Chávez Builds His Sphere Of Influence
Venezuelan Spends to Counter U.S.
By Juan Forero and Peter S. Goodman
Washington Post Foreign Service
Friday, February 23, 2007
CARACAS, Venezuela President Hugo Chávez of Venezuela has long pledged to buck Washington-backed economic policies in Latin America. Now, two months after winning reelection and consolidating his hold on the country with new powers to rule by decree, he is strengthening economic ties in the region in a bid to limit U.S. influence. READ THE FULL ARTICLE
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Follow-Up Letter to the Letter from CEPR to Juan Forero
From Dan Beeton to Juan Forero, The Washington Post
February 26, 2007
Dear Mr. Forero:
I was pleased to read your article of February 23, "Chávez Builds His Sphere Of Influence." For the first time a Washington Post article addressed some of the epoch-making changes that CEPR has been writing about for several years. The collapse of the IMF's influence in middle income countries -- not only in Latin America -- is the most important change in the international financial system since the breakdown of the Bretton Woods system in 1973.
And the collapse of economic growth in Latin America -- something that CEPR has been writing about for more than 7 years -- is a long-term failure that the region has not seen in more than 100 years. As you know, the region grew by 82 percent per capita from 1960-1980, but only 9 percent from 1980 to 2000, and about 4 percent for 2000-2005. For the first time in the Post, the article explores the possibility that the recent electoral and policy changes in the region might be related to this unprecedented long-term economic growth failure. I hope this is the beginning of a long-needed discussion of what has gone wrong. Not all of the policy changes of the "Washington Consensus" were mistaken, but clearly some need to be re-examined.
If I may offer a couple of comments:
1) I think the article overplays the idea that Chávez is directly influencing economic policy in the region. For example, it mentions "Chávez's campaign to persuade countries to break with fiscal orthodoxy." I have not seen any evidence of any such campaign. The Venezuelan government has provided credit in various forms to a number of countries, but I have not seen any statements from Chávez or any other Venezuelan officials to the effect that governments should pursue expansionary fiscal policies.
2) "For its part, the United States still has enormous influence in and close ties with most Latin American countries. Free-trade agreements now cover nearly two-thirds of economic output in the Americas, according to Thomas A. Shannon Jr., assistant secretary of state for Western Hemisphere affairs."
About one-third, or 34 percent, of economic output in Latin America (33 countries) is covered by free trade agreements. If this statement is meant to include the U.S. and Canada, then the number is about 89 percent, but of course this is simply because the U.S. and Canada account for about 84 percent of the output of "the Americas." *
3) Inflation is not "skyrocketing" in Venezuela. It's 18.3 percent on a year-over-year measure (January), or 13.7 percent on average for the last year. This is higher than the government would like but still below the level that most macroeconomic research indicates could have an adverse effect on growth.
Finally, I would note that your description of our co-Director Mark Weisbrot as an "analyst supportive of Chávez' policies" is not quite accurate. Weisbrot supports some of Chávez' policies but not others. The ones that he has written in support of, in opinion pieces, have mainly been policies that the Venezuelan opposition also supports: i.e. the misiones, increased access to health care, subsidized food, and education. Weisbrot has commented much more in favor of Argentina's economic policies, for example, than Venezuela's policies. It is not clear why the Post chose to apply a politically charged and somewhat exaggerated label to an independent economist in this case.
Nonetheless, I enjoyed the article very much and am pleased to see The Post beginning to examine these vitally important economic issues.
Sincerely,
Dan Beeton
*If Purchasing Power Parity (PPP) data are used, the numbers are different -- and this could be where Shannon gets two-thirds, but again this would have to include the U.S. and Canada, which on a PPP basis would account for 62 percentage points out of the 67 percent of output under free trade agreements. With PPP data only 15 percent of Latin America has free trade agreements. Either way, the statement from Shannon is misleading.
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