Venezuela
The autocrat of Caracas
Hugo Chávez tightens the state’s grip on politics and the economy
The man of many companiesFOR much of the past eight months, since suffering defeat in a referendum on changing the constitution, Hugo Chávez has seemed to be on the defensive. Abroad, he repaired strained relations with Colombia’s president and with Spain’s King Juan Carlos. At home, he backpedalled on unpopular measures, such as a new socialist educational curriculum and a draconian intelligence law. He met local businessmen in June and urged them to invest, in the hope that increased production would damp inflation of over 30%. But with Mr Chávez moderation rarely lasts, and he has now veered left again.
On July 31st he announced that the government would buy the country’s third-biggest bank, Banco de Venezuela, owned by Spain’s Grupo Santander. Days later, the government published 26 decrees, many of which mimic the constitutional changes rejected in the referendum. Some of them will further tighten the state’s stranglehold on the economy.
This has been growing stronger since Mr Chávez won a second six-year term in an election in December 2006. Since then he has taken over the telecoms and electricity companies, as well as other businesses (see table). In June he told the local businessmen that he had no more nationalisations in mind.
But Banco de Venezuela was on offer: Santander was reportedly close to completing its sale to a local private bank. The first the bank’s managers knew of Mr Chávez’s intention to purchase was when he announced it on live television during a speech about education. Spain’s government, which had hosted him in Madrid days previously, was also kept in the dark.
Bankers have done well from Mr Chávez’s “Bolivarian Revolution”. They have profited by arbitraging exchange controls, and from the government’s penchant for issuing debt (despite its record oil revenues). But banks face increasingly onerous regulations. These set interest rates, and require around half of loans to go at subsidised rates to favoured purposes, such as farmers and housing. Alí Rodríguez, the new finance minister, has ordered banks to cut their holdings of some government paper, on which they are likely to make a loss. On top of all this, growth is slowing. “What is it that Banco Santander is seeing that makes it want to leave Venezuela when it is making so much profit?” asked José Manuel González, the president of the employers’ confederation.
Mr Chávez has promised Santander a “friendly” deal. His oil wealth has allowed him to pay for the businesses he takes over, avoiding the friction that would be prompted by expropriation. As proliferating controls make doing business in Venezuela harder, more firms may fall into the government’s lap. “I don’t think this will be the last bank to end up in state hands, and it’s going to be happening in other sectors too,” says Gustavo García of IESA, a business school.
The takeover of Banco de Venezuela will make the state the biggest banker in the country. The president wants to turn his new acquisition, which has a big branch network, into a “socialist bank”, which will administer social security and welfare payments. This change of status may not be to the liking of the bank’s workers. The government often obliges state employees to attend political rallies, and regularly sacks those who show signs of political dissent. Some 2m of the 6.5m Venezuelans with formal jobs are now employed by the state.
The decrees will further increase the state’s powers, hobble opponents and limit the scope of private enterprise. Because the opposition boycotted the last legislative election, Mr Chávez’s supporters dominate the National Assembly. Nevertheless, after his re-election he obtained the power to pass laws on his own for a period of 18 months. The latest crop of decrees were issued on the day before this power was to expire, in such a rush that their full texts were not published until later.
Under one decree a chavista militia will become a new branch of the armed forces. Another tightens state control over food production and distribution, threatening those accused of hoarding with up to ten years in jail. A third makes it easier for the government to take over private companies in general. Another creates powerful new regional officials. They will rival state governors, who are due to be chosen in November in an election in which the opposition hopes to dent Mr Chávez’s near-monopoly of power.
Several of these measures violate the constitution of 1999, which Mr Chávez himself sponsored. “Here we have no constitution, no law and the president does exactly what he wants,” Luis Miquilena, a former ally who broke with the president, told the Wall Street Journal. Mr Chávez says anyone who disagrees with the new laws should complain to the supreme court. But the court is beholden to the president. This week it upheld a decision by the auditor-general to ban hundreds of candidates from standing in the state and municipal elections for alleged corruption, even though none has been convicted by the courts. The main apparent target is Leopoldo López, the opposition mayor of Chacao, a district in the capital. Opinion polls had given him a strong chance of being elected as mayor of Caracas.
Those polls suggest that a small majority of Venezuelans still support Mr Chávez. But voters showed in the referendum eight months ago that they do not want his autocratic socialism. They may have to show him that once again.
Bad "News"
We have forgotten so much about the immediate aftermath of the September 11, 2001 terrorist attacks that many people may not remember the deadly anthrax spores that were mailed to various prominent people in politics and in the media during that time.
None of the intended victims was killed by the anthrax but five other people were, including two postal workers, who apparently became victims because they handled the mail containing anthrax spores.
In the instant search for someone to blame, biologist Steven J. Hatfill was publicly named as "a person of interest" in the case by government officials. He became, in the media presentation, the villain du jour.
The government was eventually forced to issue a retraction and agreed to pay a settlement of more than $5 million. But retractions never catch up with the original charges, which will blight this man's life the longest day he lives.
More recently, a federal investigation has focused on someone else who worked in the same scientific laboratory as Hatfill. This time the new suspect was about to be indicted, as distinguished from being tried in the media-- and he committed suicide.
This may mark the end of the anthrax story but the reckless destruction of people's reputations and the disrupting and blighting of their lives in the media is continuing on.
There is much to be said for the British practice of limiting what can be reported in the media about someone on trial until after that trial is over.
Once a charge has been made and publicized from coast to coast-- if not internationally-- later exoneration will never get the same publicity, so the damage cannot be undone. You cannot unring the bell.
A major part of what is reported in the media-- especially the tabloid media, whether in print or broadcasts-- consists of leaks, speculation and innuendo, all repeated around the clock, day in and day out, whether or not anything is ever proved.
What someone thinks is going to happen is not news. After it happens it is news.
The 24-hour news cycle may require that somebody be saying something on the air all the time. But that is the media's problem-- and it should not be solved at the expense of ruining other people's lives.
The loss is not solely that of the particular individuals singled out for accusation or innuendo.
If an informed citizenry is the foundation of democratic government, then a misinformed citizenry is a danger.
Individuals who have never been smeared can also be affected. Highly qualified people, whose knowledge and judgment are much needed in high places, may turn down judicial nominations, for example, or decline other high-profile positions in government, if that means risking having outstanding reputations for integrity that they have built up over a lifetime be dragged through the mud in televised confirmation hearings conducted like Roman circuses.
Such top-level people can always be replaced by warm bodies, as Judge Robert Bork was replaced by Judge Anthony Kennedy, after the smearing of Judge Bork by the Senate Judiciary Committee defeated his nomination.
But the whole country continues to this day to pay dearly for having Anthony Kennedy on the Supreme Court, making intellectually foppish decisions.
One of the perennial crusades of the media has been to have more government business televised. Their self-interest in this is obvious. But the benefits of televising government proceedings-- if there are any benefits-- must be weighed against the enormous harm that this can do not only to individuals but to the country.
Television conveys false information as readily as it conveys the truth. Congressional hearings are not glimpses of truth. They are staged events to perpetuate some political spin.
Televising these political shows only impedes Congress' ability to get serious work done in private instead of spending time playing to the peanut gallery.
Both individuals and the country deserve more protection from publicity abuse than they usually get.
America's expatriate voters
Home thoughts from abroad
Could expatriate voters influence America's presidential election?
AMERICA'S presidential candidates have made a point of travelling far afield this year, in part to win over voters sceptical of their foreign-policy credentials. Barack Obama took his campaign on a tour of Europe and the Middle East; John McCain, to much less fanfare, travelled to Mexico, the Middle East and Latin America. Whatever the polls of opinion in other countries show—and they are usually highly favourable towards Mr Obama—the only votes that really matter are those of Americans. But not all of those voters are back at home.
American expatriates may have had only a small impact on the past few elections but they are keenly following this one. So far they have contributed much more money than in previous campaigns. And there are signs that by polling day in November, they may also turn that interest into power at the ballot box.
Roughly 6m Americans live abroad. This scattered diaspora, taken as a whole, wields a voting power larger than half of the states in the union. The overseas population includes well-heeled bankers in London and other financial centres around the world. But it is also composed of several hundred thousand soldiers in Iraq and Afghanistan, or stationed at other overseas military bases. In recent elections, though, these potential votes have not shown up in significant numbers on election day.
The 2006 election that saw Democrats sweep to power in Congress did not come close to drawing the kind of attention that this year's presidential race has seen—whether at home or abroad. The overseas vote two years ago was tiny. Of those 6m Americans overseas, not even 1m were registered to vote.
Technical problems, bureaucratic hoops (voters must register with the state where they last resided) and the difficulties of actually getting a vote to count all played a part in keeping turnout low. Two-thirds of the ballots fell foul of these problems. Another 10% missed the deadline altogether. All told, only 330,000 ballots (5.5% of American expats) actually wound up counting in a total of 82m ballots cast that year. That is roughly the same as the total population of just one mid-sized American city, such as Tampa, Florida.
Since then the campaign teams, as well as various pressure groups, have noticed the problems and the potential rewards of winning over Americans abroad. Mr Obama runs a blog for Americans abroad on his campaign website. The Democrats have a group that is attempting to organise supporters in foreign countries: the party held a “global primary” in February with a record turnout of more than 20,000. They favoured Mr Obama heavily. Overseas Democrats will send 22 delegates to the national convention in August. Gwyneth Paltrow, a Hollywood actress, has made an advert urging American expats to vote for Mr Obama. George Clooney will host a fundraising event for Mr Obama in Geneva, in September. The Republican Party has its own group that oversees chapters around the world and is helping to rally Mr McCain’s supporters.
The candidates are chasing money from abroad, too, either by turning up open-palmed themselves or by sending prominent advisers and friends to fundraising dinners abroad. Britain is by far the top fundraising destination. Rudy Giuliani—a failed candidate for the Republican nomination—led the way. He made headlines last September when he visited London to raise funds. Even Ron Paul, a libertarian and a long-shot for the Republican nomination, managed to raise more than $100,000 from overseas voters.
Though some candidates, such as John Edwards, struggled to prise cash from overseas Americans (only American citizens, not foreigners, can contribute money) the field as a whole set new records. By the end of April, they had raised a total of more than $2.6m, according to the Centre for Responsive Politics, a think-tank in Washington, DC.
Unsurprisingly, the charismatic Mr Obama has also done the best, raising more than $1.4m from expats. That is peanuts compared with total funds raised—Mr Obama raked in $52m in June alone—but the overseas tally has increased markedly this year. The total raised is more than double that of 2004 and five-times the figure from 2000. The candidates’ global search for supporters is yet another twist in a campaign for the presidency of a country sometimes reluctant to look beyond its own shores.
Aug. 8 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the government should create a company like the Resolution Trust Corp. to sell off the assets of any failing financial institution, while limiting taxpayer losses.
``The cost to taxpayers would still be a concern: any monetary intervention by government in a market almost always socializes losses and privatizes gains,'' Greenspan wrote in an epilogue to the paperback edition of his memoir, ``The Age of Turbulence.'' ``But, as happened with the RTC, the public cost could be minimized.''
U.S. lawmakers and Bush administration officials have recently debated how best to handle troubled financial firms amid losses totaling $494 billion stemming from the collapse of the mortgage market. Fed Chairman Ben S. Bernanke said last month nationalizing Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, is an option lawmakers can consider to reduce taxpayer risk.
The Resolution Trust Corp., founded by the government in 1989 after the savings and loan crisis, disposed of the assets of failed financial institutions.
``Our country has long since abandoned the notion that we should leave crises to be resolved solely by the marketplace,'' Greenspan said in an excerpt provided today by his office. The book is scheduled to be released next month.
`Critical Need'
``To minimize the impairment of market efficiency from bailouts, the critical need, in my judgment, is to formalize and somewhat revise the procedures improvised'' in the rescue of Bear Stearns Cos.
The Fed, in an effort to stabilize markets, provided $29 billion in March to finance the purchase of Bear Stearns by JPMorgan Chase & Co. The central bank has also accepted mortgage debt as collateral and opened up lending to securities firms.
``Losses on the Federal Reserve's balance sheet, if particularly large, could reduce the flexibility of monetary policy,'' said Greenspan, 82, who served as Fed chairman from August 1987 to January 2006.
Greenspan, since retiring, has returned to his role as a private economic forecaster, speaking at conferences and to groups of bankers and investors, while consulting for clients such as Deutsche Bank AG.
Aug. 9 (Bloomberg) -- Georgia accused Russia of waging ``full-scale war,'' as Russian troops took control of the capital of the separatist South Ossetia region, rejecting calls by the international community for an immediate cease-fire.
``Georgia is under military aggression of the Russian federation,'' Georgian Security Council secretary Kakha Lomaia told reporters in a conference call today.
Ships of Russia's Black Sea Fleet moved toward Abkhazia, another separatist region, and Russian jets are crossing the border every 15 minutes and attacking military and civilian targets in as many as six locations simultaneously, he said. Russia's actions amounted to ``full-scale war,'' Lomaia said.
Russian tanks pushed into South Ossetia and, by morning today, reinforcements backed by bombers and artillery had forced Georgian units out of the South Ossetian capital, Tskhinvali, the Russian Defense Ministry said on its Web site.
President George W. Bush said the fighting represented ``a dangerous escalation.'' He called for an ``immediate halt to violence'' and ``an end to the Russian bombings.'' Bush was speaking in Beijing where he is attending the Olympic Games.
Russian Foreign Minister Sergei Lavrov said 1,500 civilians and 15 Russian peacekeepers have been killed so far, while Deputy Chief of the General Staff Anatoly Nogovitsyn confirmed that two Russian aircraft had been shot down. Georgia has shot down 10 planes, Lomaia said. The pilot of the 10th plane is alive and has been sent to a hospital, he said.
`Aggression'
``Whatever part of Georgia is used for this aggression is not safe,'' and Russia reserves the right to attack any part of Georgia used for the offensive in South Ossetia, Lavrov said. ``The source of the aggression must be hit to prevent the aggressor from doing that again,'' he said.
Georgia must withdraw its forces from South Ossetia and sign a non-aggression pact with the region and then ``the situation can calm down,'' Lavrov said.
Russian warplanes bombed sites including the port of Poti and a military base at Senaki, in the west of the country, Georgian officials said. The town of Gori, the birthplace of late Soviet dictator Joseph Stalin, was also hit.
The conflict could endanger U.S. aspirations to secure an emerging energy corridor linking Central Asia to Europe and deals a blow to its plans for bringing the former Soviet republic into the North Atlantic Treaty Organization's orbit.
Russian President Dmitry Medvedev said the fighting was a response to Georgia's assault on Russian citizens and the peacekeepers Russia has had in the disputed region since the early 1990s.
State of War
Georgian President Mikheil Saakashvili today signed a decree declaring a state of war, Lomaia said. At least 40 Georgians, both civilian and military, have been killed, he said. This toll does not include casualties from a residential building in Gori that was bombed, he said.
South Ossetia broke away from Georgia in the early 1990s and exists now as a de facto independent state with Russian peacekeepers and economic support.
The Russian government said that 30,000 refugees had entered its territory from the region.
``The people responsible for this humanitarian catastrophe must bear responsibility for what they have done,'' including under international law, Medvedev was quoted by the RIA Novosti news service as saying at a Kremlin meeting.
The conflict ``absolutely'' dooms Georgia's chances for NATO membership, said Robert Hunter, U.S. ambassador to the Brussels- based alliance under President Bill Clinton and now a senior adviser at the policy-research group RAND Corp. in Washington. ``You don't bring in a country that has this sort of trouble.''
Peace Envoys
As those hopes evaporated, Secretary of State Condoleezza Rice planned to send an envoy to broker a cease-fire between the sides. President George W. Bush, attending the opening ceremonies of the Beijing Olympic Games yesterday, said the U.S. backed the ``territorial integrity'' of Georgia.
The European Union and the Vienna-based Organization for Security and Cooperation in Europe, which has a peacekeeping mission in Georgia, are also sending emissaries to seek a cease- fire, French Foreign Minister Bernard Kouchner said in a statement late yesterday. France, which currently holds the EU's rotating presidency, earlier called on behalf of the EU for negotiations to end the fighting.
Deputy Secretary of State John D. Negroponte summoned Russian Charge d'Affaires Alexander Darchiyev to push for a Russian pullout, according to a statement issued yesterday by the State Department. Russia's attacks are a ``dangerous and disproportionate escalation of tension,'' and the U.S. calls for an ``immediate'' cease-fire and withdrawal of Russian troops, Negroponte said.
Russian Energy
EU help may not be as forthcoming as Saakashvili wants in part because of European dependence on Russian energy supplies.
``Countries like Germany and France were already resistant to the idea of giving a NATO security guarantee to a country with an open dispute with Russia,'' said Dominic Fean, a researcher at the French Institute of International Affairs in Paris. ``I can't see how they can get the consensus of 26 states anytime soon.''
Georgia's Ambassador to the U.S. Vasiil Sikharulidze told Bloomberg Television the conflict would make NATO entry for the country harder, ``but we are strongly convinced we have to continue this way and that we will be a NATO member.''
Saakashvili, a U.S.-educated lawyer, came to power in the 2003 ``Rose Revolution'' backed by the U.S. He vowed to bring South Ossetia and two other separatist regions under central control in a challenge to Russia.
Russian Passports
South Ossetia has a population of about 70,000 and is connected to Russia's North Ossetia region by a tunnel through the Caucasus Mountains. Most residents hold Russian passports.
Georgia is a key link in a U.S.-backed ``southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia. The BP Plc-led Baku-Tbilisi-Ceyhan oil pipeline to Turkey runs about 100 kilometers (60 miles) south of the South Ossetian capital, Tskhinvali.
The U.S. seeks to connect Central Asia natural gas supplies with European markets, skirting Russia in an attempt to weaken the grip of Russia's state-run OAO Gazprom energy company. One planned pipeline route runs from the Georgia-Turkey border.
NATO in April committed itself to bringing Georgia into the alliance without providing a timeframe or a clear path toward membership -- as Bush had pushed for -- out of concern it would antagonize Russia. Putin has called the expansion of NATO toward Russian frontiers a ``direct threat'' and likened South Ossetia's drive for independence to Kosovo's from Serbia.
Kosovo Precedent?
Sergei Mironov, a Putin ally who heads Russia's upper house of parliament, said the fighting is ``grounds'' to consider South Ossetia's appeal for international recognition, which cited Kosovo as a precedent, Interfax reported.
Russia hasn't recognized Kosovo since its declaration of independence.
The ruble dropped the most against the dollar in 8 1/2 years and Russian stocks tumbled yesterday on concern the fighting would worsen.
``This could be a prolonged and bloody conflict with an unpredictable end,'' said Pavel Felgenhauer, an independent military analyst in Moscow.
Hunter said flawed diplomacy was in part responsible for the clash. ``This is an issue that was allowed to get out of hand by people who haven't thought through what NATO membership really means, and on the Russian side doing too much muscle flexing over a country that is a pretty small place,'' he said.
Aug. 9 (Bloomberg) -- European stocks climbed for a third time in four weeks as oil dropped to a three-month low and earnings from Societe Generale SA and Royal Bank of Scotland Group Plc eased concern that banks need more capital.
Marks & Spencer Group Plc, Daimler AG and Air France-KLM rose after crude oil fell more than $7 a barrel. Societe Generale, France's second-largest bank, rallied the most in six months on a smaller-than-estimated profit decline. Royal Bank of Scotland, the second-biggest U.K. bank, rose 12 percent. European Aeronautic Defence & Space Co. gained the most in seven years as the euro fell to the lowest versus the dollar since February.
Europe's Dow Jones Stoxx 600 Index added 3.2 percent this week to 289.28, the highest level since June 30. The measure has climbed 8.5 percent from an almost three-year low on July 15 as crude tumbled more than 20 percent from a record and profits from Credit Suisse Group AG to Air France-KLM and Adidas AG beat analysts' estimates.
``Much of the market had been sold off aggressively ahead of first-half results and we were due a bounce,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $63 billion. ``A weakening oil price will allow central banks to be less concerned about inflation. This makes equities look more attractive.''
This week's rally pared the Stoxx 600's decline in 2008 to 21 percent. The benchmark index for European equities has dropped in eight of the previous nine months as asset writedowns and credit losses at banks approached $500 billion worldwide, threatening to prolong the slowdown in global economic growth.
National Markets
National benchmark indexes advanced in 15 of the 18 western European markets in the week. France's CAC 40 gained 4.1 percent. The U.K.'s FTSE 100 added 2.5 percent, while Germany's DAX climbed 2.6 percent.
Marks & Spencer, the U.K.'s largest clothing retailer, rallied 9 percent. Daimler, the world's second-biggest maker of luxury cars, increased 14 percent.
Crude oil tumbled this week as the dollar's gain against the euro reduced the appeal of commodities as an inflation hedge. Futures dipped to $115.61 a barrel on Aug. 8, a three-month low.
``The decline in oil was a critical factor,'' said Gregor Logan, the co-chief investment officer at New Star Asset Management in London, which oversees about $41 billion.
Air France, Europe's biggest airline, increased 13 percent. The carrier got an added boost this week after reporting first- quarter profit that exceeded analysts' projections.
Societe Generale
Societe Generale jumped 15 percent. The bank said net income fell 63 percent to 644 million euros ($1 billion), compared with the 550 million-euro median estimate of 13 analysts surveyed by Bloomberg. The company's capital position is ``completely solid,'' Chief Executive Officer Frederic Oudea said.
Royal Bank posted a smaller loss than analysts estimated and said the 5.9 billion pounds ($11.4 billion) of writedowns it announced in April may be sufficient for the year.
The European Central Bank, the Bank of England and the Federal Reserve left their benchmark interest rates on hold this week. Still, the euro headed for its biggest weekly loss against the dollar since January 2005 as oil tumbled and ECB President Jean-Claude Trichet said economic growth will be ``particularly weak'' through the third quarter.
A stronger dollar boosts the value of sales in the U.S. currency when converted into euros and pounds, which benefits companies including EADS and BAE Systems Plc.
Lonmin Surges
EADS, which controls planemaker Airbus SAS, climbed 23 percent and BAE, Europe's largest defense company, increased 3.3 percent.
Lonmin rallied 47 percent, the steepest gain in the Stoxx 600. Xstrata Plc made a 5 billion-pound ($9.8 billion) hostile bid for the world's third-biggest platinum company, which was rejected by Lonmin as ``wholly inadequate.'' Xstrata shares tumbled 13 percent.
Coloplast A/S slumped 20 percent, the steepest drop in the Stoxx 600 Index, after the world's largest maker of ostomy products cut its forecast for the fiscal year.
Basic-resources companies and oil producers were the worst performers among 18 industry groups in the Stoxx 600 as crude and metals prices declined. Copper on the London Metal Exchange slumped 6.2 percent, the sixth straight weekly drop. Nickel and zinc also retreated.
BHP Billiton Ltd., the world's biggest mining company, lost 5.9 percent. Anglo American Plc, the fourth-largest diversified mining company, decreased 3 percent. Total SA, Europe's third- biggest oil company, slipped 2.7 percent.
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