When Prime Minister Stephen Harper conducted his first official visit to Chile, Colombia and the Caribbean in July 2007, he undertook important steps in renewing Canada’s historical ties with Latin America. Now with a renewed electoral mandate, the prime minister should continue to promote an agenda of liberalism, free trade, and democracy in the region, both for the sake of the people in the region and neutralize the destructive authoritarian influence of Venezuela’s Colonel Hugo Chavez.
Along with other developed nations and international development institutions such as the Washington DC-based World Bank and the Inter-American Development Bank (IADB), Canada must use her influence, investment, and know-how to counter Chavez’ misguided initiatives in the region.
Although Chavez was democratically elected president of Venezuela in 1998, after a failed coup in 1993, no one today would mistake him for a democrat. He has changed Venezuela’s flag, altered the country’s constitution, extended his control over the previously-nationalized petroleum industry, nationalized its main telecom and central electricity companies, tightened state control over the media, persecuted the opposition, and renamed Venezuela from “Republic of Venezuela” to the “Bolivarian Republic of Venezuela,” this in order to associate himself with Spanish-speaking South America’s liberator, Simon Bolivar, “El Libertador”.
In 2007, Colonel Chavez hosted the Bolivarian Alternative for the Americas, a summit for the socialist leaders of his own country, as well as Cuba, Nicaragua, Ecuador and Bolivia. This was followed by the nationalization of the last privately-held oilfields in Venezuela. As an encore, Chavez shut down Radio Caracas Television, a leading Venezuelan opposition-aligned television broadcaster; his government is now threatening to silence Globovision, the only remaining opposition broadcaster.
Domestically, Venezuela is a mess. Despite high oil prices and the resulting revenues, there has been a 48% increase in the country’s public debt since 1998. Inflation is higher than most neighboring countries, Venezuelan exports have decreased, corruption is endemic, and the underground economy has flourished. Violence has increased dramatically and Venezuela now has a higher homicide rate than neighboring Colombia.
While Venezuela’s public debt stands at US $22 billion, Chavez has channeled funds outside his country to fund “foreign aid” projects worth US $26 billion. Through such spending, Chavez seeks to extend his ideology of “Bolivarianism,” a mish-mash of anti-Americanism, grass-roots political activism, and socialism, throughout Latin America. However, where his mentor, Fidel Castro, was dependent upon Soviet largesse to finance and export the socialist revolution, Chavez, with pockets full of petrodollars, has acted as his own “venture anti-capitalist.”
In 2005, Chavez extended low-cost loans to Brazil and Argentina, enabling those countries to pay off the International Monetary Fund (IMF), their long-time creditor, ahead of schedule. Chavez has provided much financial aid to his protégé, Bolivia’s Evo Morales, thus enabling that country to thumb its nose at necessary economic reforms. He has provided subsidized fuel to Ecuador, Cuba, Nicaragua, the Dominican Republic, and other countries party to the San Jose trade agreement. Earlier this year, Chavez and Argentina’s leftist president, Nestor Kirchner, announced the founding of the “Bank of the South”, a direct competitor to the IADB. The recipients of this largesse are no doubt grateful. Venezuela received much support from Latin America for its recent bid for a UN Security Council seat. Unnoticed in the mainstream North American media was the admission of Venezuela to MERCOSUR, the trading bloc of southern-cone countries of Chile, Uruguay, Argentina and Brazil.
Petro-dollar populism v. the rule of law
In contrast to petro-dollar populism, Canada and international organizations such as the World Bank can assist the long-term development of these countries by promoting a rules-based approach to funding economic development. This includes strict criteria for lending which reduces the potential for corruption or the funding of economically-dubious projects. The World Bank, the Inter-American Development Bank, and Canada and the United States will be viewed as either bureaucratic or out-of-touch (or both) and will face competition from Chavez as a source of capital for Latin American development.
However, the long-term consequences of Chavez’ involvement with the region include erosion of the rule-of-law, distortions to regional economies, and the continued impoverishment of Chavez’ own country. Instead of an assessment of projects on their merits, Chavez-sponsored projects will be funded based on purely political criteria designed to score maximum points for the Bolivarian Revolution.
Unfortunately, Chavez seeks to exploit valid criticism of the World Bank. The Bank has long been accused of cronyism and inefficiencies that have slowed if not hampered development initiatives. Prior to the manufactured scandal that drove him out, former bank president Paul Wolfowitz attempted to make the institution more accountable.
Under Wolfowitz, the Bank appeared to be embracing the innovative philosophy of Peruvian economist Hernando de Soto, whose most famous book, “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else” argues for the establishment of the rule of law and private property rightsas the precursor to advancing economic progress. De Soto’s philosophy, counter to the statist tenets of Chavez’ Bolivarianism, ironically appears truer to the beliefs held by Simon Bolivar himself, a classic liberal. Unfortunately, it is too soon to tell if Wolfowitz’ reforms will survive his departure.
Venezuela’s other state export? Terrorism
There is compelling evidence that Venezuela is an active sponsor of terrorism, not only aiding violent guerilla organizations in neighboring Colombia (and thus undermining the oldest democracy in Latin America), but also providing support to Islamic terrorist groups such as Hamas and Hezbollah.
In 2003, it was revealed by U.S. News & World Report that Islamic terrorists were not only operating within Venezuela, but that Venezuelan identity documents had been provided to thousands of Syrian, Lebanese, Egyptian and Pakistani nationals. In June, Chavez visited Iran where he was warmly welcomed by President Mahmoud Ahmadinejad. Following last summer’s conflict in Lebanon, the Iranian-backed Hezbollah leader, Hassan Nasrallah, publicly thanked Hugo Chavez for his support.
Just as alarming, it was announced in September 2008 that Chavez had invited the Russian navy to conduct exercises in the Caribbean, a likely first step to allow Russian military bases in Venezuela.
Notwithstanding Canada’s historical involvement in the region, Latin Americans generally view Canada with curiosity. Brazil and Canada have a long history, somewhat marred by recent trade disputes. Brascan Ltd., the storied Canadian corporation, started as the Brazilian Traction Light & Power Company and pioneered the provision of electricity, gas, and tramway services in Rio de Janeiro and Sao Paulo in the early 1900s. Scotiabank has an extensive presence throughout Spanish-speaking Latin America. Prior to its departure from Ecuador in 2005, EnCana was one of the largest petroleum producers in that country, and had spent millions of dollars to enhance health care, education, and environmental protection.
The Canadian Advantage in Latin America
Not only are Canadian companies perceived as safer and more stable than their Latin American counterparts—and somewhat removed from local corruption—they are also viewed as “Not American.” Accurate or not and fair or not, Latin America enjoys, at best, a schizophrenic relationship with the United States. Despite the significant Hispanic demographic in the United States, too much American interest in the region is greeted with suspicion of imperialism and shouts of “Yankee, Go Home” (as President Bush was confronted on his 2007 tour). When America appears preoccupied with other areas of the world, as has happened since 9-11, Latin America accuses the United States of indifference.
Therein lays an opportunity for Canada. We are well-positioned to mentor the region’s growth as it develops its vast potential.
Aside from private investment, Canada can best assist Latin America’s development through enhanced support of democratic regimes and encouragement of good governance. We can do this through government-to-government contacts and the promotion of free trade with Latin America, either through the now-moribund Free Trade Agreement of the Americas (FTAA), or by negotiating separate bilateral trade agreements with individual countries (as we have with Chile). The FTAA talks were derailed in 2003 by a combination of disinterest from participating countries and fierce opposition by Hugo Chavez and anti-globalists who viewed the FTAA as an American-imperialist plot.
Latin America is at a cross-road. Canada’s government must not allow this close neighbor, through our own indifference, to slip into the destructive orbit of Hugo Chavez. By engaging with Latin America on all fronts, Prime Minister Harper will provide healthy alternatives to Venezuela’s easy money. We can assist with elimination of the corruption, cronyism, human rights abuses and bad economics that have held the region back for too long. Simon Bolivar would approve.