish,” praising the bilateral relationship’s “natural understanding.”

He was by no means a lonely voice in the government. Earlier this year, on April 23, during her visit to Moscow, Argentina’s president told her Russian counterpart, Vladimir Putin, that “both our countries are commemorating the 130th anniversary of the bilateral relationship by signing an ‘agreement on Strategic Integration.’”

Russia is not the only non-Western power with which this government has forged close links. During her visit to Beijing the president entered an “Integral strategic alliance” which — in her words — should not be limited to trade and investment but also extend to cultural and communications affairs. In her speech, Cristina also mentioned Argentina and China’s mutual support over their respective international claims.

Mauricio Macri shows a similar determination, but in the opposite direction. Last December, when he visited Europe he clearly specified his preference for Argentina rebuilding its links with the European Union and the United States. He was critical of the links with President Nicolás Maduro’s Venezuela as well as — albeit with less vehemence — with the alignment with China and Russia.

True, the old times in which the then-Communist Soviet Union and the — also Communist — People’s Republic of China were a unified block, are something of the past. And that China as well as Russia have trade, investment and financial relations with the EU and the US. But it is also true that China and Russia do confront each other on different issues — sometimes as allies — with the Western countries.

In the case of Russia, currently the most serious issue of confrontation is Moscow’s policy toward Ukraine. There is also a — not as burning — battle with the US to gain influence in Latin America.

China has its own problems with the US. One of them is the dispute over the South China Sea as well as some of its islands. There are several — and in some cases conflicting — claims against China from Indonesia, Taiwan, The Philippines, Vietnam, Brunei, Malaysia, Cambodia, Thailand and Singapore. Some of these countries are close allies of the US which makes its presence known in the area so as to prevent China using its military might to intimidate its weaker neighbours. The usual choreography in those cases — military exercises or “exploratory” flights over the region in conflict — triggers angry protests from Beijing.

In addition, there are several disputes over trade. The basic problem is that China’s very low labour costs turn that country into a complicated competitor, something that affects manufacturers in many countries, some of which do not have many options because they need other things from Beijing. But the US manufacturers have enough political clout so as to stop Chinese exports and to get their government to lobby against other governments on their behalf.

Some more trouble

Some international observers note that both China and Russia are facing economic troubles which affect their people. And one of the ways in which both governments could be tempted to mitigate their own political difficulties is with some doses of anti-US nationalism. The solution of which, is definitely not conflict-free.

The optimists in the “Cristinista” camp could be happy. They believe that they are playing the right foreign policy game. But they might be wrong. Argentina depends on the US and the EU over a number of issues. The most urgent — but not the only one — is access to financial markets. So at some stage, they would have to try and have some kind of rapprochement. Which might not be easy if the alignment with “the other side” gets stronger.

The optimists in Macri’s side might be equally happy. The open arms of the EU and the US are likely to be waiting for them. However, they could also be wrong. The recovered old friends might expect some signals in exchange. But Argentina’s strategic alliances with China and Russia go beyond statements at the UN General Assembly. There are contracts signed, joint ventures agreed upon and financial aid has been accepted. Disengaging from them is far from easy and could be quite expensive.

There will not be easy times ahead for the winners of the next elections.

CREDITS: BUENOS AIRES HERALD

CRISTINA, VLADIMIR AND FRANCIS

Embracing the pope and the new world order

It was back in 1944. In the midst of a meeting about the post-war world, Winston Churchill was explaining his views about the moral power of the Roman Catholic Church. Joseph Stalin interrupted him with a sarcastic comment disguised as a question: “How many divisions does the Pope of Rome have?” Stalin asked , making it clear that he only believed in military might as a source of power.

More than 70 years later, it is quite clear that those who succeeded Stalin at the Kremlin — especially after the fall of the Soviet Union — have different views about the power of the Vatican. Last Wednesday, Vladimir Putin visited the pope in Rome. It was their second meeting, and the situation in Ukraine was at the top of their agenda. Putin was not the first Kremlin leader to visit the pope.

Quite often, Argentines are said to be too self-centred and always ready to be convinced that whenever anything happens in the world, it must have some kind of link to Argentina. This writer believes that — perhaps in most occasions — it is a fair assessment. But, at the same time, in view of some of last week’s news, a look at the links that associate President Cristina Fernández de Kirchner, Pope Francis and Vladimir Putin might show some unexpected developments. There are several facts as well as some indicators, which stem from educated speculation, that seem to underpin this view.

Some facts: Russia and Argentina have publicly announced their strategic alliance. The alliance encompasses technological cooperation in areas like the generation of nuclear power that is needed by Argentina. Argentina in turn provides food exports to Russia that are quite important at a time when the EU and the US are sanctioning Moscow because of Ukraine, especially since there seem to be plans to extend the enforcement of these sanctions. Also, in political terms, Argentina supports Russia’s position in its conflict with Ukraine. And Moscow reciprocates by supporting Argentina’s sovereignty claim over the South Atlantic Islands. The alliance also implies a shared and critical view of the United States and of some its important EU partners.

It is also a fact that, when Jorge Bergoglio became Pope Francis, the Argentine president was quick to send friendly signals to Rome, putting an end to the several years of confrontation between the Kirchners and Bergoglio. These signals were acknowledged and reciprocated in terms of offering quick and quite frequent access to the Vatican, not only for Cristina, but also for several members of her inner circle.

Pope Francis has also made friendly gestures toward Putin. He has not condemned Russia’s policy on Ukraine, limiting his messages to a call for peace, asking Christians not to kill each other. And this message had some clearly identified addressees, including the Russian Orthodox and the Eastern Catholic Churches — permanently at loggerheads with each other.

Then there is the informed speculation. First, there is the fact that many top brains in the government are seriously convinced that the world is quickly changing its geopolitical shape. They point out at several indicators that range from China’s new role in the world to the emergence of the BRICS, the association of Brazil, Russia, India, China and South Africa. The economic problems in Europe underpin the Kirchnerites’ view, who remark that the end of US hegemony is here or just around the corner. Which, in turn, shows that the way forward is for strong states that, under regional associations, regulate their economies and manage — within this framework — their trade and investment relations .

Those who follow the Vatican closely emphasize the Pope’s activism which he has applied to hands-on conflict resolution, global in scope from Eastern Europe to the Middle East. They also insist on assigning a Peronist DNA to Francis, explaining such identity in terms of a geopolitical view of the world in which countries should not accept the place pre-assigned to them by the great powers.

As for the style, it implies the ability to find the adequate political task for each political leader, which can be determined by the possibility of assigning specific and appropriate roles to each of them. The obvious resemblance is to Perón who, from his Madrid exile, managed to be a more than significant player in Argentina’s politics. The observers speculate that Bergoglio has exactly the same ability. And that the future he envisages for Ms. Kirchner is that of being his informal ambassador, operating as a unifier and trouble-shooter in Latin America. It should be noted that this view, which many will see as a mere pipedream, was put forward by serious and non-Peronist operators.

@andresfederman

CREDITS: BUENOS AIRES HERALD

OUR ALLIES

Moscow, Beijing seem to be more friendly — and riskier — partners

It looked to be a return to old times. The Russian government commemorated the defeat of Hitler’s Germany with an impressive military parade staged at Moscow’s Red Square. As a display of military power it was similar to those which used to take place before the Soviet Union ceased to be, back in 1989.

For different reasons, patriotic pride being one of them, many people love military parades. Children also seem to have a weak spot for these displays. However, the main objective of governments staging military parades is not the enjoyment of their citizens.

Military parades send to other governments polite messages about military strength and determination to use it if necessary. And, because of the Ukraine situation, the messages sent by Russia had clearly defined addressees: the EU and the US.

The absence of Russia’s World War II allies from the celebrations made this patently clear, bringing about a sense of déjà vu to the occasion. Which the presence — among others — of China’s President Xi Jinping made even stronger.

However, both Russia and China have abandoned Communism, which does not mean that they are now Western-style democracies. But the two countries have implemented their own — and different — style of capitalism. And they still confront with the US. These confrontations are geopolitical rather than ideological. Ukraine is not about Communism or Capitalism but about regional power, control and influence.

This is the context in which Argentina has decided that the two former communist powers are now the country’s strategic partners of choice. And this triggers concerns in the US and — to a certain extent — in the EU. There seems to be no problem with the most obvious links, namely Chinese and Russian industrial exports to Argentina and food imports from this country. But other links and partnerships continue to raise eyebrows, especially when they have to do with sensitive defence issues.

The mysterious space base being built by China in Neuquén — over which seemingly the Argentine government will have no control — does not make people in the US or the EU happy. The same can be said of Argentina’s recent announcements about military exercises to be shared with Russia.

And the quite loud rhetoric which accompanies anything related to these alliances makes matters worse.

It could be argued that the associations with the Western powers have not delivered much for Argentina. The list of complaints would be quite long and the first places would go to financial issues ranging from Judge Griesa to a quite unhelpful IMF.

There are, however, a number of risks which might outweigh the benefits of the new alliances. First and foremost there is geography. Argentina is part of the Western Hemisphere or — as some say — the US’s backyard. And, quite far away from our new strategic allies. Whether we like it or not geopolitics are a fact of life. Even if Argentina is not powerful enough to disregard this reality, some attractive features of the new alliances might appear to be.

Given the situation of Argentina’s finances, many argue that China is a much friendlier banker than — say — the IMF. And would cite the latest loans to support their case. But such loans have their own — perhaps unwritten — conditions. As many have already pointed out, China is very effective in forcing its exports on partners. Especially when such partners depend on Chinese help.

As for Russia, its own financial position is far from brilliant, which leads many to question Putin’s stability despite his current popularity. Even riskier is the fact that Russia seems committed to expand its regional power and recover its past glories. In other words, more Ukraines. If this happens, the reaction from the EU and the US is likely to be quite unfriendly. The current conflict would escalate. And the last thing that Argentina needs is to be caught in the middle of a serious political confrontation between Russia and the Western powers.

One question needs to be asked in the context of the government’s current foreign policy and alliances, and it is about Brazil. Based on geography, history and even the narrative of most Argentine politicians, Brazil should be this country’s first partner in a regional bloc which would then be entering other alliances.

An alliance with Russia or China of a regional bloc containing Argentina and Brazil would be much more effective, let alone safer. In geopolitical terms Argentina would not be a lonely ally of far-away powers but part of a regional bloc entering into alliances with third parties. Moreover, the relative power of the two sides would be more balanced. Even in sensitive issues like defence, such bloc has more choices and options and is less subject to pressure.

However, none of this hinders the legitimacy of the government’s policy or of the new alliances. True, given the relevance of the policy change, reaching a previous consensus with the opposition parties would have been a preferable way of doing things. But then, the world is not perfect.

@andresfederman

CREDITS: BUENOS AIRES HERALD