Latin America
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While Argentina's stock market has risen 61% over the course of a year, Brazil's market, under Lula, has dropped 20%
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Brazil
11 Mar 2025 |
Unless it's rigged, Lula will lose next year's Brazilian election
Three terms. That's how many stints socialist Lula da Silva has served as president of Brazil. Of course, those three terms have been sandwiched around his 580 days behind bars; 580 days for a 12-year prison sentence for corruption and money laundering. Those are US-like ratios. While prison didn't keep him out of the presidential palace, his toilet bowl approval ratings now stand between him and a fourth term. Most disconcerting for Lula, he is losing the working-class vote that thrust him back into power. Just one-in-four Brazilians support the president, and those figures are a lot lower amongst the growing business class in the country. The state of Brazil's economy is the reason for the souring of support. Thanks to Lula's profligate social spending plan, the national debt has reached 75% of GDP—granted, that looks envious to us Americans, whose politicians have spent into a 125% debt-to-GDP hole. Inflation has been on the rise, reaching nearly 5% at the end of 2024, and the Brazilian real continues to fall against the dollar. Brazil also has a complex and convoluted set of business rules and regulations which inhibit entrepreneurship. The country's election won't be held until 04 October 2026, so Lula has time to turn his fortunes around, but he won't. The same politician which welcomes Chinese warships to its ports will continue to make the dyed-in-the-wool moves he is most comfortable with, and that will doom his chances come next year. Brazil could be the shining star of Latin America with the right leadership, which will hopefully be put in place next year. There is an exchange traded fund for Argentina (our favorite Latin American market), ARGT, Brazil, EWZ, and Latin America at large, ILF. Despite its recent run-up (see graph), we still see plenty of room to run in the Argentinian market. As for ILF, 60% of the companies are based in Brazil and 25% in Mexico, so we wouldn't touch it. |
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China
21 May 2024 |
Even with leftists, China is wearing out its welcome in Latin America
No matter the year, there are always a handful of leftist leaders sprinkled throughout Latin America who would gladly work hand-in-hand with China if for no other reason than their disdain for the United States. The current lineup includes AMLO of Mexico, Lula of Brazil, Boric of Chile, and Petro of Colombia. Lula regularly welcomes Chinese warships to dock at ports in Rio, not to mention "warships" of the Iranian navy. But the communist nation seems to be doing everything it can to spoil its simpatico relationship with our neighbors to the south by using the old and stale playbook of dumping—flooding a foreign market with goods at a price below which domestic producers can compete. Two dozen years ago, China exported under 100,000 tons of steel to Latin America each year. Now, it is flooding the region with almost ten million tons of the metal alloy—worth around $8.5 billion—annually. The US and EU have already slapped massive penalties on steel emanating from China, and suddenly three of the four countries mentioned above are following suit with similar—though not near as stiff—tariffs. They must walk a fine line, however, as China is both the biggest buyer of raw materials from and a major investor in the region. There are many retribution levers in which to pull, and China has shown a willingness to wantonly use these tools in the past. Argentina is a great example of how quickly the landscape can change. Just two short years ago, under the leadership of Peronist President Alberto Fernandez, the country became part of China's grand Belt and Road Initiative—otherwise known as the New Silk Road. With the election of outspoken capitalist Javier Milei came the worst possible outcome for China: a pro-American president who talks of the evils of communism. While China has done an excellent job of placing government officials in the smallest of South American provinces, it won't take much for the working class masses to see what is going on. As is always the case, socialist leaders will try to pin economic troubles on the US; but that argument is getting more and more tenuous. As a miner in Argentina's northwestern province of Jujuy ("who who EEH") put it, "The Chinese seem to be taking over everything." The best thing the United States can do in response is work diligently to strengthen ties throughout every corner of the region. The United States has a comically bad strategy with respect to maintaining relations in Latin America. In fact, it really isn't a strategy at all. It is more to the discredit of America's hodge-podge approach to the region that it is to the credit of China's efforts. With each new US administration comes a new policy, much to the consternation of our true friends throughout Latin America. We are not going to win over the likes of a Lula in Brazil, but why alienate those who share our beliefs? It is time for a Monroe Doctrine 2.0; a warning shot fired over the head of communist China. But who is around to craft such a document? |
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Argentina
ARGT $47 20 Nov 2023 |
To the chagrin of the left, a fervent, pro-American capitalist wins in Argentina
Just for fun, we went back four years into the PennEconomics way back machine and reviewed our notes on the recently held (at the time) Argentinian election in which leftist Alberto Fernandez and his anti-American running mate, Cristina Kirchner, rose to power. We posited the notion that they would leave the country's economy in shambles. Voilà, four years have passed and our analysis was spot on. We have been irritated with the coverage of this year's election by the mainstream media, which has all but assured us that Economy Minister Sergio Massa would win, carrying on the Peronist legacy. This despite the country's 140% annualized inflation rate and crumbling economy. Lo and behold, to "everyone's shock," pro-American libertarian candidate Javier Milei (mih LAY), who looks somewhat like a young Benny Hill, stormed to victory with a 15-percentage-point landslide. We watched as a stunned Bloomberg host asked an expert, "How will Argentina's economy react to this surprise?" Let us answer that: "Um, Haidi, the Global X MSCI Argentina ETF (ARGT $47) surged over 11% the day following Milei's victory." Even more upset that many in the press was Brazil's current leader and former prisoner Lula da Silva. Understandably, he had a cozy relationship with the Peronist government of Fernandez and was a big backer of Massa. Of course, it probably didn't help that Milei had labeled Lula a communist (accurate) with whom he wouldn't deal. The two countries are historically big trading partners. As for Milei's plans to snap Argentina out of its funk, he has proposed such radical plans as ditching his country's peso and making the US dollar the national currency, as well as eliminating the country's central bank. He also said he will prioritize trade with the US over erstwhile partners such as Brazil, and will make a "spiritual journey" to the United States and Israel soon. Things are about to get very interesting in South America's second-largest economy. Despite its nightmarish condition, we are excited to see what Milei will do with the Argentinian economy. He certainly has a mandate, along with the personality and passion to make seismic changes. None of this will sit well with the leftists of the region; hopefully, America will show a bit of gratitude—via increased trade—for his love of capitalism. |
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Venezuela
CVX $175 09 Jan 2023 |
Thawing of relations: Chevron shipping 500,000 barrels of oil from Venezuela
Any hopes of helping depose Hugo Chavez’ hand-picked successor in Venezuela, Nicolas Maduro, appear dashed; time to start exporting Venezuelan crude. The Biden administration granted an expanded license to oil giant Chevron (CVX $177) for the purpose of opening back up the supply of oil from Venezuela to the US and other western nations. The first tanker, in fact, has already picked up its load. After four years of sanctions which have done little to change the political dynamic in the country, the administration is trying another tack. The amount of money Chevron might make out of the deal will be constricted due to the terms of the license; but, considering the billions of dollars owed by the PDVSA—Venezuela’s state-owned oil agency—to the company, it has little to lose. From the US government’s standpoint, the idea is to slowly increase ties with the nation in return for political reform and “free and fair” elections to be held later this year. As for the heavy crude, it is headed to refineries on the US Gulf Coast. The European Union has also been granted an exception for receiving Venezuelan oil to help offset the losses from the Russian embargo. The South American nation has the world’s largest proven oil reserves—some 35 billion more barrels, in fact, than Saudi Arabia. The way the people of Venezuela are suffering, this is the best possible course of action for the US to take. Eventually, the citizenry will force change; the more draconian our approach to the country, the easier it will be for the Maduro administration to make the US a scapegoat for the economic turmoil. |
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Mexico
EWW $53 |
AMLO tried to nationalize Mexico's electrical grid; the lower house of congress short-circuited his plans
(19 Apr 2022) The state oil company of Mexico, Pemex, is the most indebted oil company in the world. This makes perfect sense, as it is owned and operated by a government rather than private enterprise. What Mexico accomplished through Pemex, President AMLO had hoped to do for the country's electrical grid: nationalize it. To that end, his allies in the Congress of the Union attempted to push through a bill restoring government control over the electrical sector. Fortunately for the Mexican people, the body's lower house refused to deliver. Needing a two-thirds majority to amend the constitution, only 55% of the lower chamber's members voted for the scheme, handing AMLO a rare legislative defeat. AMLO lashed out, calling critics of the bill betrayers of Mexico and defenders of foreign interests. Considering the bill's passage would have greatly diminished foreign investment in Mexico's energy sector, it sounds like these members were acting in the best interest of the citizenry. This is yet another example of a country's leadership wishing to have it both ways: they want foreign money but wish to keep full control of the entities. It simply doesn't work that way. One of these days, Mexico will offer a great opportunity for investors. That day won't come, however, until elected officials understand and accept how a free market works. The easiest way to invest in the Mexican economy is through the iShares MSCI Mexico ETF (EWW $53). The fund lost 46% of its value in spring of 2020 during the early days of the pandemic, and has a one-year fund outflow of $518 million, leaving just $900 million in total assets under management. |
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Venezuela
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Strange bedfellows: Invasion of Ukraine has opened up a doorway to Venezuela, with Maduro talking capitalism
(09 Mar 2022) "Misery acquaints a man with strange bedfellows," as Shakespeare posited in his play, The Tempest, and what is going on between the United States and Venezuela right now underscores that point. President Nicolas Maduro, whose leadership seemed to be hanging from a thread as hyperinflation inundated his country, has to be looking on in satisfaction as Putin's invasion of Ukraine has diverted the world's attention. Now, it appears that the Russian energy embargo in the US has opened up an opportunity for trade to resume between the two nations. Officials from the Biden administration headed into a secret meeting last weekend in Caracas; when it was over, Maduro had agreed to release two political prisoners from the United States in return for discussions over lifting some trade sanctions. Holding some 17.8% of the world's proven oil reserves, and with the Keystone pipeline from Canada having been killed by the administration, the truth is we could sorely use oil from our erstwhile political opponent in South America. For his part, Maduro seems to be almost embracing capitalism in an effort to staunch the mass exodus of citizens and bring a halt to hyperinflation. Most socialists tend to double down on the failed philosophy of Marx when backed into a corner, so this is a hopeful sign. In its heyday, Venezuela produced around 3 million barrels of oil per day; thanks to sanctions and infrastructure issues, that figure is now down to around 800,000. By comparison, the US produces nearly 12 million barrels of oil per day—more than Russia and more than Saudi Arabia. With its vast store of reserves and some technical support, Venezuela could (relatively) quickly double its output. If Maduro is truly interested in bringing his country back from the brink, he must make a host of pro-free-market moves for this to happen. He just made one: he will allow US dollars to flow freely throughout the country once again, meaning workers can be paid with the greenback instead of the virtually worthless bolivar, and companies will be allowed to issue debt in foreign currencies. In another hopeful sign, a recent poll showed only 38% of Venezuelans wish to flee their country. In a sad commentary, that is a dramatic improvement from a similar poll taken a few years ago. The ball is in Maduro's court. We are not under any false impression that Venezuela is suddenly going to become a Chile, Colombia, or even Mexico with respect to the country's relationship with the US, but even a small thawing of relations should equate to the open flow of oil once again. And that is something which would benefit both economies—and certainly buttress Maduro's grip on power. |
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Bolivia
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Money is flooding out of Bolivia as socialists regain power
(30 Nov 2020) Sadly, a large percentage of Latin Americans seem have a loving adoration of socialism, despite its history of bringing misery to the masses. There is a constant battle raging between economic freedom and leftist tyranny in the region, with the latter often winning the war for the hearts and minds of the people. The latest example comes from Bolivia, where socialist Luis "Lucho" Arce (pron. "ARE say"), a staunch advocate of exiled former socialist president Evo Morales, just won a landslide victory in the presidential race. The nation's poorest citizens may adore Arce, but the country's wealthy are sending a different message. Bolivia's international cash reserves have plunged from $6.4 billion to $5.1 billion since the election, as both citizens and corporations in the country have been converting their bolivianos to US dollars and sending the cash abroad. One of Arce's key planks was the promise to implement a wealth tax on the country's richest citizens. Bolivia has a population of 11.7 million and a per capita GDP of approximately $4,000. For comparison, Bolivia's more "investment friendly" neighbor to the east—Brazil—has a per capita GDP of $10,400. The country's primary exports are natural gas, metals (mainly silver and zinc), and soybean products. As is well documented in the region, socialists who gain power in Latin America tend to hold onto their position with a firm grip despite any ruling constitution. Evo Morales came to power in January of 2006 and was forced into exile in Argentina only after civil unrest following a disputed election in 2019. If Arce learned anything from his mentor, expect him to be the grand leader of Bolivia for some time to come—despite the exodus of wealth from the country. |
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Mexico
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Latest attack in Mexico exemplifies seismic challenges country faces
(29 Jun 2020) For all of the challenges the US currently faces, it could be worse. Mexico, despite its potential, remains weighted down by government corruption and cronyism, decaying infrastructure, and rampant crime—among other massive challenges. The latest example of rampant crime comes to us from Mexico City, where a well-orchestrated attack on the city's police chief has left the city—and country—shaken. Armed with assault rifles, grenades, and a Barrett sniper rifle, members of the Jalisco cartel launched the daylight attack last Friday, wounding the police chief and killing two of his bodyguards and a woman on her way to work. Small businesses in Mexico City face extortion ("pay us or pay the consequences"), civilians and tourists face the constant risk of being caught in the crossfire, and opposing crime groups often turn city streets into war zones. When the perpetrators are caught, police officials and federal judges are often targeted for taking action. A few weeks before this most recent attack, a federal judge overseeing organized crime cases was gunned down at his home in front of his wife and two children. Ironically, Mexican President "AMLO" has taken a softer approach toward dealing with cartel violence. His efforts at placating the groups seems to be falling on deaf ears. Until the country can gain some semblance of control over the violence and stem government corruption, Mexico remains a foreign market for investors to avoid. |
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Mexico
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Mexico's economy shrinking as pandemic takes toll
(05 May 2020) Mexico's gross domestic product (GDP) fell 1.6% both from the previous quarter and the same quarter in 2019, showing the effect the pandemic is having on this emerging market economy. Unfortunately, this comes on the heels of the country's first full-year contraction in a decade. Comparing Mexico's numbers to its northern neighbor, US GDP shrank 4.8% annualized in Q1, while Mexico is now on pace for a 6.1% full-year contraction. The country's manufacturing-heavy economy saw a number of supply-chain disruptions caused by the virus, to include a suspension of operations at a number of auto assembly plants. Production in March of autos and light trucks fell 25% from the same period a year ago, and production in April will almost certainly be zero as new vehicle sales have dropped 90% from a year ago. If the Q1 annualized projection holds, it will be Mexico's worst economic contraction since 1995. Last month, Moody's downgraded the country's credit rating to Baa1—just one notch above junk. |
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Bolivia
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Bolivia ratchets up the pressure on Mexico and Spain after those countries show support for former president (and dictator) Morales. (30 Dec 2019) Back on 11 Nov, we reported on Evo Morales' fall from grace in Bolivia following his latest fraudulent election win. After members of the South American nation's military walked off their respective posts, including those stationed around the presidential palace, the dictator was forced to flee, seeking refuge in Mexico while his minions fled to the Mexican embassy in La Paz, Bolivia. Now, after uncovering further evidence that both Mexico and Spain have been aiding and abetting members of the Morales regime, Bolivia's acting president, Jeanine Anez, has given the Mexican ambassador and two high-ranking Spanish diplomats 72 hours to leave the country. Bolivia is demanding that Mexico hand over the officials in the embassy who have outstanding arrest warrants. As for Spain's role, a number of Spanish embassy officials—accompanied by security officers—attempted to sneak into the Mexican residence in La Paz in a probable attempt to move the asylum seekers. Spain has officially denied the charges, saying the diplomats just wished to visit. While Morales has now left Mexico City for the open arms of Argentina (and the newly-elected socialist Fernandez/Kirchner regime), this case buttresses our argument that Mexico is reverting back to its own leftist, anti-capitalist roots. While emerging markets will have a strong year ahead, Mexico won't be part of that movement.
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Bolivia
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Bolivia's leftist president resigns after pressure from armed forces. (11 Nov 2019) It is hard to imagine a fraudulent election in Latin America actually being exposed—with real consequences being applied—but that is exactly what has just happened in Bolivia. President Evo Morales, fast friends with the likes of Putin, Castro, and Maduro, has been forced to step down from his office after 13 years, pressured by the Bolivian army after a fraudulent national election has spurred rioting in the streets. On Sunday, Morales took to Twitter to announce that he would not leave the country, despite an outstanding arrest warrant against him. What is different from this case and Venezuela's illegitimate president Maduro remaining in power? One big factor is the move by members of the Bolivian army to abandon their posts, including those guarding the presidential palace. The Venezuelan army has not found the mettle to take such a bold step, at least not yet. Russia is labeling the incident a coup, with Cuba, Venezuela, and Mexico joining that chorus. The first three usual suspects shouldn't surprise anyone; the Mexican response, however, should give pause to anyone who refused to believe that President Amlo was nothing but a full-throated leftist cut from the same cloth as Morales, Castro, and the room-temperature Chavez. It is refreshing to see this level of boldness both by the citizens of a Latin American country and its armed forces. Perhaps their courage will serve as inspiration for the people of Venezuela, many of whom are choosing to flee their home country instead of fighting to put recognized President Juan Guaido in his rightful seat.
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Brazil
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Brazil's Bold New Leader Tackles the "Untouchable"
(15 Sep 2019) By tackling pension reform first, Bolsonaro has proven he means business. This article also gives readers a few ways to take advantage of his momentum. (Members: Select the button to read the full article in The Penn Wealth Report) |
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Mexico
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The US may not be going into a recession, but Mexico is on the verge. (22 Aug 2019) In late November of last year, leftist "AMLO" was sworn in as Mexico's 58th president. He ran on a platform of economic growth and a clampdown on corruption. While Mexicans celebrated his victory, we were dubious of his promises—to put it mildly. Well, corruption is still rampant in the country, and the Mexican economy is about to slip into recession. After notching a first-quarter decline of 0.2%, the country's Q2 GDP came in at 0.1%, narrowly missing the recession mark. This Friday, however, that rate is expected to be revised slightly downward. If that revision moves the needle more than ten basis points to the left, recession has hit our neighbor to the south. And why wouldn't it? How does a country boost social spending, roll back the privatization of industries, pretend to rein in rampant corruption, and still continue to grow with a global economy in the doldrums? It doesn't. Nonetheless, we expect the citizenry will give the beloved AMLO the benefit of the doubt for years to come. We reduced our exposure to Mexico (which primarily resided in emerging markets ETFs) after AMLO's election, and we don't see that exposure increasing anytime soon.
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Argentina
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Argentina's stock market melts down following President Macri's primary loss. (13 Aug 2019) Four years ago, in the winter of 2015, we wrote of Mauricio Macri's unlikely presidential win in Argentina. In a leftist country which blames America for the military coup d'etat of 1976 and the ensuing Dirty War, it was remarkable that a center-right, pro-business candidate could ascend to the office. Now, Macri's unlikely journey has come to an end. Anger among voters over austerity measures put in place following an International Monetary Fund (IMF) bailout in 2018, and the country's rampant inflation, led to a drubbing in the primaries for the president. A strong showing by the populist Peronists—those sharing the leftist ideology of former President Juan Domingo Perón and his second wife, Eva Perón—pushed Alberto Fernández easily over the finish line. Most disconcerting may be the fact that his running mate will be the nation's former president, Cristina Kirchner, an anti-American nationalist. In addition to the country's stock market plummeting, the Argentine peso has weakened about 25% since the primary results. Instead of celebrating, the citizens should be pondering the country's economic path under a Fernández/Kirchner regime—it won't be pretty. Argentina has South America's second-largest economy, behind Brazil. Instead of buying a basket of Latin American stocks (such as the iShares Latin America 40, symbol ILF), consider country-specific ETFs from areas making economic progress, such as the iShares MSCI Brazil Capped ETF (symbol EWZ).
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Venez.
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More evidence that Russia remains an enemy to the US, and a force for instability: 100 Russian troops arrive in Venezuela. (28 Mar 2019) The human suffering taking place in Venezuela is difficult to watch, and equally difficult to fathom. After a year which saw a one million percent inflation rate in the country, the hapless Maduro hangs on to power, despite worldwide condemnation. Two countries continue to stand by the dictator, however: China and Russia. Putin, with his delusions of power, believes he can prevent an overthrow of the communist regime, as evidenced by the arrival of 100 Russian troops in Caracas. According to the Russian foreign ministry, a team has been dispatched to "discuss military cooperation at the request of the government in Caracas." For his part, President Trump has demanded that all Russian troops exit the country, and restated his position that "all options" remain on the table to make that happen. With Putin involved, Venezuelan opposition leader Juan Guaidó needs to reinforce his security team. If the recognized leader of the country suddenly falls ill, doctors should immediately check his system for the radioactive substance polonium-210. This is a battle which Putin and Maduro cannot win—the level of human suffering is too great for the regime to survive much longer. To Putin, however, he sees his involvement as tit-for-tat for America's involvement in places like Ukraine and Syria. Additionally, losing an anti-American ally on the continent will be a very hard pill to swallow.
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Venez.
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Global Strategy: Latin America
The US officially recognizes opposition leader as interim president of Venezuela. (24 Jan 2019) How long have we been saying that the starving Venezuelan people will eventually rise up and remove, one way or another, communist thug Nicolás Maduro from power? It truly is amazing that it has been allowed to go on this long. When a thug dictator remains in power while his people starve, it is almost always due to the military tamping down any opposition. Right now, in Venezuela, high-ranking military officers earn about $50 to $85 per month in pay; common ground-pounders earn around $8 per month. The individuals who are allowing Maduro to remain in power are watching their own families starve. The US just ratcheted up pressure against the murderous regime, officially recognizing 35-year-old Juan Guaidò, the opposition leader, as the country's interim president. Many other countries are following the US lead. In response, Maduro has broken off relations with the US (stupid move, as we buy half of the country's dwindling oil supply) and has ordered all American diplomats out of the country within 72 hours. Our dear friends, the Russians and Chinese, are still backing Maduro. As for Guaidò, he has courageously taken an oath of office in front of tens of thousands of cheering onlookers. If he survives, and when the military finally turns on Maduro, this brave patriot will usher in a new age for the Venezuelan people, and the region will become vastly more stable. The end of the cartoonish Chavez clone is near. Every civilized nation in the world recognizes his reelection to a second, six-year term as a sham. Inflation is so high that the bolivar is as worthless as Deutsche marks were in 1923 (one dollar would buy around one trillion notes). The end of Maduro is at hand, but it is interesting to note who, in addition to Putin and Xi, supports Maduro's murderous regime: Mexico's new leftist leader Obrador, Turkish President Erdogan, Cuba's president, and Bolivia's far-left Evo Morales. One would hope that the United States will remember this list long after Maduro falls. |
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Venezuela
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Maduro devalues already-worthless currency as Venezuelans flee country. (20 Aug 2018) Inflation in the socialist state of Venezuela is currently chugging along at an annualized rate of 1 million percent. That is no joke and no typo. Talk about putting the Weimar Republic to shame. Now, inept, bumbling socialist leader Nicolas Maduro is taking it to the next level by devaluing the national currency, the bolivar, by 95%. Put another way, before Maduro’s devaluation, it took 285,000 bolivars to buy one US dollar. Post devaluation, it will take six million bolivar to buy that same dollar. Of course, this is insane; which is why 2.3 million Venezuelans—in a nation of just 31 million—have fled the country since Maduro took over from his deceased mentor, Hugo Chavez. To assuage his citizens, der comandante is raising the minimum wage from the equivalent of $1 per month to $30 per month (which they will never actually see). Venezuelan society is literally collapsing before our very eyes. Why, then, has Maduro not been removed? We will discuss that very topic in this coming Sunday's Penn Wealth Report.
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Venezuela
Citgo |
US federal judge authorizes seizure of Citgo assets. (10 Aug 2018) Venezuela, by its own actions, doesn't have much going for it right now, but it still owns one valuable asset: Citgo Petroleum. Actually, Citgo is a subsidiary of Venezuela's state-controlled oil company, PdVSA, but a US federal judge just took the first step in wresting control of the company away from the draconian government. Judge Leonard Stark issued a ruling in favor of defunct Canadian miner Crystallex International, which had argued that the Venezuelan government reneged on a mining rights deal, and wanted to seize Citgo assets in the US. The judge's decision opens the door for a potential wave of other filings by unpaid creditors to squeeze money out of the downstream energy interest. Looks like Maduro can say goodbye to one of his last global money-making vehicles. Venezuela and its state-controlled companies have over $60 billion of outstanding unsecured bonds which the government has stopped paying interest on, and over $150 billion in total debt outstanding worldwide.
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Nicaragua
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What a difference a generation makes; Ortega loses control of Nicaragua. (19 Jun 2018) He was once the darling of the socialist left. While Ronald Reagan was busy winning his second term by carrying 49 out of 50 states, Nicaragua was going in a different direction—electing leftist Sandinista leader Daniel Ortega with 67% of the vote. A lot has changed since November of 1984, but one thing has not: Daniel Ortega is the president of Nicaragua. This time around, however, the masses are not exactly on his side. As the country descends further into chaos due to Ortega’s purge of political opponents, the people are demanding he go. Ortega controls the government and the police force, however, along with roving paramilitary gangs. The former guerrilla leader may be looking at Maduro in Venezuela for hope, but the revolt in Nicaragua is further along. His political opponents may be dead, but with an uprising in every major city, his days are very numbered.
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Colombia
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As Mexico prepares to lurch (further) left, another Latin American country votes for economic freedom. (18 Jun 2018) These are not happy days for Latin American leftists. The curtain began to fall when their great benefactor, the Soviet Union, was swept into the dustbin of history. Then Hugo Chavez assumed room temperature, followed by el daddy himself, Fidel Castro. Sure, the Daniel Ortegas and Nicolas Maduros are still out there, but they are cartoon characters compared to their leftist heroes. True, millions of people remain impoverished in their respective countries, but the hungry masses are no longer buying what their leaders are selling. Sadly, the people of Mexico are about to make an economically-tragic mistake and elect leftist/nationalist Andres Manuel Lopez as president. They are swimming against the Latin American tide, however, which continues to wash pro-democracy forces into power. Venezuelan neighbor Colombia is the most recent example of this movement. The country just elected conservative former senator Ivan Duque (DOO keh) as their next president, and the tally wasn’t even close. Duque, the charismatic 41-year-old lawyer, beat his leftist opponent, former M-19 guerrilla Gustavo Petro, by a vote of 54% to 42%. Two major planks of Duque’s campaign were combating the flow of Venezuelans flooding into the country’s northeastern border (as many as 100k per month), and fighting the record level of cocaine production. In addition to focusing on these two issues, the new president also plans to reduce taxation and simplify the tax code.
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Venez.
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Our prediction: Maduro signed his own death warrant with rigged election win
(21 May 2018) It was an impressive victory. Almost as impressive as every Putin, Chavez, Castro, and Idi Amin electoral victory. And quite amazing. In a country whose citizenry is starving en masse, and where the inflation rate is expected to top 2,000% this year, uncharismatic dictator Nicolas Maduro just got reelected with 76% of Venezuelans (who voted) voting for him—the very man responsible for their dire straits, at least since Hugo assumed room temperature. The fear of torture and death by a dictatorial regime can control the masses for only so long. Freedom will always find a way. More than likely, in Maduro's case, it will begin with an uprising by the nation's military. The government cannot afford to keep all of the high-ranking members—and their families—fed and well paid. Certainly not with a 2,000% per year rate of inflation. And starving people know that bashing America won't put food in their kids' mouths. Maduro will be busy celebrating his victory this week, oblivious to the fact that his days are numbered. Let's just hope that a reformer—not another socialist dictator—will appear to fill the void. |
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Cuba
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The first non-Castro in six decades is taking power in Cuba; and this means absolutely nada
(19 Apr 2018) 1959. Fifty-nine years ago this year. Thug communist dictator Fidel Castro takes command in Cuba. It is hard to believe it has been that long ago; or that it has been a full ten years since his hapless brother, Raul, took over for him. Now, for the first time since JFK was in office, Cuba will get a non-Castro as its el presidente. But does that really mean anything to the poor (literally) people of Cuba? Nope. Miguel Diaz-Canel is cut from the same cloth as his two predecessors, though from a duller section of the fabric. It would be nice to think that Diaz is more of a Nicolas Maduro, the soon-to-be-deposed thug who took over from Hugo Chavez in Venezuela, but it probably isn't that simple. Leftists around the world have a love affair with the island that resides just 105 miles from the coast of Florida, and the steady stream of tourist pesos will probably keep the communist regime afloat for the foreseeable future. At least the women of the country still have the rice cookers Fidel gave them on International Women's Day back in 2005. |
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Brazil
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Brazil's Supreme Court effectively ends leftist da Silva's effort to win back the presidency
(05 Apr 2018) In 2016, Brazil's slow-as-molasses court system received an electric shock when the country's Supreme Court ruled that any defendant who loses their first appeal can be imprisoned before filing any further appeals. That two-year-old ruling came back to haunt leftist former president Lula da Silva, as the Court rejected his efforts to remain free while appealing his graft and corruption charges—and running his campaign for re-election. Protestors were expected to take to the streets in major Brazilian cities to voice their anger at the decision, but supporters of conservative former army officer Jair Bolsonaro, who is also running for the highest office, are rallying in support of the rule of law. The 74-year-old da Silva is facing as much as 12 years behind bars. |
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Mexico
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Mexican GDP getting hurt as violence around tourist destinations continue
(01 Mar 2018) Mexico, for all of its promise, has some pretty huge problems, and look for them to become exacerbated if leftist Andres Manuel Lopez Obrador wins the July elections. One of the biggest challenges the country faces is the inability to keep foreign tourists safe, even in the most luxurious locations. A wave of drug/gang-related attacks have left scores dead in such popular destinations as Cabo San Lucas and Cancun. Gunmen opened fire at a popular Cancun nightclub several months ago, killing five and causing a dangerous stampede. An 18-year-old from Denver was among the victims. In Tijuana, the 2017 homicide rate was 1,744—nearly double the 2016 rate. Five Mexican states were recently hit with a US State Department "do not travel" warning, the most severe issued by the department. While the candidates in the Mexican election trip over themselves blaming their neighbor to the north for a host of internal problems, the country continues to descend due to lack of leadership. As for the leftist Obrador: he is leading by double-digits in the polls. |
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Venezuela
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Venezuela calls for early elections; spoiler: Maduro wins
(24 Jan 2018) In a democracy (or, technically, a representative republic), the state of the economy typically sways elections one way or the other. But Venezuela is no democracy. If it were, President Nicolas Maduro would have been thrown out of office years ago. Despite the level of abject poverty among the country's citizens, the very capitalism which could free them from their economic woes is typically portrayed as a caricature villain, with the face of Uncle Sam. Against that backdrop, the autocrat Maduro has called for early national elections to take place this April. Let's go ahead and end the suspense: the socialist with a 20% approval rating among the population has a 100% chance of being reelected. It is the 21st century, not the 11th. The fact that the citizens of a nation need to live like farm animals (actually, worse) is a black mark on humanity. What do we have a United Nations for, again? |
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Venezuela
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Venezuela's oil production plummets to lowest levels since 1989
(18 Jan 2018) Looking at the failed socialist state that is Venezuela, if you had to pick one probable lifeline for that country what would it be? Most people would answer "oil revenues" without giving it much thought. After all, what is the country selling the rest of the world besides crude? (In fact, 95% of export revenues come from crude.) Incredibly, and incredibly depressing for the poor souls living under the iron socialist fist of the simpleton Nicolas Maduro, the country's one trump card is collapsing at a stunning rate. Oil production fell 11% in the one-month period between November and December alone. For all of 2017, production is down by nearly one-third—to 1.6 million barrels per day. To put that in perspective, US crude production currently sits at around 10 million barrels per day. Venezuela's state-run oil company blames "sabotage and terrorism" for the steep output decline, yet offers no proof. In reality, complete mismanagement and a government structure in total chaos is the cause. There will be national elections held in Venezuela later this year. After some degree of literal national starvation, the Venezuelan people must take charge and force Maduro and his socialist ilk from power. Sadly, there is zero chance he would let that happen through an election which he ultimately controls. |
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Venezuela
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What do you do when your currency is in the toilet and inflation is at 1,000%? Start your own cryptocurrency
(08 Jan 2018) Venezuela is a country being ruled by a hapless socialist dictator—Nicolas Maduro. The country's national currency, the bolivar, is in absolute free-fall, and inflation is running somewhere near 1,000% per year. So, what is a commie leader to do? Start his own cryptocurrency, of course. Proclaiming that "the 21st century has arrived!" (more like the 11th century), Maduro unveiled 100 million units of the petro—a digital currency to be backed by the specific assets of a Venezuelan oil well. No word on when the first 100 million tokens will be "mined," but how much do you want to bet the Maduro government will try and pay off their $150 billion of global debt in petros before the country goes into full-fledged default? This would be really fun to watch, if it weren't for all of the Venezuelans living in abject poverty thanks to the string of socialist Venezuelan regimes. (2018.01.18 UPDATE: Inflation for the calendar year of 2017 was about 2,600% in the country.) |
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Mexico
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Mexico's monthly trade deficit doubles as oil imports rise
(28 Nov 2017) Granted, the United States could only dream of having such small deficits, but the $2 billion trade imbalance recorded by Mexico for the month of October is more than double its October, 2016 figure. While exports rose 13.2% from the prior mont (to $37 billion), imports grew 16.3% (to $39 billion) over that same time frame. Increased oil imports and the jump in oil prices were a major factor. Through the first ten months of the year, Mexico's aggregate trade deficit was $11.12 billion. The US trade deficit for January through October is roughly $400 billion. Canada, the US, and Mexico are currently engaged in heated NAFTA re-negotiations. |
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Venezuela
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Venezuela's Sham National Elections
Would-be dictator Nicolas Maduro just pulled off a fraudulent vote putting his leftist buddies—and wife—in perpetual control (27 Jul 2017) We’ve said it before and we will say it again: Nicolas Maduro may act like his dictatorial mentor, but he is no Hugo Chavez, and that will be his downfall. To be sure, the wannabe leader-for-life just scored a major victory...read the rest of the story in the Penn Wealth Report by selecting here: Vol. 5, Issue 02. |
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Venezuela
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(17 Jul 2017) "Zero hour" is at hand in Venezuela as opposition to Maduro's proposed "super body" mounts.
It truly is amazing that Nicolas Maduro, the bumbling would-be dictator of Venezuela, has not been removed from office by now, but the country's opposition parties have promised "zero hour" is at hand. Here's the catalyst: Voters gave the Democratic Unity coalition, the opposition group to Maduro's Socialist Party, overwhelming control of the legislature in 2015. In an effort to nullify this action, Maduro has called for a national vote on the creation of a new legislation "super body" known as the Constituent Assembly. This body would effectively end the powers of the current legislature. The opposition—and most of the citizens—are worried that the July 30th vote will be rigged in favor of approval, and massive demonstrations and strikes have sprung up to force a new national vote to elect a new president. Unlike the dictator Chavez, who assumed room temperature back in 2013, Maduro has just a 20% approval rating. The key question will be which side the country's military comes down on when "zero hour" strikes. |
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GS
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(30 May 2017) True to form, Goldman Sachs helps prop up Venezuelan dictator. I truly cannot stand Goldman Sachs (GS $138-$218-$255). Were it a country, it would be France. When the mega-bank has a chance to turn a profit, the unique circumstances surrounding a situation rarely seem to matter much. Just ask the poor Venezuelan citizens who are trying to loosen President Maduro's grip on power. Goldman Sachs threw the Maduro government, which is slowly starving its citizens, a lifeline this week when it announced it would purchase $2.8 million face value of Venezuelan government bonds, to the shock of opposition forces. The bank got a sweet deal for sure, paying 31 cents on the dollar for the bonds, or $865 million. Despite the haircut on the notes, that $865 million will allow the government even more time to decimate the population. Anything for a buck, huh GS? (Photo: Venezuelans rightfully protesting Goldman Sachs' disgusting action)
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JBS
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(22 May 2017) Huge Brazilian meatpacker JBS falls 30% after accusations. After Brazilian President Michel Temer accused the owners of meatpacking giant JBS S.A. (JBSAY $4-$4-$8) of insider trading, the company's stock began what would become a 30%, one-day plunge. In a televised weekend address, the president made the accusations in response to JBS executives telling the press that they bribed Temer and his two predecessor, Dilma "Aunt Bea" Rousseff and Lula da Silva, as part of a graft scheme. JBS was slated to take its international unit public on the NYSE soon. That is now off the table indefinitely.
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Brazil
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(18 May 2017) Brazil ETF drops 16% after allegations. The representative ETF we use when investing in the country of Brazil, the iShares MSCI Brazil Capped Index (EWZ $25-$39-$41), got hammered at the open on Thursday on reports of bribery allegations against President Michel Temer. The president supposedly encouraged a Brazilian businessman to bribe a jailed former congressman into silence. The opposition party is calling for Temer's immediate resignation (there's a shocker). Based on the continual flow of false narratives created by the global press (Temer is in a centrist party in a country dominated by leftists), don't put any stock in the legitimacy of these allegations; rather, delve into the possibility of buying EWZ on the pullback. The ETF has about $6 billion in assets. (Photo: Brazilian President Michel Temer)
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Venezuela
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(01 Apr 2017) "Day of reckoning" is moving closer in Venezuela. It's hard to replace a world-class thug/dictator/statist. C'mon, Raúl Castro filling the shoes of murderous brother Fidel? Dilma "Aunt Bee" Rousseff following Lula da Silva? Please. Dmitry Medvedev taking over for Vlad? That didn't last long. Then there is the hapless commie Nicolás Maduro in Venezuela, who took over for the beloved dictator Hugo Chavez. At least back then the people had smiles on their faces while they stood in line half-a-day for a roll of toilet paper. For Maduro, they are actually sprouting a collective spine. The latest crack in the fissure came this week as the nation's top cop, Attorney General Luisa Ortega, declared that the Venezuelan Supreme Court had no legal authority to dissolve the opposition-controlled congress—which it did in March. The Supreme Court is packed with Maduro allies. Last year, retired Major Gen. Cliver Alcalá, a Chavez appointee, blasted Maduro's undemocratic actions. When a dictator loses the military and the police force, they are cooked. For the people's sake, let's pray the downfall happens soon.
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Brazil
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(20 Mar 2017) Brazil facing fallout from tainted meat scandal. Brazil, already in the throes of its worst recession on record (thanks to the socialist policies of impeached former president Dilma "Aunt Bea" Rousseff), is facing a tainted meat scandal that threatens to materially impact its beef and poultry exports. Brazilian federal police are investigating charges that the country's largest meat exporters routinely bribed sanitary officials for health certificates, and that the companies exported salmonella-infested and otherwise tainted meats. Many governments around the world have suspended any imports from the companies under investigation pending closure. Brazil is the second largest exporter of beef and poultry—behind the United States, and its number one meat importer is China (which is ironic, considering that country's rotted pig scandal).
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Venezuela
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Latin America. Treasury Department puts Venezuelan VP on sanctions list. Tareck El Aissami, vice president to bozo Venezuelan dictator Nicolás Maduro, has been placed on a US sanctions list for allegedly aiding international drug traffickers. Placement on the sanctions blacklist freezes any assets Aissami may have had in the US and blocks US companies from doing business with the VP. Some members of the leftist American press are lamenting the lost opportunity their "dear new president" might have had to mend fences with the socialist South American country. Give us a break.
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Venezuela
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(19 Dec 2016) Chaos in Venezuela over cash crunch. Wouldn't it be great if this were the beginning to the end of socialism in Venezuela? Hopeful thinking, but hopeful signs as the citizens are being dragged, kicking and screaming, into realizing what the likes of Hugo Chavez and Nicolas Maduro have brought them. The idiot Maduro has pulled the largest bill in circulation (the 100-bolivar note, worth three US cents) out of circulation before new bills were put into circulation, causing riots in the streets over the weekend. On state TV, Maduro said the leaders of the riots were "following US instructions to incite chaos." Yeah, that's it.
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Venezuela
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(14 Dec 2016) Maduro plunges Venezuela deeper into despair, voids currency. Comically-inept Venezuelan President Nicolas Maduro announced on Monday that the nation's largest bank note, the 100-bolivar bill (worth about three US cents) would become void on Wednesday night. Citizens, from street cleaners to physicians, left their jobs to stand in line at local banks to deposit the bills before they became null. Maduro claimed to make the move to crack down on Colombian smugglers who hoard the bolivars to buy price-controlled food in Venezuela, reselling the goods at a markup. The 100-bolivar note accounts for about half of the money supply in circulation in the country. Why hasn't this buffoon been taken out yet by the people?
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Venezuela
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(31 Aug 16) Brazil's goofy socialist dictator impeached. Brazil's senate voted 61-20 to oust the country's disastrous leader, Dilma "Aunt Bea" Rousseff.
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Argentina
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Obama’s Argentina Trip was the Right Move, Despite the Anger it Garnered Among the Electorate
(24 Mar 16) Considering the stranglehold socialists have had on Latin America for the past generation, it is almost a miracle that Argentineans (or Argentines, if you prefer) actually voted in a center-right leader, Mauricio Macri, last year to clean up the mess left in the wake of the 12-year hurricane known as the Kirchner regime (see “The Leftist Latin American Dominoes Are Falling,” Vol 3 Issue 50). Considering Macri’s pro-growth stance, and the fact that the Argentines love to hate the US, Obama certainly could have skipped the trip, using the Brussels bombing as an excuse to head home. He didn’t, however, and that was the right decision to make—despite feigned cries of outrage from home. America needs to embrace the bold move that put Macri in power, and that is what Obama did in his joint press conference with the energetic and charismatic Macri. The president made the trip on the 40th anniversary of the 1976 coup—a coup which the US supported—that placed a military dictatorship in power. For the US, it was a clear case of supporting the “lesser of two evils.” Tens of thousands of Argentines were killed under that dictatorship, and most in the country find the US as culpable as the military junta that came to power. Obama squarely confronted the issue in the news conference in Buenos Aires, and even presented an olive branch by offering to declassify military documents related to the country’s involvement in the coup. For his part, Macri praised the US’ economic prowess, and expressed his desire to open direct trade between the two countries. This was a gutsy move on his part considering the hatred and disdain most of his electorate have for the US. Many in the US have accused the president of being much more simpatico with leftists in Latin America like Maduro, Rousseff, Ortega, and Castro. If those accusations are true, then it is all the more impressive that he would make this effort to befriend Macri, and a pro-democracy friend in the region is exactly what we need. (Reprinted from the Journal of Wealth & Success, Vol. 4, Issue 3.) (OK, got it. Take me back to the Penn Wealth Hub!) |
A “Devastating” Night for the Socialists in Venezuela
(09 Dec 15) While the opposition party in France was busy celebrating their win, members of Venezuela’s longtime ruling party, the United Socialists, were busy crying in their fermented chicha. The Democratic Unity opposition alliance declared it had won such a massive victory in Sunday’s legislative elections that it could soon wrest control from the dictator Nicolas Maduro, ending 17 years of socialist rule in the country. For the thug’s part, Maduro says that he will not recognize the election results. (Page 17 of the World Dictator’s Handbook.)
It may not matter whether Maduro recognizes the win or not. On Tuesday the National Electoral Council reported that the opposition party won 109 seats; add that to the three wins attributed to a sympathetic party and the Democratic Unity coalition will control 112 out of 167 seats—a supermajority.
A supermajority of non-leftists in the legislature is a nightmare scenario for Maduro’s socialists. It gives the opposition the ability to remove Supreme Court justices, pass laws, and draft a new national constitution that could feasibly remove Hugo Chavez’s hand-picked successor from office.
How did the socialists respond to the electoral pummelling? It began with barrage of tweets filled with images of former Soviet leaders Vlad Lenin and Joseph Stalin (who “purged” about 40 million citizens during his reign of terror), with the text demanding “no whining!” Maduro hosted his weekly television show near the tomb of Chavez, blaming the drubbing on infiltrators from the West, i.e. the United States. We have previously reported in the Journal of the three-hour-long lines to get a loaf of bread or a roll of grainy toilet paper in Caracas; Maduro proclaimed that this, too, was the result of outside forces.
While the president was throwing his tantrum, his minions went to work as well. At the “hot street corner” in Caracas, a section of town known for its Communist sympathizers, Maduro’s vice president proclaimed that “This revolution is for 500 years.” Someone should probably tell him that Hitler’s 1,000-year Reich only lasted 12. The country’s foreign minister, meanwhile, bragged that more than enough legislators will stay true to their socialist ideology when the reckoning hour is at hand. Time will tell, but one thing is absolutely certain: the socialists are doubling down on their oppressive ideology.
Despite this great victory against tyranny, the citizens of Venezuela will pay a steep price in the scorched-earth battle that is sure to ensue. The newly-elected officials won’t take power until January, which gives the socialists plenty of time to throw their Molotov cocktails. Even after January, expect Maduro’s supporters in government to flagrantly flout the rule of law. What happens, for example, if the stacked Supreme Court members simply refuse to give up their seats? If a good portion of the military remains loyal to Maduro, complete chaos could reign. Laws may be passed by the legislature, but what happens when those responsible for implementing the laws are either bribed or threatened?
In short, we can expect a massive power struggle between the executive and the legislative branches in Venezuela. Under the country’s constitution, the president enjoys a very small veto power, and laws sent back by the president to the legislature can be overridden with the supermajority. But what happens if some of the 112 members of the new ruling party suddenly turn up dead? Wasn’t that the implicit threat conveyed in the socialists’ tweets? Isn’t that how Lenin, Stalin, or even Putin would handle the crisis?
To be sure, there is an economic crisis in Venezuela that is literally starving a wide swath of the citizenry. Anger and desperation bubbled to the surface during last week’s elections, but this anger could easily give way to stark terror if Maduro decides he has nothing to lose.
(Reprinted from next Sunday's Journal of Wealth & Success, Vol. 3, Issue 50.)
The leftist Latin American dominoes are beginning to fall
(27 Nov 15) This wasn’t supposed to happen. To socialists in power in Latin America, election results are something to be driven like a Soviet-era tank—clunky but effective. After all, did anybody really believe that Castro won 99% of the vote in Cuba, or that Hugo Chavez didn’t have his opponents silenced. How on earth, then, did a center-right politician become the president of Kirchner-controlled Argentina?
The election really was a shocker. Following the collapse of the Soviet Union and the loss of its satellite nations, which quickly turned to capitalism, Marxist heads-of-state suddenly became melancholy, longing for the good old days. In Central and South America, however, papá Fidel was still revered by the masses on the lower rungs of the economic ladder. Never mind that dictators like Castro were the reason the masses were dirt poor.
In the late 1990s and early 2000s, the Pink Tide, or marea rosa, swept across much of the continent, with populist socialist dictators gaining a stronghold over a vast swath of the land south of the United States. By 2005, nearly three in four of the 350 million or so inhabitants of South America lived under state-controlled rule.
With Fidel’s age and decrepit health becoming a liability, his Venezuelan protégé, Hugo Chavez, became the standard-bearer of the hammer and sickle for the region. Daniel Ortega regained control in Nicaragua. Lula da Silva became the hero of the favelas in Brazil, before handing the baton off to his own inept protégé, Dilma Rousseff. Evo Morales was elected to carry on the revolution in Bolivia. When Chavez assumed room temperature, Venezuelans turned to his hand-picked successor, Nicolás Maduro.
Then there was Argentina. For twelve years, between 2003 and 2015, the country was run by the Kirchner family—first Néstor and then his wife, Cristina. The Kirchner diarchy was closely aligned to the Castro/Chavez style of government control. But these leftist-controlled countries were, in good measure, banana republics, with oil being the “banana.” As oil prices fell, trouble surfaced.
The oil that greased the machinery.The great commodities boom of the past decade fueled, to an incredible degree, the ability of leftist leaders to spend almost unfathomable amounts of money on social programs designed to keep the poor in their back pockets. Of course, these leaders also spewed anti-American diatribes to deflect any blame for domestic problems.
Despite the riches flowing into the oil-producing nations like Brazil, these irresponsible leaders did what the far-left always does: spend with reckless abandon. Even in the strongest revenue-generating years, the financial situation was tenuous at best. But then disaster struck: the price of oil plummeted faster than anyone could have foreseen. Within a year, oil rigs were being mothballed, drilling became unprofitable in many places, and double-digit inflation became the norm.
All of the graft and corruption taking place at nationalized firms began bubbling to the surface. Suddenly, the people grew tired of America being portrayed as the whipping boy for failed domestic policies. It was not that they suddenly liked America any more than they had, they simply realized that the solution to their problems had to come from within. They wanted solutions, not frothy-mouthed rhetoric. In Argentina, enter the 56-year-old mayor of Buenos Aires, Mauricio Macri.
Macri represented a pro-growth, center-right movement that called for free markets and an end to government-led corruption. His opponent, almost unanimously picked to win the race, was Cristina Kirchner’s anointed successor: the 58-year-old governor of the Buenos Aires province, Daniel Scioli.
Both Scioli and Kirchner used scare tactics to vilify Macri, claiming that he would make the voters’ pesos worthless were he elected. The only problem with that argument was the fact that their pesos already were worthless, thanks to a government that spent 12 years printing all the money it needed for an endless stream of wasteful programs. To quote the “Reverend” Wright, Argentina’s chickens were comin’ home to roost. An angry electorate went to the polls, first in October, and then, for a runoff, on 22 November. In a stunning rebuke of Kirchner’s Peronist Front for Victory party, Macri was vaulted to power.
Cleaning up the mess.When the Berlin Wall finally came down, Westerners were aghast to see what generations of communist rule had created. In Argentina, we know that the new president will face a 25% inflation rate and an anemic currency. Kirchner allowed Argentina to default on its debt last year (for the second time), forcing S&P to downgrade the country’s rating to selective default. The country’s closest trading partner is Brazil, which is embroiled in its own commodities-based nightmare. Will Argentinians give Macri the time he needs for this herculean task? We are about to find out.
For his part, the vibrant and energetic 56-year-old has come out of the gate swinging. He has said that he will immediately move to have Venezuela expelled from the Mercosur trade bloc for its violations of the 2001 democratic charter. He will also end the agreement with Iran stemming from a 1994 terrorist attack on the Buenos Aires Jewish community center. Look out Brazil, Venezuela, and Cuba; change may be headed your way. (Reprinted from the Journal of Wealth & Success, Vol. 3, Issue 47.)
Are More Mexicans Now Returning Home, and What Could that Mean to the US?
(19 Nov 15) We learned long ago that one should always maintain a detached and critical thought process when it comes to the news—especially when the “pollsters” are making the news. We also understand that the media outlets tend to take a poll that fits neatly into their template and run with it, irrespective of possible sourcing issues. So, when we saw that the Pew Research Center (known for its “push-polling” questions) released a new study showing that more Mexicans were returning back to their home country than were coming to America, we were skeptical. Let’s dig a little deeper into that bold argument.
The study claims that about 16 million Mexicans have come into the United States over the past 40 years, with about half that amount doing so illegally. Between 2009 and 2014, however, nearly one million Mexicans returned home versus 870,000 or so heading north across the border. Since the math is often “fuzzy” in polling data, let’s look into a possible rationale for this argument to be validated.
The enormous disparity in the number of Mexicans coming to the US to look for work before, versus after, the 2008 financial crisis lends credence to the argument that most would-be emigrants are looking for economic opportunities (rather than a desire to leave their home country for some other reason). Think of a teeter-totter with the US economy at one end and the Mexican economy on the other. Whether it was our economy weakening or the Mexican economy strengthening, there is almost an exact correlation between the GDP differential and the number of citizens going one way or the other. In short: It is clear that, as the Mexican economy improves, the immigration issue diminishes.
A recent Gallup poll (granted, not much more trustworthy an organization than Pew) shows that just over one in ten Mexicans would consider emigrating. That number is about one-half of what it was just seven years ago. That is due, in huge measure, to the attempts to modernize the Mexican economic juggernaut and an ever-increasing number of Mexicans solidly in the middle-class.
We have long made the contention that Mexico will develop into a world-class economic powerhouse as the graft and corruption that has been so prevalent is finally dealt with, forcefully and persistently. As one of only two nations bordering our own, it is very much in our own best interest to support and foster Mexico’s nascent efforts to strengthen.
Being students of history, it is fascinating to look back and see how rapidly the world can shift and transform, though rarely do contemporaries realize the scope of what is happening right under their feet. While today we see a mammoth national debate raging over immigration, the conflict could fizzle out as quickly as the Mexican government could loosen the impediments to domestic growth.
We see a day in the not-to-distant future when Mexicans are offered direct financial incentives to bring their talents north of the Rio Bravo. Unthinkable? Take a look back at the world of 1900 versus the world we saw going into the new millennium. Or even the quarter-century between the start of the Great War and Germany’s invasion of Poland. The unthinkable can take place at a breakneck speed.
As we manage the multiple Penn portfolios, we always do so with an eye toward the future. And keeping an eye on the future means having a solid grasp of the past. (Reprinted from the Journal of Wealth & Success, Vol. 3, Issue 46.)
Marxist Venezuela About to Default on its National Debt--US to Impose Sanctions on Crackdown
(12 Dec 14) You have to feel for the poor little Marxist schlub leader of Venezuela, Nicolas Maduro. After all, he is just trying to hold the torch for his dead Marxist mentor, Hugo Chavez. Now, the ultra-poor residents living in the country’s barrios, the very people who put Maduro in charge, are turning on him amidst 60% inflation and the world’s highest murder rate.
(Read More in the Journal of Wealth & Success, Volume 2 Issue 27)
Violence in Venezuela Ramps Up as Economy Spirals Down
(13 Feb 14) If history has proven one thing, it is that communists and socialists do a pitiful job at running an economy, despite any natural advantages that may be present in their country. Venezuela, which has an export ledger consisting of 95% oil and 5% "other," should be rolling in the dough with crude up around $100 per barrel. Why, then, has the country's economic conditions gone from really bad to mortally wounded?
Nicolas Maduro is South America's answer to Kim Jong Un of North Korea. Both trying to fill the shoes of effective evil leaders, they are still working on their public imagery. Maduro, the 51-year-old former union activist with close ties to Cuba and Russia, is facing mass protests due to uncontrollable inflation and a deteriorating economy. Like his predecessor, he is placing the blame for the country's woes on America and the evil corporations operating in Venezuela. He appears unable to make the sale like Chavez did, however.
In the leadership vacuum, a number of opposition figures have come to the surface in recent months to lead citizens into the dirty streets of Caracas in an attempt to demand improved economic conditions. Maduro has countered with arrest warrants on his biggest political opponents, one of which is a descendant of revolutionary hero Simon Bolivar, the man after which the country's currency is named.
Amidst the turmoil, Moody's Investors Service knocked Venezuela's status deeper into junk territory, which will make it harder for the government to get funding. Currency inflation crossed over the 50% mark last year, leading many citizens to dump their bolivars on the black market for U.S. dollars selling for ten times the official government rate. Maduro has forced many domestic companies to slash the cost of goods being sold to citizens, but that action will create an array of other problems, and will do little to stem hyperinflation going forward.
In the old days, a country with a Marxist leader could turn to its friends in communist Russia. Now, however, Vlad Putin has his hands full trying to reconstitute the Soviet Union. Raul Castro in Cuba, Kirchner in Argentina, and Rousseff in Brazil can lend moral support, but they are all aware that their own respective situations are not much better than Maduro's. It should be an exciting decade to turn our lawn chairs south and watch the fireworks from the safety of North America.
Venezuela is the Child that Continually Makes the Wrong Choices
(23 Jan 14) We have all see this kid, or teen, or young adult. No matter how much you try to help them, you know they are going to make the bad decision, over and over again. Venezuela is that poor kid in the form of a country. Just as Fidel Castro transformed Cuba from a vibrant and wealthy port for travelers into a nation of America-hating paupers, happy to get a "free" rice cooker from Father Fidel, Venezuela remains convinced that the free market is their biggest threat.
The chance they had for real reform when a 58-year-old nut job by the name of Hugo Chavez assumed room temperature has been squandered. Now, the hand-selected choice of the socialist dictator rules the country with the same amount of prowess as his predecessor. Nicolas Maduro has taken a sputtering and inefficient system and actually succeeded in making it worse. Sort of a Venezuelan Jimmy Carter, if you will.
Socialists believe that every economic problem (or social problem, for that matter) can be solved by applying more and more government. Maduro's latest brilliant idea is to weaken the state currency, the bolivar, to free up dollars for the cash-strapped government. But it's more complex than that: a more preferential exchange rate will remain for items such as food and medicine imports, but anything frivolous, like a book or a calculator, will face an onerous exchange rate of 11.36 bolivares per dollar.
The plan is to decrease imports and increase exports, but these Byzantine exchange rules have led to an economic growth rate of near zero and an inflation rate of 56%. Furthermore, foreign companies trying to figure the system out are finding other markets in which to export their goods. As is always the case, the black market fills the void when the people want something. Many locals are now exchanging their near-worthless bolivares for dollars at a fraction of what they should be getting. The result has been a 73% reduction of the currency's value on the black market.
As with any good Marxist, the country's top economic adviser (and oil minister) placed the blame squarely on foreign companies, and domestic companies who import goods. Rafael Ramirez told reporters that "there are some groups of companies that we have determined were defrauding the state. There's no way to fix them...they owe us." As the poor souls residing in Venezuela continue to suffer, it will be interesting to watch how long Maduro is able to successfully pin all of the country's problems on the United States, like the former dictator so effectively did.