“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

"Never for money/always for love" - The Talking Heads

Tuesday, May 02, 2006

peak privatization

The Wall Street Journal’s David Luhnow and Jose de Cordoba turn in a good article on Bolivia’s nationalization – it puts it in the broad picture of the global trend away from privatization. The least LI can say about this is that we wrote an article for the Austin American Statesman a long time ago – in November, 2001 – predicting that the tide had turned on privatization. It is nice to be proven right. And Daniel Yergin can eat his hat.

However, while it makes sense from the standpoint of a country that depends on a primary product export to make as much off that export as possible, there are various problems with doing so. The Gulf states long ago nationalized their major export, and nobody calls the Gulf states hotbeds of communism – it is, in fact, a mistake to take the ideological tenor of nationalization too seriously. Whether Bolivia’s nationalization will just be a passing affair, or whether it will take, will depend on whether Morales’ government can attract the capital to build up a supervisory structure. And the time really is fortunate, insofar as Venezuela, if it was so inclined, could be a source of seed money.

"Chavez and Morales are both playing a game of chicken with foreign oil companies," said David Mares, a professor of political science at the University of California at San Diego who studies the regional oil industry.
It remains to be seen whether the moves by Messrs. Chavez and Morales will lead to a broader regional backlash against foreign oil companies and further complicate the global energy market. "Obviously there are concerns" about a ripple effect, "but we don't know what the future impact is going to be," said Bob Davis, an Exxon Mobil Corp. spokesman.”

Interestingly, Ecuador, mistaking itself for a free and autonomous country, has recently tried to put a surplus tax on oil companies sucking out Ecuador’s petroleum wealth. Of course, the Bush White House has decided that decision just won’t stand:
“Proposed legislation will increase the Ecuadorean government’s income from oil revenues by some US$600m a year at current prices, but could ruin the chances of a bilateral trade agreement with the US, which must be initialled by a May 15th deadline. Negotiations between the two countries have been in abeyance since March.
As have other oil-producing countries, Ecuador has moved to capture a greater share of the windfall earnings arising from a tripling of oil prices since 2002. Talks on a free-trade agreement (FTA) deal with the US began two years ago, at the same time as Andean neighbours Peru and Colombia. The latter two have both now signed agreements, which must now be ratified by their respective legislatures (as well as by the US Congress).

In all three countries there has been substantial domestic opposition to freer trade with the US, largely from producers such as farmers who see it as prejudicial to their interests but also from a vociferous nationalist lobby that considers it a capitulation to US pressure. In Ecuador, however, indigenous groups form the backbone of opposition to the trade accord. They have proven to be a potent force of protest in the recent past, contributing to direct action that has given rise to successive bouts of extreme political instability.

Although the US government is not bound to interfere in the foreign dealings of its domestic companies, the issue is closely tied to FTA negotiations because rules guaranteeing the enforceability of contracts are a central part of bilateral trade deals. FTA talks were suspended when the oil plans were first announced, and are yet to resume. Unless a comprise solution can be worked out by mid-May, a trade deal is unlikely to be brought before the US Congress for ratification before the mid-term elections later this year. Manuel Chiriboga, Ecuador’s chief trade negotiator, denies Ecuador is reneging on its commitment to investment protection clauses in established contracts, but has acknowledged that completing the trade deal on time is now a remote possibility.”

The Bush White House position is simple. In order to become independent of foreign oil, we have to start thinking of companies where American hq-ed oil companies work as secretly American. That way, it isn’t foreign anymore. And as American hq-ed companies do a lot for America – they lower the taxes they pay, they cycle money through offshore banks, and they send American legislators on very fun junkets – it is all to the good of your average American citizen.

One does have to laugh a bit, though. Here the biggest collection of senile cold warriors in the world sit on their asses in the Executive branch, losing a war in Iraq, while under their noses Latin America has tilted so far to the left that it makes the late seventies, when Carter was president, look like reactionary heaven. Plus, even Mexico has recently passed a reasonable law decriminalizing private possession, within reasonable limits, of most drugs.

All of the seams are coming out of the baseball.


Brian Miller said...

"All the seams are coming out of the baseball"

I like that. You should trademark it for use throughout the lefty blogsphere :)

The conservatives just don't get it, do they? Why should the vast majority in these countries trust their business elites to benefit the country as a whole? Not that I believe the revolution will "give us jobs" and instantly solve anything, but give them credit for trying something different than the Chicago School pablum.

roger said...

Actually, Brian, this is an open source site. No trademarking, man! I encourage readers to print out posts, soak them in water for twenty four hours, add flour, and make up their own papier mache Limited Inc masks!

roger said...

PS -- I know you are a fan of OB's. She has a hilarious post today. Check it out!

Brian Miller said...

Thanks, roger. (By the way...I Called Stewart on his little snark.)