Playing with Fire

The Colombian presidential elections of April 1970 pitted Minister Misael Pastrana against former general and (peaceful) dictator[1] Gustavo Rojas Pinilla.  Into the night, Rojas was leading in the vote count until the Interior Minister ordered radio stations to stop broadcasting partial results.  By morning, several regional voting stations had issued corrected results and Pastrana was declared the winner.

Thus was born the M-19, the most famous left-wing guerilla movement of the 1970s and 1980s.  As one of his founders later remarked, “if the General couldn’t get a fair election, there was no point for us to go on fighting in the political arena”.

Two decades before, the 1948 assassination of Liberal leader and presidential candidate Eliecer Gaetán, a populist “progressive” albeit anti-communist, had triggered a civil war ultimately resolved by the coming to power of General Rojas Pinilla.

Frustrating voters’ aspirations or manipulating elections often leads to upheavals, regardless of culture or geography.

The April Revolution of 1960 overthrew South Korean President Syngman Rhee when people realized that he denied them alternatives and had falsified the results of the vice-presidential elections. 

Similar uprisings or revolutions occurred in the Philippines (1986), Bahrain (1994), Indonesia (1998), Ukraine (2004), Ivory Coast (2010) among others.

Which brings us to France, a country of great sophistication with a penchant for sudden popular outbursts.

Politicians, jurists and journalists’ arguments notwithstanding, it is a fact that, today, French voters are effectively “denied” a vote for political change.  Current presidential candidates include:  Jean-Luc Melenchon (far left, admirer of Hugo Chavez), Benoit Hamon (left of socialist President Hollande who kicked him out of his cabinet), Emanuel Macron (former Minister of Finance in Hollande cabinet, probably center-left), François Fillon (former Prime Minister of President Sarkozy, center-right/right) and Marine Le Pen (president of the National Front, right/far-right).

No sooner was Fillon leading the polls that he was the subject of an anonymous attack in the press about remuneration that his wife had received to serve as his assistant in Parliament.  The dossier was well researched and presented him in the worst possible light.  A panel of three judges was formed to investigate whether or not any abuse had taken place. While it doesn’t look good to employ your wife, and for a while your children, it doesn’t seem that he committed any crime or abuse given the statutes that apply to the funding of congressmen staff in France.  Nevertheless, he dropped precipitously in the polls and has been fighting for his political life ever since.

Marine Le Pen, who was shown as winning the first round of the voting, was also the target of attacks from Brussels for similar issues (employment of assistants) and from French justice regarding campaign financing and other matters.  But unlike Fillon, she has refused to appear in front of the judges, alleging interference with her campaign.

No other candidate has been targeted, only those right-of-center.  The likely calculation of the attackers is that Fillon will not make it to the second voting round (since no one is expected to win over 50% in the first round), setting a Macron-Le Pen contest with Macron winning it.

Such a second round field would be damaging for France as Fillon is the only candidate with an honest diagnosis of what ails France, and both a plan and the will to engineer a recovery.  Le Pen’s economic program is unrealistic, while Macron’s is so timid as to have little impact over a 5 year mandate.

However, the attacks on Fillon could also backfire on the plotters.  While Le Pen and her National Front are described as extreme right, they are, in reality, very populist and nationalist.  And while many of Fillon’s voters approve of conservative economic policies, they are energized by issues such as immigration and regaining sovereignty from Brussels; to them, Macron’s economic program is marginally more attractive, but Le Pen’s nationalism is a bigger draw.  Add to that the spite that their candidate was torpedoed by the left and Le Pen could become a real magnet for Fillon's base.

The election of Donald Trump, and its aftermath, is often presented as what France (and its neighbors) could expect in case of a Le Pen victory.  I think it would be worse.  France is much more centralized than the US, it is deeply enmeshed in the eurozone and the European Union, its society is less harmonious, and its economy is more fragile.  Finally, there is its culture, which produced three revolutions: 1789, 1848 and May 1968.

Countries only make the painful changes that they need after touching bottom, not before.  France has drifted downward for a long time, but it hasn’t touched bottom yet.  However, manipulated elections gone awry could push it down hard and trigger, not change, but chaos.

There is still the possibility that Fillon will win and gradually get France back on the upswing,

Or that Macron will win, ushering an era of stagnation and rising frustration and division,

There is also a chance that Le Pen wins, installing a forceful president with only 2 seats out of 577 in the National Assembly, little hope of building a governing coalition or attracting first class cabinet candidates, and a dangerous economic agenda.

Three possible election outcomes, and I don’t know what probability to attribute each one of them.

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[1]Rojas Pinilla was an unusual dictator in that he was put into the job by both Conservative and Liberal parties to bring an end to their bloody fighting and reestablish peace.

Latin America in 2014: part I

Muchos años después, frente al pelotón de fusilamiento, el coronel Aureliano Buendia había de recordar aquella tarde remota en que su padre lo llevo a conocer el hielo.  Macondo era entonces una aldea de 20 casas de barro y cañabrava construidas a la orilla de un rio de aguas diáfanas que se precipitaban por un lecho de piedras pulidas, blancas y enormes como huevos prehistóricos.  El mundo era tan reciente, que muchas cosas carecían de nombre, y para mencionarlas había que señalarlas con el dedo[1].

 Gabriel García Marquez, One Hundred Years of Solitude

Few novels have had as powerful and magical beginnings, and when GGM’s book, once translated, reached Europe and the US in the late 1960s, it instantly put Colombia on the literary map.  Subsequent García Marquez novels were anxiously expected and read, and by and large, didn’t disappoint although never quite matching their trailblazer.  Soon, the world rediscovered older Latin writers such as Neruda and Borges, and welcomed the likes of Vargas Llosa, Cortazar, Fuentes and others. 

Since then, through periodic ups and downs, Latin America has more often than not faded from the headlines.  I believe that in 2014 it will make a return.  Paraphrasing García Marquez again, time is not passing, it is turning in a circle. 

There have been many attempts to draw parallels, to put Latin countries in neat boxes, in short, to simplify the Latin reality.  Like all generalizations, these efforts contained some elements of truth that had little overall predictive value.  Indeed, while there have been two principal colonizing influences, Spanish and Portuguese, there also have been important[2] immigration flows from Italy, Germany, France and the Middle East.  At present, there appears to be a political and economic cleavage between Atlantic (Venezuela, Brazil, Argentina) and Pacific (Chile, Peru, Colombia, Mexico) countries but this distinction wouldn’t have existed thirty years ago.  Finally, there is a tendency to bundle Latin American countries together as commodity producers; many do export commodities but their customers are somewhat different and so is the mix between hard and soft commodities.  In the end, because of topography, demography and history, one should consider each country separately.  Evidently, being in the same neighborhood, there has been and always will be interaction among them.

2014 should bring to the fore a number of important challenges and issues which will probably result in heightened volatility and tensions in this region, and ultimately, major changes.  Let us consider these Latin countries on a case by case basis.

Colombia

No single factor explains the resurgence of the Colombian economy better than the drastic improvement in the security climate in the country, and in particular the beating back of the FARC and drug traffickers since 2003.  Pipeline attacks is a good index of security levels as it affects the most dynamic sector of the economy. 

This chart from Valores Bancolombia shows that attacks reached their lowest point at the end of President Uribe’s second term in office. Unfortunately, they are now back up to their level of a decade ago.

President Santos has staked his legacy on reaching a peace accord with the FARC.  By all accounts, he is thoughtful and deliberate, and he is correct in emphasizing the huge benefits that peace would bring.  The question is how do we get there?  Was the relaxation of the pressure on the insurgents necessary?  Will waning support from Venezuela pressure the FARC to settle?  Will FARC leaders, lately seen relaxing on the beach in Cuba, lose their fighting ardor and want to retire?  Will the Colombian population accept terms that would allow reinsertion of the FARC in society and politics?  More crucially, will a successful political negotiation with the FARC bring an end to the involvement of its members in drug trafficking and violence?

On a macroeconomic level, the Colombian economy is both healthy and dynamic; it enjoys a large domestic market and relative proximity to North America.  A key challenge is developing an efficient infrastructure which is all the more necessary by an unforgiving topography; after some significant delays, it appears that the legal and regulatory framework for large scale project development is now ready.

Right now, President Santos looks likely to win reelection next May; this would be good to convince the FARC if they want to make a deal.  But the November 2013 deadline for a deal has already passed, and it is unlikely that the negotiations can be extended much longer unless the security climate is improved.  2014 should therefore force the parties to make some tough decisions:  the President either breaks the negotiations or he applies greater military pressure on the FARC to force a settlement; the FARC either settle soon or face the risk of harsh military retributions with no domestic or international support.

My guess is that, as elections approach and time for negotiations runs out, violence rises but the security climate improves, and we have already seen what this means for the economy.

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[1]  Many years later, as he faced the firing squad, Colonel Aureliano Buendia was to remember that distant afternoon when his father took him to discover ice.  At that time Macondo was a village of 20 adobe houses, built on the bank of a river of clear water that ran along a bed of polishes stones, which were white and enormous, like prehistoric eggs.  The world was so recent that many things lacked names, and in order to indicate them in was necessary to point.  (Unfortunately, this translation fails to convey the poetry and rhythm of the original text)

[2]  Not in absolute numbers but in terms of their importance for the host countries.