Archive for the ‘Latin America’ Category

FARC Is Weakened, But Far From Dead

FARC has been severely hit by the killing of its leader Alfonso Cano, but it has proven to be a resilient and adaptive insurgent movement and is unlikely to demobilize any time soon. For the Colombian conflict to be resolved, political measures will be crucial.

By Lisa Wüstholz for ISN Insights

There is no doubt that the death of Alfonso Cano, head of the Revolutionary Armed Forces of Colombia (FARC), on 4 November 2011 has dealt a severe blow to the guerrilla movement. Cano was the ideological leader of the Communist insurgent group and an old hand at rebelling against the Colombian government. He was the first Comandante en jefe in FARC’s 47 years of history to be killed in combat. As a committed Marxist, he had sought to intensify the revolutionary fight against the government ever since taking over FARC from one of the group’s founders, Manuel Marulanda, in 2008.
The death of Cano is the more troubling for FARC since it constitutes only the latest in a series of setbacks that the rebel group has recently been experiencing. On the level of leadership, three senior members of the Secretariat, FARC’s seven-person high command, have been killed in the past three years: Raúl Reyes, el Mono Jojoy, and Iván Ríos. Like Cano, they were all iconic figures of FARC.
Cohesion and vulnerability
At the level of followers, FARC is estimated to have shrunk from 20,000 members at its peak a decade ago to around 8,000 fighters. There are reports of large-scale desertions and battle fatigue among the revolutionary troops. Generally, there are signs of growing fragmentation among the rebels. Some fronts are said to operate more and more autonomously from the central command, being more concerned with trading drugs than with the revolutionary struggle. Recently, FARC also had to give up some historical strongholds in the center of the country and move more to the west (in the direction of Cauca, where Cano was found) as well as towards the northeast, further splitting the group. Hence, cohesive action in the name of the group’s stated goals has become ever more difficult. FARC has certainly lost its aura of invulnerability.
What is worse from FARC’s perspective is that the Colombian armed forces are still advancing. Their fight against the rebels has intensified ever since former President Álvaro Uribe came to power. US support has significantly strengthened the military capabilities of the Colombian forces: Among other things, they received Blackhawk helicopters, making it possible to carry out air strikes against rebel camps, as well as help in improving surveillance obtained through satellites and the interception of phone calls in order to locate FARC’s positions.
Additionally, the armed forces have improved their position thanks to valuable intelligence gained from FARC deserters and successful raids on FARC camps. In a raid on a camp in Ecuador, during which FARC international spokesman Raúl Reyes was killed, laptops, hard drives and memory sticks containing sensitive information about FARC operations were discovered.
With FARC on the run rather than on the march, the guerrillas have less time than ever to indoctrinate their new members. This, in turn, is bound to further the decrease in cohesion of the rebel troops.

A resilient and adaptive movement
For all these setbacks, it would be premature to expect the demise of FARC. The end of the group has been predicted several times already. For example, when he was serving as defense minister, current President Juan Manuel Santos declared FARC decidedly shaken. However, three years later, FARC is still fighting. The guerrilla movement has shown remarkable resilience in the face of campaigns to eradicate it. It has also demonstrated the ability to adapt, adjusting its way of fighting to match its own strengths and the actions of the Colombian armed forces.

There are many indications that the guerrilla group is still very active. Its propaganda machine is running, as can be seen on the continuously updated FARC website. The battle is still on, as shown in the frequency with which the rebels continue to launch deadly attacks: Shortly before and after the death of Cano, FARC carried out several strikes, killing at least three people and injuring 23 in the first half of November alone. According to a Colombian think-tank, the number of attacks is actually on the increase. In 2010, the figure was close to reaching the record 2,063 strikes of 2002.
Having adapted their strategy, FARC fighters today tend to launch more small-scale attacks using weapons that require no direct interaction with the Colombian army, such as IEDs and land mines. Furthermore, having retreated to the border regions with Ecuador and Venezuela, they now operate in territory that is not conducive to the Colombian army conducting large-scale raids. The terrain also makes it easier for the rebels to hide. There is substantial evidence that FARC has expanded into the territory of these neighboring countries, leading to inter-governmental disputes. Even though President Santos has reconciled with Venezuela, these liminal territories are still patrolled less vigilantly than those of Colombia and thus provide a hideout for the rebels.
Leadership and financial means
The death of the FARC leader will not plunge the organization into chaos. FARC is hierarchically structured, similar to regular armed forces, and the succession of Cano has likely been decided for a long time. That Cano would follow the FARC’s long-time leader Manuel Marulanda had been decided four years before the latter’s demise. Cano’s replacement, Timoleón Jiménez alias Timochenko, was apparently elected as early as one day after the killing and his succession publicly announced only a few days later; Iván Márquez was already positioned as second-in-line. Both commanders are senior members of the FARC Secretariat, having fought for almost 30 years, and they have proven their skills in the military and the political fields, respectively. Both are said to be inclined to continue the path chosen by Cano, even though Timochenko is known to be a touch more radical.
The diminishing of the group has to be put in perspective: FARC is still as big as the Tamil Tigers (LTTE) at their peak and is stronger in numbers than many jihadist groups. It continues to constitute a viable fighting force; one could even argue that FARC is becoming “leaner and meaner“.
Furthermore, FARC has enough financial means at its disposal to continue fighting for a long time. The group is estimated to gain at least $100 million a year through the drug trade, extortions, and kidnappings. The wealth of the guerrilla group also allows it to buy heavy weaponry: its arsenal is said to include – among others – mortars, landmines, surface-to-air missiles and anti-tank weapons. There are even rumors that it was involved in trading uranium.
Unsurprisingly, therefore, FARC has already stated that it will continue fighting and not lay down arms before a peace agreement has been signed. This is also because the group’s previous attempt to engage in legal political activity backfired: The killings of 4,000 members of the Unión Patriótica (a political party founded by former FARC members and other left-wing organizations) by right-wing paramilitaries have not been forgotten.
A window of opportunity, nevertheless
For all these reasons, it seems safe to assume that the killing of Cano has been a mostly symbolic blow to FARC. Still, the current situation does constitute a window of opportunity for the Colombian government to settle the conflict, provided that it plays its hand right.
First, it should not rest on its laurels, as FARC is not even close to being militarily defeated. The fact that the death of Cano was revealed without the euphoria that accompanied past announcements suggests that the Colombian government is quite aware of this. The armed forces need to continue their current advance and not give FARC time to reorganize. Second, to diminish public support for FARC, the government must address the grievances of the rural population. Above all, land reform is urgently needed in Colombia. Third, as in the case of the Taliban insurgency in Afghanistan, there is need for a political solution to the FARC challenge. There have been several peace talks in the past and these talks should now be resumed. Relying on military means alone might lead to more fragmentation within FARC, but will not put an end to the violence.
Juan Manuel Santos could actually be the right man to finally bring peace to Colombia. Being less of a hard-liner than former president Álvaro Uribe, he has already succeeded in reconciling with Venezuela. This was a major step towards undercutting the guerrillas’ operational base, as tensions would only help FARC – especially because the new leader, Timochenko, is said to have connections to the Venezuelan elite. With Cano killed, Santos has the domestic political capital to kick off new talks. His idea of a constitutional amendment to integrate former guerrillas into civilian life could be a good starting point for a dialogue with FARC.

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Spy vs Spy: Cyber Crime, Surveillance on Rise in Latin America
Written by  Southern Pulse

Phone tapping, data theft, and secret recordings have made headlines across Latin America in recent weeks, reflecting the growth of cyber crime and information trafficking in the region, as Southern Pulse explains.

Domestic spying is in the news this month in the Western Hemisphere. A subject that is often not discussed in formal settings has made its way to the front pages of at least a dozen countries in Latin America and the Caribbean over the past few weeks. The news includes phone taps, hacked emails, covert video surveillance and legislative debates over privacy online and offline. A confluence of events around the region and the globe as well as improved spying technology has pushed this trend into the open and could change how the spy vs spy, police vs crime and government vs opposition scenarios play out in several countries.

Certainly, there have been phone taps and secret recordings for decades in Latin America. Perhaps the most famous examples were the “Vlad-videos” in Peru under the administration of President Fujimori and National Intelligence Service chief Montesinos. What makes 2011 different is the surge in surveillance by governments across the political spectrum and the media providing increased coverage of the situation.

The technology and techniques are a mixture of old and new. Phone taps and illegal recordings are old technologies that have become more sophisticated while data mining of social networks is a new field that all governments around the globe are just beginning to understand. Private hacking gangs appear to have surpassed the capabilities of government intelligence agencies in terms of the ability to hack email and computers, creating a new black market for information trafficking.

It’s worth noting that the technology to encrypt data has also become cheaper and easier to use, but has not yet caught on in much of Latin America. However, the increased public nature of government and private sector surveillance should push an increased demand for privacy technologies in the coming year, both by criminal groups and civilians who want greater privacy from the government.

Some examples from recent weeks follow:

A New York Times article described enhanced intelligence cooperation between the U.S. and Mexico that includes phone tapping technologies. The U.S. has assisted in the creation of intelligence fusion cells in Mexico and is providing information to a vetted group of Mexican authorities so that they can conduct operations against criminal organizations.

In Honduras, an investigation revealed that the email servers at the presidential palace had been hacked, giving one or multiple organizations access to email, the president’s schedule and budget documents. Foreign government involvement does appear likely at this point. An Israeli firm has been hired by the government to provide increased cybersecurity protection.

Even as officials from the government of former President Uribe are being investigated for phone taps and domestic spying on judges and political opponents, the Colombian government showed off some new surveillance capabilities. Police utilized new online forensic capabilities and arrested a hacker who broke into the account of a journalist. The government, under attack by a local branch of the hacking group Anonymous, has announced they plan to have a new CERT agency online before the end of the year that can counter and investigate attacks.

In Venezuela, phone calls by opposition candidates have been recorded and played on state television as a way of embarrassing those politicians. It appears state intelligence is behind the tapping of the phones. This news comes just months after other sources indicated that Venezuela’s intelligence services, with the assistance of Cuban intelligence and private hacking groups inside Venezuela and Colombia, have hacked into the private email accounts of journalists and politicians and have stolen their messages for at least the past five years.

In Bolivia, the government tapped the phones of indigenous protesters and U.S. embassy officials. President Morales then revealed phone calls made between the two groups as a way of showing a plot against his government. In the process, he showed that his government is tapping the phones of political opponents and foreigners living in the country.

In Argentina, a number of private emails by Kirchner government officials recently appeared on a website “Leakymails.” There are three aspects to this scandal worth considering. First, the content of the emails contains personal information about key political officials. Though most of the emails released are rather boring, one set of emails does appear to link a government-backed candidate to organized crime. Second, the question of how the emails were obtained may point to the state intelligence service or former officials within the intelligence service committing domestic espionage. There are indications outside non-state groups hacking into government officials’ email account. Third, an Argentine judge ordered local ISPs to block the Leakymails websites. This opens a new chapter in web censorship in Argentina and the region and places the question of how private ISPs filter Internet content directly onto the policy agenda.

The government of Brazil fined Google for failing to reveal identifying information about an Internet user. According to Google, Brazil is the top country in the world for making requests to obtain user information or to block search results through legal actions. Part of this is due to Brazil’s speech laws that give public officials broad sway on any issue that could be considered libel or slander.

Similarly, the government of Ecuador is considering passing a law that would require Facebook and Twitter to provide information about anonymous postings based out of that country. Though President Correa has backtracked on his initial request, draft versions of the law suggest an expanded government authority to track the identity of users online.

The governments of Chile and Brazil have said they are starting to monitor social media sites as a way of detecting criminal activity as well as potential social unrest. For Brazil, this operation has included a military unit dedicated to cyberwarfare and cyberdefense. This unit is also receiving training from Israeli and U.S. firms in offensive operations in the cyber-domain, the first Latin American government to admit that publicly. For Chile, the monitoring of social media has made the government a target for the international hacking group Anonymous, which is also attacking government websites as a way of supporting recent protests by student groups. Chile’s domestic cybersecurity units, particularly those within the police, are now forced to increase their capacity to handle the incidents.

The issues reported only hint at some of the issues that remain hidden from public view. Police and intelligence organizations across the region have expanded their capacity for surveillance in recent years and a number of foreign firms from the U.S., Europe and Israel are assisting them in that effort. Meanwhile, criminal groups have banded together with hackers from Eastern Europe and Russia to enhance their technological capabilities to steal government and corporate information.

Back at the regional level, Latin American intelligence agencies are running into the same problem as their developed world counterparts: how do they analyze all the data they collect? The ability to collect and store data is moving more quickly than the ability to process, analyze and utilize it. For Presidents Chavez and Morales, who have very specific political targets for their intelligence collection campaigns, this has not been much of a problem. However, for Mexico, Brazil and Colombia, whose intelligence efforts do focus on organized crime (in spite of some high profile scandals in which they don’t), they cannot keep up with the data in a timely fashion. All three countries are known to have missed arrest opportunities in which they had data about a relevant target but did not filter it out of their mounds of data quickly enough to operationalize it.

Lurking among all of these government-related surveillance and privacy issues is an increase in private sector and corporate espionage in the region. Much less reported, companies have had gigabytes of data stolen by local private hacking groups and foreign governments from Eastern Europe and East Asia. In various surveys, over half of corporations in the region report being victim of cyberattacks and theft of data. These corporations, when they manage to detect the problem, generally do not report the problems to the governments. While it is apparent from the above examples that governments have plenty of surveillance issues on their plate, this private sector surveillance challenge cannot be ignored. The threat that some corporations and criminal groups may surpass local police and intelligence agencies in their surveillance and spying capabilities can be a problem for the future security of these states and the civil rights of their populations.

Reprinted with permission from Southern Pulse. See original article here.

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From the FT’s beyondbrics blog, this piece on the development of trading/bartering internet sites in Cuba

In Cuba, capitalism thrives on Craigslist-like sites

Even as the Cuban president, Raúl Castro, fumes over stumbling blocks placed by his own party bureaucracy to economic reforms, the internet is beginning to remove them one by one.
Castro appears to be meeting resistance from communist diehards – or more likely old-fashioned stick-in-the-muds – to his proposals that would allow private ownership in homes and cars, for example, on the Communist island.
That simply is not a problem for a handful of internet sites that are, in effect, putting the reforms into practice.
One site,, has been operating for some years, apparently from a base in Miami, and seems to be tolerated by the Cuban government. The site is based on the “permuta”, or “swap”, system.

All housing in Cuba is state-owned but swaps are allowed, as long as no money is exchanged. It has been an open secret for years in Havana, however, that often large sums have changed hands under the permuta system.
By allowing home ownership, Castro’s reforms will in effect legalise the black market in housing. But has been quoting prices for years.
When beyondbrics checked out, several of its features were unavailable because of “database errors”, whatever they might be. But some users’ comments were interesting.
One woman wrote that it was a wonderful site and “something I never imagined that ever existed in Cuba”. Where might she have been all those years?
Another pointed to the reality of any internet project in Cuba: access to the population is very restricted. “It’s really difficult to find someone where I work who has internet access and lets people like me get into the site,” wrote one.
Yet another reflected the absence, through unfamiliarity, of market tools that are normal in other countries but not in Cuba. “In Cuba we don’t seem to understand that ads for apartments should specify their size in floor space,” one cybernaut wrote.
“There are ads with five-bedroom apartments that turn out to have only 100 square meters. These must be just cubby holes, not bedrooms,” he or she snorted. “And there are other apartments of 200 square meters with only two bedrooms. Now that is really spacious but you wouldn’t know the difference from the ads.”
However, is tame by comparison with, the market leader in every sense of the word. In Cuban Spanish a “revolico” is a bit of a mess. The anonymous organisers of the website admit that it is a mess, “but an organized mess”.

Revolico, which is also based in Miami and has frequently been blocked in Cuba, offers a market in everything from homes, cars, casual sexual encounters, language classes … you name it.
Most of what is on offer is not legal – not yet anyway – though some is tolerated. A photo of a $30 a night apartment on offer to foreigners in central Havana gives a glimpse of a comfortable lifestyle not shared by the Cubans whose rather spartan homes a beyondbrics correspondent visited on his last trip to the island.
Meanwhile, Raúl Castro appears to be exasperated at the internal opposition to his reforms. In a televised speech on Monday, after days of confabs with party and government leaders, he berated the “psychological barrier to change that is created by inertia”.
And he added: “Not for the first time, I’d say that our worst enemy isn’t imperialism, much less those who get paid within Cuba by the imperialists to do their work for them. The worst enemy is failing to correct our very own errors.”
Maybe Castro could click on a couple of links to see how it’s done. Or maybe he already has.
Related reading:Come get your MBA in…Cuba?, beyondbrics
Cuba libre?, FT
Ageing Cuban leadership seeks new blood, FT
In depth: Raúl’s Cuba
, FT

In Cuba, capitalism thrives on Craigslist-like sites | beyondbrics | News and views on emerging markets from the Financial Times –

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Should Greece follow Argentina’s path? 
Tilt Populi »

[VftG] Argentina: Opportunity or Renewed Crisis

Posted 2 August 2011, 17:20 BST

by Josh Rosner, Graham Fisher & Co

Over the past several months commentaries have repeatedly drawn comparisons between the current Greek situation and Argentina’s default. Some so-called “experts” have even urged the Greek government to follow Argentina’s model, defaulting on their obligations to creditors, breaking their peg to an external currency and then restructuring in a manner that relieves them of their burdens. These comparisons are both misinformed and dangerous.

I have spent much of the past year working on problems of peripheral European economies and, as part of my research of prior sovereign defaults, recognized a massive disconnect between Argentina’s fairly good fundamentals and the market pricing of their risks. Over the next few months I will be looking more closely at the opportunities, risks and likeliest path Argentina will take in the face of these rising macro-economic risks.

While the default is now a decade past, Argentina remains locked out of international capital markets, distrusted by neighboring governments and once again heading toward a narrowing and difficult set of choices that could impair their ability to best serve the needs of their domestic economy and their populations.

There are clear and obvious solutions to their problems, and a once in a generation opportunity to embrace a solution that could secure Argentina’s position as the next Latin American economic miracle, and an example to the troubled economies of peripheral Europe. Unfortunately, there is little evidence that the current government sees these opportunities or intends to embrace them.

When Argentina chose to default on $81 billion in bonds in 2001, its debt to GDP was relatively paltry – 62%, compared to Greece’s 150%. Since their default, the Argentines have entered into agreements to restructure more than 91% of their defaulted debt by haircutting those creditors by 70%. In the process the country has eliminated $57 billion of principal obligations and has avoided interest payments of almost $59 billion, after considering the $6.5 billion of interest payment on the exchange securities offered to those creditors in settlement. This is a spectacular success for Argentina’s debt negotiators. However, there remains a relatively small amount of defaulted debt still to be resolved: Paris Club arrears, outstanding ICSID awards, and some bonds in the hands of holdouts who do not appear to be going away anytime soon.

The government has been engaged in ongoing legal battles with remaining bond creditors that have resulted in the United States Federal Court, Southern District awarding over 100 judgments against the government for $7 billion. The government has chosen to ignore these judgments, and refused on principle to negotiate with its holdout creditors. It has adopted a similar attitude vis-à-vis the ICSID awards, and has dragged out its Paris Club negotiations, repeatedly submitting proposals that the bilateral creditors consider unserious.

By standing on principle, the government has locked itself out of the global capital markets, even though their debt level is far below their realistic borrowing capacity. Besides the fact that, because of their selective default rating, interest rates on Argentine bonds would be hugely expensive, any attempt to sell new debt into international markets would expose the bond proceeds to attachment by creditors. As long as the judgments against it remain unresolved, Argentina has little chance to access foreign capital and, instead, must rely on domestic funding for its economy.

Herein lies the real crisis that awaits Argentina and should be recognized as reason enough for Greece not to look to Argentina as an example. While Argentina’s economy is large, diversified and has per-capita gross domestic product that is more than twice that of its peers, it is over-reliant on domestic funding and a long-in-the-tooth commodity boom to support its economy.

As a result, the government has seized central bank reserves and nationalized pension fund assets to pay its performing debt, and, unlike virtually any other commodity-based economy in the world, Argentina has avoided using any of the funds generated by the commodity boom to create a countercyclical reserve fund. Even with the benefit of record exports of U.S. dollar-priced soybeans, central bank reserves have barely budged from their $50 billion level for several years. Where most of their neighbors have benefitted from foreign capital inflows, the Argentines have suffered from massive capital flight – US$10 billion, or about $100 million a day, during the first half of 2011 alone. In trying to address this capital flight, the government has harmed relations with both domestic and international businesses by requiring all domestic businesses that import foreign goods to become exporters as well. The results of these social policies are all manner of distortions: companies like BMW are exiting Argentina and domestic auto importers are being forced to enter unrelated businesses such as wine exporting.

The government’s unwillingness to resolve outstanding legal battles with remaining creditors and its reliance on expansive domestic measures have resulted in persistently high rates of inflation which continue to unnecessarily hollow out the economy. Thus, instead of capitalizing on a comparatively positive fundamental picture, Argentina is heading toward one of two dead ends: either draining the domestic economy to service debt and fund government spending, or defaulting on domestic and international debt once again. As in 2001, the ruinous consequences of this policy will impact the Argentine people first and foremost. With the monetary base increasing 41% y/y, inflation is hurting Argentina’s savers just as any future default would disproportionately harm domestic creditors.

In 2012, Argentina will be faced with almost $20 billion of debt service payments. The government has said that it expects to fund this through a primary surplus of about $5 billion, rolling over about $5 billion of multilateral and public sector organizations debt, further use of international reserves, new debt “sales” to domestic public sector agencies and cash advance from the central bank. But there are unacknowledged limits to such an approach. Public sector agencies, including the National Social Security Administration, already hold 46.8% of all Argentine government debt, and this portion of the debt grew by 9.5% in 2010. Meanwhile, with the expansion of the peso supply, the margin of central bank reserves available for external debt servicing is shrinking. In spite of its benign debt to GDP ratio, Argentina risks cannibalizing its economy if it does not re-enter international capital markets soon.

What’s a Government to do?

If the government is able to move past its ideological distaste for resolving disputes with the Paris Club, non-tendering bondholders and ICSID award holders, it would position the people of Argentina to finally put the entire default behind them and, given their relatively low debt/GDP, reap the benefits of a massive and well executed reentry into global capital markets.

If, rather than continuing to raid the domestic economy, the government chose to settle the $7 billion of outstanding creditor judgments, either by using some portion of reserves or by issuing new notes, the cost of settlement, even at the full nominal value of all claims, would be more than offset by savings within three years. This approach would allow the Argentine government to efficiently and effectively manage their economy without the risk of further hollowing it out through artificial interventions.

Moreover, with the threat of litigation and further attachments of bond proceeds behind it, the major rating agencies would be forced to recognize that Argentina’s fundamentals should merit a higher grade. Such a change in Argentina’s credit risk profile suggests that it could, in short order, achieve the Baa3/BBB ratings of its major peers.

On that basis, CDS spreads on Argentina would likely collapse by between 400 and 550 basis points, converging with the levels of its investment grade peers. The CDS spread compression that would accompany such settlements and the ensuing upgrades in ratings would net the federal government interest savings of between $15 and $22 billion over the next 8 or 9 years. The benefits would extend beyond the federal government and would result in a reduction of interest expenses on the billions of dollars of provincial debt by several hundred million dollars a year. The reductions in sovereign interest expense would, as a logical consequence, also reduce the cost of borrowing by private industry.


[Savings calculation assumes that $78bn of Argentine public debt (excluding bilateral and multilateral obligations) maturing through 2018 are refinanced at a credit spread of 1.40% (the average 10 year CDS spread among Brazil, Chile, Colombia, Mexico, Panama, and Peru) rather than a credit spread of 6.50% (the 10 year CDS spread for Argentina, as of 7/26/11)]

Moreover, and maybe more important a factor in driving growth and productive capital allocation, an accommodation with the Paris Club, and payment of outstanding ICSID awards would remove barriers to foreign direct investment, and Argentina could then join its Latin American peers in benefiting from recent capital inflows. As capital re-enters the country, the cost of borrowings by public companies would fall, public company equity multiples would increase and securities held on behalf of the Social Security Administration would reap the benefit of massive price appreciation.

When is a Default a Success?

To properly evaluate whether a default has been successful, the correct measure is not the nominal haircut to the amounts owed to foreign creditors, but, rather, the ne t present value of those savings weighed against costs, explicit and implicit, borne by the population. By that measure, Argentina’s 2001 default has not yet been anything close to a success, nor is it a model that Greece or any peripheral European economy should emulate. While a reduction in foreign debts provides some short-term benefit and may be a prerequisite to successful economic turnaround in the short-term, debt reduction alone cannot be judged a success until the government has restored broad access to international capital markets at rates that reflect the economy’s positive fundamentals. For Argentina, there is a clear path to such an outcome. Unfortunately, until the government takes the decision to travel down that path – a decision that is justified regardless of its antipathy toward its Paris Club, ICSID and “vulture” creditors – it will not have achieved a successful restructuring. In fact, Argentina is on the cusp of wiping out the benefit of the debt forgiveness that it has already forced on creditors in the 2005 and 2010 exchange. With dwindling reserves, a declining surplus, high inflation, and an eventual end to the commodity boom, there is an increasing risk that Argentina will hit the wall, again, and that Argentines will find that an ideologically driven economy promises much, but delivers little to the man in the street.


Joshua Rosner is Managing Director at independent research consultancy Graham Fisher & Co and advises regulators and institutional investors on housing and mortgage finance issues. Previously he was the Managing Director of financial services research for Medley Global Advisors and was an Executive Vice President at CIBC World Markets. Mr. Rosner was among the first analysts to identify operational and accounting problems at the Government Sponsored Enterprises and one of the earliest in identifying the peak in the housing market, the likelihood of contagion in credit markets and the weaknesses in the credit rating agencies CDO assumptions.


Disclaimer: The opinions expressed in “View from the Ground” columns do not necessarily reflect those of the FT Tilt editorial team. FT Tilt may edit the columns for clarity; any errors of fact or omission are the authors’ own.

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Ollanta wins in Peru

hope for the best, but prepare for the worst…

Who’s who on Humala’s economics team

1:55pm EDT
(Reuters) – Left-wing former army officer Ollanta Humala has claimed victory in Peru’s presidential election and sought to reassure investors he has shed his radical past and will adhere to responsible economic policies.
He has surrounded himself with experienced technocrats who are more moderate than his earlier advisers.
Still, critics say some of his advisers came of age in the 1970s and favor a strong state that rejects some tenets of a neoliberal model implemented in Peru in the 1990s, which emphasized deregulation, little or no public subsidies, privatizing state-run companies, and free trade.
Below is a rundown of some of his key advisers. Some of them may get named to top policy posts or Humala may try to generate a “shock of confidence” by picking someone with deep experience in banking and markets.
The timing of an announcement has not been made clear but appointments will be hugely important to signal to markets how Humala will manage the economy.
A professor at Lima’s Catholic University, Jimenez authored Humala’s campaign platform, which was later modified several times over criticism it was too radical. Jimenez has a doctorate in economics from the New School in New York, which is known as a contrarian department skeptical about the monetarism and neoliberalism taught at most major universities in the United States. A former director in the finance ministry’s debt department, Jimenez teaches courses on monetary policy.
Also a professor at Lima’s Catholic University, Dancourt has been a director and president of Peru’s central bank. He has been mentioned as a possible replacement for Julio Velarde as central bank chief. Velarde is widely viewed as Peru’s most successful central banker ever, having slain hyperinflation and averted deflation in two different mandates.
An economics professor at the San Ignacio de Loyola University, Burneo has a doctorate in business administration. He has served as vice finance minister, a central bank director, and president of state-run Banco de la Nacion. He previously worked for the campaign of former President Alejandro Toledo. He has been mentioned as possibly being named the next finance minister.
A former chief of Peru’s development bank Cofide and central bank director, Schydlowsky has a doctorate in economics from Harvard University. He was an aide to Toledo’s government.
A professor at the ESAN business school in Lima, Roca has a doctorate in economics from Cornell University. He was president of Indecopi, Peru’s anti-trust regulator, during the Toledo government.
(Reporting by Terry Wade, Teresa Cespedes, Patricia Velez and Caroline Stauffer; Editing by Andrew Hay)
© Thomson Reuters 2011. All rights reserved.

Factbox: Who’s who on Peru Humala’s economics team | Reuters

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Iran is Building a Secret Missile Installation in Venezuela – Opinion

This photo released by the Iranian Defense Ministry, alledgedly shows a Nasr1 (Victory) missile in a factory in Tehran, Iran, Sunday, March 7, 2010. Gen. Ahmad Vahidi announced on state TV Sunday a new production line of highly accurate, short range cruise missiles capable of evading radar. The missile named Nasr 1 (Victory) will be capable of destroying targets up to 3,000 tons in size according to Vahidi. Iran frequently makes announcements about new advances in military technology that cannot be independently verified.

AP Photo/Iranian Defense Ministry, Vahid Reza Alaei, HO

This photo released by the Iranian Defense Ministry, alledgedly shows a Nasr1 (Victory) missile in a factory in Tehran, Iran, Sunday, March 7, 2010. Gen. Ahmad Vahidi announced on state TV Sunday a new production line of highly accurate, short range cruise missiles capable of evading radar. The missile named Nasr 1 (Victory) will be capable of destroying targets up to 3,000 tons in size according to Vahidi. Iran frequently makes announcements about new advances in military technology that cannot be independently verified.

In November of last year, the German daily Die Welt reported that a secret agreement between the Venezuelan president, Hugo Chávez, and his Iranian counterpart, Mahmoud Ahmadinejad, had been signed.
The agreement was said to have been signed and finalized on October 19 by both parties, though no details were offered. Hugo Chávez, who had traveled to Iran on what was called expansion of relations between the two countries, acknowledged that the details of the latest accords were not released, and that some agreements went beyond those put on paper.
The leaders of Iran and Venezuela hailed what they called their strong strategic relationship, saying they are united in efforts to establish a “New World Order” that will eliminate Western dominance over global affairs.
Now, the German newspaper, however, confirms that the bilateral agreement signed in October was for a missile installation to be built inside Venezuela. Quoting diplomatic sources, Die Welt reports that, at present, the area earmarked for the missile base is the Paraguaná Peninsula, located 120 kilometers from the Colombian border.
A group of engineers from Khatam Al-Anbia, the construction arm of the Iranian Revolutionary Guard, covertly traveled to this area on the orders of Amir Hajizadeh, the commander of the Revolutionary Guard Air Force.

Die Welt writes that the Iranian delegation had been ordered to focus on the plan for building the necessary foundations for air strikes. The planning and building of command stations, control bases, residential buildings, security towers, bunkers and dugouts, warheads, rocket fuel and other cloaking constructs has been assigned to other members of the Revolutionary Guard Corps of Engineers. The IRGC engineers will also be interfacing with their Venezuelan counterparts in fabricating missile depots that are said to go as deep as 20 meters in the ground.
The report maintains that building such depots is not easy and that they must be built to accommodate a network of special pipes necessary for the transfer of fuel within the installation, while expelling poisonous materials to the outside. At the same time, necessary precautions must be taken to withstand all possible air strikes.
Security sources have stated that the plans for the underground missile depots will be prepared by experts from the chemical engineering department of the Sharif Industrial University and Tehran Polytechnic. Apparently, these experts have produced and presented their first proposal to the Revolutionary Guards’ Khatam Al-Anbia headquarters.
Based on sources inside Iran, reports indicate that the Revolutionary Guards have established many entities and facilities in Venezuela as front companies involved in covert operations, such as exploration of uranium.
Venezuela is said to have significant reserves, something that Iran is desperately in need of for the continuation of their nuclear bomb project. Other activities include housing of the Quds forces, along with Hezbollah cells in these facilities, so they can expand their activities throughout Latin America and form collaborations with drug cartels in Mexico and then enter America.
Many of the Iranian so-called commercial facilities in Venezuela are under strict no-fly zone regulations by the Venezuelan government, and are only accessible by the Iranians in charge of those facilities!
With Iran’s refusal to halt its nuclear program and the progress they’re making with their missile delivery system, this new military alliance with Venezuela is most alarming for our national security here in America.
Based on my sources, I believe the radicals ruling Iran are emboldened by the confusion of the Obama administration in confronting Iran’s nuclear program. The Iranian regime feels that America has exhausted all of its options with its negotiation and sanctions approach and therefore no longer poses a serious threat to Iran’s nuclear drive.
The Iranian officials recently announced that Iran will continue enriching uranium to the 20 percent level (enriching uranium to 20 percent is going 80 percent of the way to nuclear bomb material), and that it also intends to install centrifuges in the previously secret site at the Fardo enrichment plant.
With Iran’s pursuit of the bomb, its collaboration with rogue states, and its continuous support of terrorist groups in the Middle East and around the world, it is time to realize that the Iranian regime poses the gravest danger to world peace, global stability and our national security.
The Obama administration needs to take immediate action to stop the jihadists in Tehran from acquiring the nuclear bomb. Failing to do that means we will face a new brand of terrorism on a scale that will dwarf 9/11 by comparison!
Reza Kahlili is a pseudonym for an ex-CIA spy who requires anonymity for safety reasons. He is the author of “A Time to Betray,” a book about his double life as a CIA agent in Iran’s Revolutionary Guards, published by Threshold Editions, Simon & Schuster, April 2010.

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Opinion: Iran is Building a Secret Missile Installation in Venezuela –


Liveable v lovable

The FT asks a very good question, Why is it no one really wants to live in the most liveable cities? 

…The polls underlines the fundamental fault that lies at the heart of the idea of measuring cities by their “liveability.The most recent surveys, from Monocle magazine, Forbes, Mercer and The Economist, concur: Vancouver, Vienna, Zurich, Geneva, Copenhagen and Munich dominate the top. What, you might ask, no New York? No London? No LA or HK? None of the cities that people seem to actually want to emigrate to, to set up businesses in? To be in? None of the wealthiest, flashiest, fastest or most beautiful cities

“These surveys always come up with a list where no one would want to live. One wants to live in places which are large and complex, where you don’t know everyone and you don’t always know what’s going to happen next. Cities are places of opportunity but also of conflict, but where you can find safety in a crowd.
“We also have to acknowledge that these cities that come top of the polls also don’t have any poor people…” 

Liveable usually does not mean the most dynamic…

… can someone coming from somewhere else improve themselves, reinvent themselves? Is there upward mobility? The top cities score badly again. London and New York are magnets for immigrants precisely because they allow those kinds of new beginnings

The common criteria of What makes a city great for all these surveys are:

Blend of beauty and ugliness – beauty to lift the soul, ugliness to ensure there are parts of the fabric of the city that can accommodate change.

Diversity – if lots of people are wanting to come to a city, there must be something there. 

Tolerance – the only way diversity works but also an accommodating attitude to sexuality (gay communities are famously successful inner-city regenerators) and religion (there are signs of increasing intolerance towards religious minorities all over the world). 

Density – density of habitation is crucial in ensuring density of activity, a vibrancy of commerce, residential and cultural activity. 

Social mix – the close proximity of social and economic classes keeps a city lively. 

Civility – impossible to measure and slightly against my stated notions about the benefits of friction but critical nevertheless. I once criticised the ingratiating politeness in the US and was told by an American who used to live in Paris that “it’s better to be told to have a nice day by someone who doesn’t mean it than to be told to go f*** yourself by someone who does”. Discounts any Israeli or Russian city from ever getting on the listEH

Read the whole article here 

Liveable v lovable 

By Edwin Heathcote

Published: May 6 2011 17:52 | Last updated: May 6 2011 17:52
A collage of city monuments and landmarks
Vancouver is Hollywood’s urban body double. It is famously the stand-in for New York, LA, Seattle and Chicago, employed when those cities just get too tough, too traffic-clogged, too murderous or too bureaucratic to film in. It is almost never filmed as itself. That is because, lovely as it is, it is also, well … a little dull. Who would want to watch a film set in Vancouver? To see its skyscrapers destroyed by aliens or tidal waves, its streets populated by cops and junkies, its public buildings hosting romantic reunions? Yet Vancouver (original name, Gastown) has also spent more than a decade at the very top of the charts of the best city to live in the world. Can that really be right?
The big cities it seems, the established megacities of the US, Europe and Asia are just too big, too dangerous, too inefficient. So what do these top cities have in common? How exactly do you measure “liveability”?No. Not at all. In fact, Vancouver’s boringly consistent topping of the polls underlines the fundamental fault that lies at the heart of the idea of measuring cities by their “liveability”. The most recent surveys, from Monocle magazine, Forbes, Mercer and The Economist, concur: Vancouver, Vienna, Zurich, Geneva, Copenhagen and Munich dominate the top. What, you might ask, no New York? No London? No LA or HK? None of the cities that people seem to actually want to emigrate to, to set up businesses in? To be in? None of the wealthiest, flashiest, fastest or most beautiful cities? Nope. Americans in particular seem to get wound up by the lack of US cities in the top tier. The one that does make it is Pittsburgh. Which winds them up even more.
So that’s the mountains, lakes and huge cups of generic coffee accounted for. Then there’s efficient public transport (that faint whoosh is the sound of London, NY and LA disappearing). There are also cultural institutions, global connectivity, green urban policies, well-designed housing within an easy commute, and so on. Each determinant on its own seems an indisputably good thing. But what do they mean together? Can Munich (Monocle’s Number 1) really be one of the best places in the world to live? On a Sunday afternoon?All the surveys use an index. But what is on it? “There’s always proximity to nature,” says Tyler Brûlé (editor of Monocle and patron saint of liveable cities and airport lounges, whose column appears weekly in the FT’s Life & Arts section). “Global connectivity is important, education and we’ve recently added chain store metrics – is there a Starbucks or a Zara?” he says.
To even begin to understand how these slightly unsettling results are arrived at, we need to understand who compiles them and who they are for. The lists are made by well-travelled academics, researchers and journalists for corporate, media and creative executives on generous expense accounts as well as other academics enjoying grants and stipends. And, of course, by Tyler Brûlé.
Most of these people are profoundly concerned with things like well-designed street furniture, a proliferation of eye-wateringly expensive artisanal retail, boutique hotels with good (English-speaking) service and environmentally friendly mayoral policies. Certainly these are all things which help but they skew the polls to a particular type of European or marginal Pacific city. What they also do is to strip out all the complexity, all the friction and buzz that make big cities what they are.
I spoke to Joel Kotkin, a professor of urban development, and asked him about these surveys. “I’ve been to Copenhagen,” (Monocle’s Number 2) he tells me “and it’s cute. But frankly, on the second day, I was wondering what to do.” So, if the results aren’t to his liking, what does he suggest? “We need to ask, what makes a city great? If your idea of a great city is restful, orderly, clean, then that’s fine. You can go live in a gated community. These kinds of cities are what is called ‘productive resorts’. Descartes, writing about 17th-century Amsterdam, said that a great city should be ‘an inventory of the possible’. I like that description.”
Joel Garreau, the US urban academic and author, agrees. “These lists are journalistic catnip. Fun to read and look at the pictures but I find the liveable cities lists intellectually on a par with People magazine’s ‘sexiest people’ lists.”
Ricky Burdett, who founded the London School of Economics’ Cities Programme, says: “These surveys always come up with a list where no one would want to live. One wants to live in places which are large and complex, where you don’t know everyone and you don’t always know what’s going to happen next. Cities are places of opportunity but also of conflict, but where you can find safety in a crowd.
“We also have to acknowledge that these cities that come top of the polls also don’t have any poor people,” he adds. And that, it seems to me, touches on the big issue. Richard G Wilkinson and Kate Pickett’s hugely influential book The Spirit Level: Why More Equal Societies Almost Always Do Better (2009) seems to present an obvious truth – that places where the differential in income between the wealthiest and the poorest is smallest tend to engender a sense of satisfaction and well-being. But while it may be socially desirable, that kind of comfort doesn’t necessarily make for vibrancy or dynamism. If everybody is where they want to be, no one is going anywhere.
“Sure, Vancouver is beautiful,” says Kotkin, “but it’s also unaffordable unless you’re on an expense account and your company is paying your rent.” Burdett agrees: “Economically all these cities at the top of the polls are also in the top league.” In fact, it can often be exactly the juxtaposition of wealth and relative poverty that makes a city vibrant, the collision between the two worlds. Where parts of big cities have declined, through the collapse of industries or the fears about immigration that led to what urbanists have termed the “donut effect” (in which white populations flee to the suburbs, leaving minorities in the centres), there is space to be filled by artists and architects, by poorer immigrants arriving with a drive to make money and by the proliferation of food outlets, studios and galleries. These, in turn, attract the wealthy back to the centre, at first to consume, and then to gentrify. Whether in New York’s SoHo, Chelsea or Brooklyn, in Berlin’s Mitte or London’s Shoreditch, Hoxton and now Peckham, it is at these moments of radical change that cities begin to show potential for real transformation of lives, or for the creation of new ideas, culture, cuisine and wealth. Once gentrification has occurred, bohemians may whinge about being priced out, as they always have done but, in a big enough city they are able to move on and find the next spot.
In a strange way the everyday conflict with the (unliveable) city can also become part of the attraction. Professor Tony Travers of the LSE says, “At one level the kind of urban sophisticates who live in these areas, in Hoxton or Brooklyn, want to fight the city. The urban struggle is part of the self-image of living on the edge.”
If the relative poverty of newcomers to the city distorts income equality in one direction, then the arrival of the super-wealthy does the same from the other end. The recent turmoil in the Middle East has led to a huge wave of investment in London property, one of the traditional safe havens for foreign money. London, unlike many cities that appear high on liveability lists, has few controls on property ownership. “If cities are any good,” says Travers, “they’ll attract a footloose international crowd who bring wealth.” And so the gap gets bigger.
He adds: “But they also come because of stability. If they buy something, they’ll be able to get their money back.” Which explains why New York and London remain popular, desirable and hugely expensive, despite never appearing on the lists.
The big cities also suffer from size. It’s true that Tokyo (Monocle’s Number 4) occasionally makes it on to these lists but metropolises like London, New York, Paris and Istanbul struggle with aged infrastructure and vast, sprawling transport systems. They are penalised in surveys for their inefficiency compared to, say, a small Scandinavian city. But it’s easy to be efficient when you’re small and when you have a highly taxed, wealthy population. It is also easy to initiate green measures, from recycling to cycling, which prove far more challenging in a proper metropolis with its problems of crumbling infrastructure and mobile population.
Yet it is proven again and again that the biggest cities are in fact the greenest. Their density, the close proximity in which people live and the minimal amount of land they occupy – compared with largely suburban Vancouver, for example, makes for a far smaller carbon footprint. Mumbai is probably the greenest big city there is – slums like the million-strong Dharavi use minimal land, energy and water. And, of course, without wishing to patronise, it is undeniable that there are happy people living surrounded by their families in Brazil’s favelas and millions living lives of drudgery and lonely despair beneath northern Europe’s leaden skies. The world’s most liveable informal cities lists have yet to be pioneered.
There is one criterion which throws up shockingly counter-intuitive results – beauty. On this criterion alone, almost any Tuscan hill town, perhaps Venice, perhaps Paris, would come out on top, yet none of these are there. Most of the beauty in the cities which occupy the tops of the leagues seem to ghettoise their beauty outside the city. They have convenient escapes, though the most beautiful and enjoyable – Rio, San Francisco and others – are curiously absent from the lists. The problem is that beauty doesn’t do you any good at all. It’s not a factor for the efficient, mid-sized chart toppers – though places such as Zurich certainly have their lovely bits. But it also damages your chances of making it into the disaffected megacities mentioned at the start of this article. The most beautiful cities become monuments to their own elegance, immobile and unchangeable. They cannot accommodate the kind of dynamic change and churn that keeps cities alive. In London, New York and Berlin, it is their very ugliness which keeps them flexible.
“The other big question,” says Kotkin, “is can someone coming from somewhere else improve themselves, reinvent themselves? Is there upward mobility?” The top cities score badly again. London and New York are magnets for immigrants precisely because they allow those kinds of new beginnings. They do have class structures but they are increasingly malleable.
There is one problem, though, that remains hard to ignore – violence. Johannesburg may be beautiful but its per capita homicide rates are astronomical; Los Angeles and New York are held back for the same reason. Washington DC’s per capita homicide rate, for example, is more than 30 times that of London and this continues to hold US cities down in the rankings. Urban guru Richard Florida remarks that the key to liveability is to “ensure that a city can guarantee the safety of all its residents”.
Of course, the ultimate difficulty with these surveys is that tastes are individual. I find London infuriating but –with the possible exception of New York – couldn’t think of anywhere else I’d rather live. “The city is a unique and private reality,” wrote Jonathan Raban, author of Soft City. He proposed that his London was a “soft city”, a place that everyone remakes in their own manner, in which every place evokes a personal memory or connection and which we navigate through our own unique mental maps. Our cities are our own – we make them inside us. No city means the same to two people so how on earth can we measure them?
Edwin Heathcote is the FT’s architecture critic
Rankings: the best and the worst
New York
The only city that gives me a thrill every single time I walk through it. Fast, furious, brash, cosmopolitan yet completely self-absorbed, it is the perfect big city.
Rio de Janeiro
An extraordinary cocktail of pleasure and pain, beaches and favelas, condos and shacks, Rio is one of the most beautiful, most tolerant and most varied cities on earth. Unfortunately, its high murder rate discounts it from traditional best cities lists. But what a cityscape.

The fulcrum of the delicate balance between Europe and Asia, Christianity, secularism and Islam, Istanbul manages to be both one of the most beautiful cities on earth and yet accommodating to huge and constant change. It is a young, international, wildly commercial city with an extraordinarily vibrant street scene, open 24 hours and genuinely alive.

London seems to have the ability to reinvent itself. It has been a magnet for immigrants for centuries and remains a place where the poor can make something of themselves and the wealthy can enjoy their money. Its infrastructure is crumbling, its property overpriced and its weather dull but London’s cultural life is astonishing and most of its museums are free.
It might be more than 1,500 years since Rome was a proper world city but its allure lies in a blend of history, chaos, beauty and infinite layers of culture.
A few that don’t make the grade
Impossible to traverse on foot, infinitely rude, corrupt, understandably alcoholic and seriously traffic-clogged, Moscow needs work. It does have some beautiful bits, from the Kremlin through to the masterworks of revolutionary modernism but the legacy of the communist police state hangs heavy.
Everything that could go wrong with a city does here. It is, in fact, a place with no “here”. A succession of malls, highways, hotels and hideous towers, it has spent its history announcing its arrival but hasn’t a clue what to do when it gets there.
Once it was the workshop of the world, an astonishing morass of industry that somehow threw up a powerful, elegant Victorian city, which has been completely destroyed. Its decline has been less complete than that of, say, Detroit or Flint but it manages to be uglier nevertheless.
I know, I know – beautiful, holy, history lingers in its every shady corner. Yet the treatment of Arabs as second-class citizens, the ghastly security wall smashing through its edges and the omnipresent guns have spoilt it. Jerusalem is the perfect example of why tolerance is so critical to a city. Clippings – The MasterBlog’s FT Clips Navigator

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