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May Day in Bolivia
May 1, 2012 12:49 PM   Subscribe

Bolivian President Evo Morales celebrated the first of May by nationalizing the electrical grid. While the move was not entirely unexpected, the blow to the Spanish-owned power company Repsol YPF is undeniable, especially in the wake of the recent call by the Argentine government to do the same.
posted by msali (91 comments total) 9 users marked this as a favorite

 
Just what the economy of Spain needed! I saw a news report that Spain and Portugal are suffering a brain drain. Young Spaniards have been moving to central America because the opportunities there are better.
posted by Chocolate Pickle at 12:56 PM on May 1, 2012


Not a "recent call" - the argentines did expropriate YPF shares from Repsol.
posted by JPD at 12:59 PM on May 1, 2012 [3 favorites]


Also the Bolivian T&D business was owned by Red Electrica, not Repsol.
posted by JPD at 1:01 PM on May 1, 2012 [1 favorite]


Not a good time to be a wealthy Spaniard: general strikes at home, foreign assets getting nationalized.
posted by phrontist at 1:04 PM on May 1, 2012 [2 favorites]


Like Argentina's oil reserves, this stuff was all privatized in the 90s because international development bigwigs at the IMF and elsewhere said it would spur growth and investment. Neoliberalization didn't deliver, so the governments are taking their assets back. Good for them.
posted by mek at 1:05 PM on May 1, 2012 [61 favorites]


With this, I just realized that as an American, I don't want socialism. I want the responsible capitalism I've always been promised.
posted by dances_with_sneetches at 1:21 PM on May 1, 2012 [9 favorites]


Red Electrica Corporacion S.A. owned only 1.5% of the Bolivian company, not exactly a blow to the Spanish economy. Also, the Spanish government itself has a history of expropriation.
posted by jsavimbi at 1:24 PM on May 1, 2012


The company nationalised in Bolivia is (was) owned by Red Electrica de España, not Repsol. Whereas Repsol is in the hands of private investors, REE's largest shareholder is the Spanish government.
It isn't a very big blow to REE, though: Bolivia only makes up 1.5% of its global turnover, and Morales has already hinted that it'll pay a fair price (unlike the Argentine government, which is taken a much more hostile stance). However, this trend is worrying to all Spanish companies having invested in South America: it seems like open season on them, with the Spanish government quite powerless to help them.
posted by Skeptic at 1:26 PM on May 1, 2012 [1 favorite]


Just what the economy of Spain needed!

Indeed. Spain might see these as national assets in the same way the United Kingdom viewed the Falkland islands and send down the armada to take them back from those thieves.

Lacking an armada, however, Spain needs to just suck it up.
posted by three blind mice at 1:26 PM on May 1, 2012 [1 favorite]


After the mostly unpunished pillaging the power companies did to California in the early 2000s, I don't have a lot of sympathy of private power companies.
posted by bottlebrushtree at 1:27 PM on May 1, 2012 [7 favorites]


This may be a valuable precedent for us here in the US when we want to take back all the infrastructure which will probably be purchased by the Chinese during the next 20 years as they unload all the dollars they are now accumulating.
posted by jamjam at 1:29 PM on May 1, 2012


Not sure how this

Red Electrica Corporacion S.A. owned only 1.5% of the Bolivian company,

Fits with this.

Red Electrica owned 74 percent of Bolivia’s electrical transmission network, or 1,720 miles (2,772 kilometers) of high voltage lines.
posted by psycho-alchemy at 1:30 PM on May 1, 2012 [1 favorite]


Also, the Spanish government itself has a history of expropriation.

Huh? The last significant nationalization in Spain I can think of was that of the Rumasa group back in the 1980s, and this was because it was more rotten than a ten-year-old mackerel head.
posted by Skeptic at 1:30 PM on May 1, 2012 [1 favorite]


Our local power company *is* socialized (I live in Tallahassee, Florida), and there's never been a real push (except by weirdo hardliners) to change that. The power company is owned and operated by the City of Tallahassee, and that suits us fine. According to what I've heard, rates are lower here than anywhere else in Florida.
posted by Edison Carter at 1:39 PM on May 1, 2012


Not sure how this

Red Electrica Corporacion S.A. owned only 1.5% of the Bolivian company,

Fits with this.

Red Electrica owned 74 percent of Bolivia’s electrical transmission network, or 1,720 miles (2,772 kilometers) of high voltage lines.
posted by psycho-alchemy at 1:30 PM on May 1 [+] [!]


Jsavimbi confused the percentage of Bolivia in Red Electrica's global turnover (which is 1.5%) with the percentage which Red Electrica owns (owned) in the Bolivian company.

As for all those applauding the move, consider this: this isn't an extractive industry, exploiting Bolivia's natural resources, it is about distributing electricity. Something which requires technical knowhow and a lot of capital, two things which Bolivia isn't greatly endowed with. Roughing foreign investors like that isn't going to help Bolivia acquire either...
posted by Skeptic at 1:42 PM on May 1, 2012 [5 favorites]


Power to the People.
posted by hal9k at 1:44 PM on May 1, 2012 [10 favorites]


Seems appropriate. If the power grid isn't a public good and a piece of national infrastructure, I don't know what is.
posted by Stagger Lee at 1:56 PM on May 1, 2012 [3 favorites]


Really though, if we're celebrating international worker's day, it shouldn't have been the state seizing the power grid, it should have been the workers. Power grabs by the state aren't terribly revolutionary, but the same move by the workers... now that'll be something exciting.
posted by Stagger Lee at 1:58 PM on May 1, 2012 [4 favorites]


No single country has all the natural resources and human capital it needs. All countries (even North Korea) realize they benefit greatly from cross-border cooperation. Some if it is labeled "foreign aid", but the vast majority of it is called "trade" or "foreign investment".

Discouraging international cooperation is not good for a country, in the long run. But it could be good for a populist politician, in the short run.
posted by Triplanetary at 1:59 PM on May 1, 2012 [6 favorites]



Discouraging international cooperation is not good for a country, in the long run. But it could be good for a populist politician, in the short run.


It seems to me that re-nationalizing national capital like the country's energy grid, which had been privatized around 20 years ago -- with the company controlling it trying to extract the maximum possible rents with the minimum possible investments during that time -- is probably going to do more good for Bolivia than giving its "populist" president a popularity boost.
posted by junco at 2:05 PM on May 1, 2012 [14 favorites]


What's the old saying again? He who generalizes is an idiot? Indiscriminately embracing any kind of foreign economic activity in your country as an a priori good without considering the specifics of the arrangement is an example of over-generalizing to the point of idiocy IMO.
posted by saulgoodman at 2:10 PM on May 1, 2012 [5 favorites]


Discouraging international cooperation is not good for a country, in the long run. But it could be good for a populist politician, in the short run.

I think this is less discouragement and more spare-the-rod thinking. The power company had plenty of chances to do the job right (in the view of the Bolvians), now they're out of chances.
posted by Slackermagee at 2:10 PM on May 1, 2012 [2 favorites]


As for all those applauding the move, consider this: this isn't an extractive industry, exploiting Bolivia's natural resources, it is about distributing electricity. Something which requires technical knowhow and a lot of capital, two things which Bolivia isn't greatly endowed with. Roughing foreign investors like that isn't going to help Bolivia acquire either...

Some people will be worse off, but for sure it won't be the Bolivians...
posted by Jehan at 2:11 PM on May 1, 2012


No single country has all the natural resources and human capital it needs. All countries (even North Korea) realize they benefit greatly from cross-border cooperation. Some if it is labeled "foreign aid", but the vast majority of it is called "trade" or "foreign investment".
Well, yeah, but coming down from the general point to the specific example: what "foreign investment" tends to mean for a lot of these countries is that foreign companies are given a license to export money. Given an effective monopoly, they are free to set prices, and often neglect the plant and strip assets while they're about it. Often, the more "cross-border cooperation" there is, the greater proportion of the country's GDP disappears overseas as repatriated profit. Let's call this system of foreign "investment" what it is: neocolonialism.
posted by Sonny Jim at 2:12 PM on May 1, 2012 [4 favorites]


Monopolies should be in the hands of the state, or at least not for private profit. Where there's no market, there's no place for capitalism.
posted by Jehan at 2:13 PM on May 1, 2012 [7 favorites]


Well you also need to know the terms under which electricity distribution was remunerated and what the history of Red Electrica in Bolivia was. Without knowing any of those things it's really really really hard to have any sort of opinion on this that isn't based purely on ideology.
posted by JPD at 2:13 PM on May 1, 2012 [10 favorites]


Monopolies should be in the hands of the state, or at least not for private profit. Where there's no market, there's no place for capitalism.

A regulated monopoly is not capitalism.
posted by JPD at 2:14 PM on May 1, 2012 [3 favorites]


According to what I've heard, rates are lower here than anywhere else in Florida.

When I lived there, many years ago, the town of Ukiah in California had a locally-owned electric company. They were great, so easy to deal with, and super-responsive if you had problems. And the rates were better than PG&E's by a fair bit, as I recall. They were one of the better features of that town.

I was long gone by the time the power shortages hit, but when the rest of California was under rolling blackouts (because of the weird laws that had been passed, forcing PG&E to interact with scammers on their terms, pretty much), it's my understanding that the lights stayed on in Ukiah.

There are some things that goverment does a very good job with. Electricity seems to be one of them.
posted by Malor at 2:16 PM on May 1, 2012 [3 favorites]


hal9k: Power to the People.

Ooh! I'll upgrade my crossbow, please.
posted by Malor at 2:18 PM on May 1, 2012 [1 favorite]


Indiscriminately embracing any kind of foreign economic activity in your country as an a priori good without considering the specifics of the arrangement is an example of over-generalizing to the point of idiocy IMO.

Indiscriminately rejecting it as an a priori evil, without any knowledge whatsoever of the specifics of the case, as most commenters seem to be doing here, also seems rather idiotic, doesn't it?

The history of privatisations in Latin America isn't exactly uplifting, but that of nationalisations is even more depressing.
posted by Skeptic at 2:21 PM on May 1, 2012 [4 favorites]


This kind of thing could either be good or bad: either a technique to redistribute resources to those who need them or a simply a stepping stone to re-privatization or some other kind of cronyism in the hands of nationalist elites.

This is one of many kinds of risks for investors. They'll deal with it fine. However, if this is cronyism-masquerading-as-populism, we should all worry about the Bolivians and Argentinians who must live under the solidified power of those elites. It's simply too soon to tell with the Bolivian move, though there's some evidence to suggest that the Argentinian nationalization is more about Kirchner's attempt to achieve dynastic power than populism.
posted by anotherpanacea at 2:39 PM on May 1, 2012 [4 favorites]


Not a good time to be a wealthy Spaniard

1585 was the last time it was really good to be a wealthy Spaniard.
posted by Renoroc at 2:50 PM on May 1, 2012 [2 favorites]


Like Argentina's oil reserves, this stuff was all privatized in the 90s because international development bigwigs at the IMF and elsewhere said it would spur growth and investment. Neoliberalization didn't deliver, so the governments are taking their assets back. Good for them.

they did get paid for the assets. They won't be able to sell them a second time. On the other hand, I'm not sure that power grids are best run by private enterprises. It was just a gimmick to cover budget holes. One large payment does not make it worth it. My understanding is that US experience is that public power is more efficient.
posted by Ironmouth at 2:53 PM on May 1, 2012


they did get paid for the assets.
A suspiciously consistent factor in those '90s privatizations was that the "bargain" nature of the prices the utility companies went for.
posted by Sonny Jim at 3:00 PM on May 1, 2012 [2 favorites]


My understanding is that US experience is that public power is more efficient.

It's more than just efficiency. Many places in the US didn't get a real electrical infrastructure (see Tenn.) until the New Deal. It's a chicken-or-egg problem: you can't have the economic development to justify investment in an electrical grid until you have electricity to the the economic development to...

And the US is going to need a new New Deal to replace a lot of the infrastructure built during the old New Deal... or you could just wait for the free market fairies to depopulate all the places with failing water/sewer/transportation/energy infrastructure.
posted by ennui.bz at 3:07 PM on May 1, 2012 [2 favorites]


A suspiciously consistent factor in those '90s privatizations was that the "bargain" nature of the prices the utility companies went for.

And one of the reasons for those "bargain" prices was that many foreign investors, who had already bitter experience of previous waves of nationalisations in Latin America, didn't even bother to bid. Spanish corporations were prominent in the 90s' privatisations not least because US investors staid away. Now it's goodbye to the Spanish, and in a couple of years it will be hello to the Chinese, I guess.
posted by Skeptic at 3:09 PM on May 1, 2012


And one of the reasons for those "bargain" prices was that many foreign investors, who had already bitter experience of previous waves of nationalisations in Latin America, didn't even bother to bid.

Right, but if private buyers aren't all that interested, what reason is there for selling a public asset at a crappy price? Presumably an ideological rather than economical one.
posted by mek at 3:36 PM on May 1, 2012 [7 favorites]


As for all those applauding the move, consider this: this isn't an extractive industry, exploiting Bolivia's natural resources, it is about distributing electricity. Something which requires technical knowhow and a lot of capital, two things which Bolivia isn't greatly endowed with. Roughing foreign investors like that isn't going to help Bolivia acquire either...
Ah yes, these Bolivians are too stupid to run a state-owned power grid (which they had actually built themselves, before it was privatized) so they should have left it in the hands of a company owned by the Spanish government.

In any event, any kind of natural monopoly, like a power grid or a phone network (or a highway system) is in essence an extractive situation. Even though you're not "taking" anything out of the ground, you can charge whatever you want to distribute power.
It seems to me that re-nationalizing national capital like the country's energy grid, which had been privatized around 20 years ago -- with the company controlling it trying to extract the maximum possible rents with the minimum possible investments during that time -- is probably going to do more good for Bolivia than giving its "populist" president a popularity boost.
Exactly. REE didn't build the power grid, they got it cheap from a corrupt prior government, and were probably trying to extract as much money as possible.
Indiscriminately rejecting it as an a priori evil, without any knowledge whatsoever of the specifics of the case, as most commenters seem to be doing here, also seems rather idiotic, doesn't it?
Well, you seem to be unaware of the fact that the Bolivians managed to build the grid themselves, and assumed they wouldn't be able to run it. So it seems to me that the person commenting without knowledge here was you.
Spanish corporations were prominent in the 90s' privatisations not least because US investors staid away. Now it's goodbye to the Spanish, and in a couple of years it will be hello to the Chinese, I guess.
Because obviously they're too stupid to run the grid themselves, right? So obviously they'll have to sell it.
posted by delmoi at 3:43 PM on May 1, 2012 [6 favorites]


Well, you seem to be unaware of the fact that the Bolivians managed to build the grid themselves, and assumed they wouldn't be able to run it. So it seems to me that the person commenting without knowledge here was you.

None of the equipment was made in Bolivia (there are maybe 5-6 companies that make large scale Transmission equipment) and I do not know, but I would be highly confident that the engineering and project management was done by foreign firms. Its not a simple project and it would be folly to try to do it w.out outside expertise. And the money to build the grid was almost certainly raised in the sovereign bond markets. Those bonds were later defaulted on, and the asset sales were part of the IMF's (misguided) efforts during the 90's to bring Bolivia back into the world of sovereign issuers.

The point is - nothing is black and white. I'm not saying the expropriation is good or the asset privatizations of good. you just can't reduce it to something that simple. You also don't know the context of why REE was targeted by Morales. They could really be doing a shitty job. The terms of their remuneration could be totally unfair. It could just be rank populism. Unless someone presents evidence one way or another you just can't say if this is a good things or a bad thing. And even then who the hell really knows.
posted by JPD at 4:21 PM on May 1, 2012 [2 favorites]


In any event, any kind of natural monopoly, like a power grid or a phone network (or a highway system) is in essence an extractive situation. Even though you're not "taking" anything out of the ground, you can charge whatever you want to distribute power.

No. This is not how natural monopoly assets in private hands work in any functioning state. There are always rules. Sometimes those rules are poorly constructed so you make more money than you should, but that's still not "Charging whatever you want"
posted by JPD at 4:24 PM on May 1, 2012


mek: "Neoliberalization didn't deliver"

Except Neoliberization DID deliver, and for many countries delivered big time. The fact everybody and their brother is talking about Brazil these days is due to the economic reforms of the 90s. Keep in mind Argentina never went through true reforms like Brazil did, they may have sold some assets here and there, but the state (and the private sector) are as sick as they've always been.
posted by gertzedek at 4:27 PM on May 1, 2012 [1 favorite]


Utilities should not be in private hands; the potential for economic exploitation and wasteful rent-seeking behaviors is too great, and with the constant demand most private enterprises have for showing accounting profit growth year over year, even the basic economics of these arrangements don't add up. Without appealing to emotional prejudices about private sector effeciency, what's the economic argument for privatizing public utilities anyway?
posted by saulgoodman at 4:30 PM on May 1, 2012 [3 favorites]


Stagger Lee: "Really though, if we're celebrating international worker's day, it shouldn't have been the state seizing the power grid, it should have been the workers."

Hey Stagger Lee, the 19th century called. You probably didn't hear because of all the racket these steam looms make.
posted by gertzedek at 4:34 PM on May 1, 2012


what's the economic argument for privatizing public utilities anyway?

In a place like bolivia that can't issue local currency denominated debt it pushes a ton of capital risk and requirement on to the private sector, usually/hopefully the foreign private sector. The argument is actually much stronger in places like that then in the US.

The scope for bad behavior for utilities that are pipes and wires is a lot lower than it is for service providers.
posted by JPD at 4:35 PM on May 1, 2012


Except Neoliberization DID deliver,

What did it ultimately deliver, though? One destructive asset bubble after another? The Chilean Economic Miracle that disappeared thousands of political dissidents and made a tiny proportion of the population wealthy while the rest served them under constant threat of political persecution? What other than indscriminate GDP growth and new more subtle forms of debt bondage has it delivered exactly?
posted by saulgoodman at 4:35 PM on May 1, 2012 [3 favorites]


The fact everybody and their brother is talking about Brazil these days is due to the economic reforms of the 90s.

A lot of stuff is getting mixed up in your comment. Changes in Brazil's fiscal policy in the 80s were enormously influential, as they put an end to runaway inflation; the debate on the effects of privatization in the 90s remains open. And don't confuse the privatization of utilities with the privatization of industry: most of Brazil's privatization was non-utility industry, like steel mills, mining companies, aeronautics, etcetera.
posted by mek at 4:41 PM on May 1, 2012 [3 favorites]


In a place like bolivia that can't issue local currency denominated debt it pushes a ton of capital risk and requirement on to the private sector,

If America isn't even powerful enough to force private companies to fully absorb their own risks (as the financial crash and the socialization of all that nominally private risk amply demonstrated), how is Bolivia going to force the multinationals to eat their own risk if it came to a real crisis point? Its still a public good--in the event the private sector failed catastrophically, the public sector is still ultimately on the hook for those risks.
posted by saulgoodman at 4:45 PM on May 1, 2012


mek: "Right, but if private buyers aren't all that interested, what reason is there for selling a public asset at a crappy price? Presumably an ideological rather than economical one."

Because the "asset" becomes nothing more than a place of employment for politically connected people, enjoying fantastic salaries without bothering to show up for work. Also the "asset" commands a public works budget, out of which a sizeable percentage is skimmed off the top regularly due to endemic corruption by the same politically connected people mentioned above. The end game of the economic activity of the "asset" becomes not serving the public (before privatization, up until the early 90's, you needed to wait upwards of five years to get a landline phone installed in Brazil) nor pumping money into the state's coffers (before rules were changed in the 90s, Petrobras, the Brazilian state owned oil monopoly, has historically sent more money to its own pension fund than to the state), but providing privileges to a political class.

In that scenario, there's no price too low to get rid of these assets - if they are given away for free, the state still benefits.
posted by gertzedek at 4:47 PM on May 1, 2012 [1 favorite]


how is Bolivia going to force the multinationals to eat their own risk if it came to a real crisis point? Its still a public good--in the event the private sector failed catastrophically, the public sector is still ultimately on the hook for those risks.

Because the multinationals wrote the debt at worst guaranteed on the assets bought with the proceeds at best guaranteed higher up in the corp structure. The government isn't on the hook at all. The debtholders don't have a claim on the government. Actually if things were dire enough a smart government could probably buy out the debtholders on the very cheap.
posted by JPD at 4:50 PM on May 1, 2012


So public corruption is a bad thing and the only alternative is to give the private sector a chance to try their own approach to cornering the market and corrupting it? Because there's nothing preventing the private sector from being corrupted either.
posted by saulgoodman at 4:53 PM on May 1, 2012 [2 favorites]


This is asinine. The record is extremely clear: utilities are the poster boy of what is best left to government. By its very nature, utilities are a public good - you extend service even in areas where the there is negative economic return, because there are other values of essence to society than strictly economic values. Private industry doesn't care about those values, which is why they don't serve any areas that don't justify economic returns, and you get vast areas that are permanently fucked - whether telephony/communication, road/transportation, postal services or electricity. If government had not stepped in, you'd still not have electricity in vast areas in the U.S.. Whenever there are schemes to provide alleged "competition" to the Post Office, those services cherry pick the customer areas and services and leave the PO holding the bag, at which point various bright bulbs proclaim crisply that "government can't run anything efficiently", which is another long-range tactic to privatize public good and grab the revenue stream for their buddies. Roads, telephones, and so forth - a sorry record. And what happened in California once "competition" was brought into the power industry? And what about the nuclear industry - offloading long range costs onto the taxpayer and grabbing the revenue stream into private pockets.

Private industry has its place, but utilities is one area that's emphatically ill suited for that.
posted by VikingSword at 4:56 PM on May 1, 2012 [7 favorites]


That was for gertzedek, btw. There's no monopoly on the potential for cronyism and corruption on either side of the public/private divide. Both are demonsrably corruptible.
posted by saulgoodman at 4:56 PM on May 1, 2012 [3 favorites]


Changes in Brazil's fiscal policy in the 80s were enormously influential, as they put an end to runaway inflation; the debate on the effects of privatization in the 90s remains open.

Hold on - I thought it was Cardoso's reforms in the early 90's that are widely seen as what ended hyperinflation. Cardoso was seen as if not a neoliberal, pretty close to one.
posted by JPD at 4:56 PM on May 1, 2012 [1 favorite]


mek: "Changes in Brazil's fiscal policy in the 80s were enormously influential, as they put an end to runaway inflation; the debate on the effects of privatization in the 90s remains open."

You're mistaken. The fiscal policy changes in the 80s were very limited in scope and did nothing to contain inflation. Runaway inflation wasn't controlled until 1994 and the fiscal responsibility laws didn't come until the mid 90's as well.

"The debate on the effects of the privatization" remains open because members of the current government were radically opposed to it at the time (as they were to the plan that actually succeeded in controlling inflation), and even though this government has benefited greatly from these reforms they can't afford to give any credit to the policies they viciously denounced 20 years ago.

mek: "most of Brazil's privatization was non-utility industry, like steel mills, mining companies, aeronautics, etcetera."

Yeah, you don't know what you're talking about. The whole of Telebras was privatized, together with Embratel and several regional energy players. Telebras was the crown jewel of the privatization process.
posted by gertzedek at 5:00 PM on May 1, 2012 [1 favorite]


gertzedek: Except Neoliberization DID deliver ...Keep in mind Argentina never went through true reforms like Brazil did, they may have sold some assets here and there, but the state (and the private sector) are as sick as they've always been.

Ah, once again conservatives just make things up to support their ideological beliefs since reality has a well-known liberal bias. The truth is that Argentina told the IMF to go stick it in 2001 and their economy has grown much faster than Brazil's ever since. Today the per capita income in Argentina is 40% higher than Brazil.
posted by JackFlash at 5:03 PM on May 1, 2012 [6 favorites]


saulgoodman: "So public corruption is a bad thing and the only alternative is to give the private sector a chance to try their own approach to cornering the market and corrupting it? Because there's nothing preventing the private sector from being corrupted either."

Yes, there could be - you could create independent regulatory agencies (like the FCC in the US) and task them with being watchdogs. Of course you need to prevent the regulatory agencies from being staffed with cronies, as your government already is, but you can write the rules for that as part of the privatization process. This was done somewhat successfully in Brazil. Not so much in Argentina.
posted by gertzedek at 5:06 PM on May 1, 2012


There's no magic accountability woowoo that only takes hold in privately-owned companies. Regulatory oversight can be conducted over public and private companies both. And corruption isn't unique to government, either: just look at the private American banking industry. (Spare us from the Fannie and Freddy counterpoint.)
posted by mek at 5:32 PM on May 1, 2012 [3 favorites]


JackFlash: "The truth is that Argentina told the IMF to go stick it in 2001 and their economy has grown much faster than Brazil's ever since. "

Since 2002 Brazil is governed by a left-wing government, so I don't understand what your dig on conservatives is supposed to mean.

I think it's easy to conclude Argentina's economy grew faster than Brazil's because their economy cratered completely in 2001. (BTW Brazil had other problems hindering growth as well - world's highest interest rates and incredible levels of government expenditure, two issues that were completely neglected by the government in recent years)

Argentina has had historically much better economic indicators than Brazil. They had European levels of GPD per capta up until the 60s. The question you should be asking is why a country so wealthy finds itself in such dire economic straits in the 80s-90s?
posted by gertzedek at 5:33 PM on May 1, 2012


mek: " And corruption isn't unique to government, either: just look at the private American banking industry. "

If this is your example of corruption in the private sector, I am glad to see you have lived a very charmed life and you don't know what corruption is. This is Latin America, son - this isn't a Goldman Sachs trader selling junk to a Deutsche Bank trader.
posted by gertzedek at 5:35 PM on May 1, 2012


Gertzedek, you are the one who claimed that Argentina was doing so much worse than Brazil because Brazil accepted neoliberal (conservative) reforms and Argentina did not. In fact, contrary to your belief, Argentina is doing much better than Brazil, despite telling the neoliberals (conservatives) to stuff it. Note that neoliberalism is a right wing conservative ideology.
posted by JackFlash at 5:41 PM on May 1, 2012 [1 favorite]


None of the equipment was made in Bolivia (there are maybe 5-6 companies that make large scale Transmission equipment) and I do not know, but I would be highly confident that the engineering and project management was done by foreign firms. Its not a simple project and it would be folly to try to do it w.out outside expertise. And the money to build the grid was almost certainly raised in the sovereign bond markets. Those bonds were later defaulted on, and the asset sales were part of the IMF's (misguided) efforts during the 90's to bring Bolivia back into the world of sovereign issuers.
The fact that a both issues sovign bonds and builds infrastructure does not mean that the infrastructure was paid for by foreign investment. Presumably they had a tax base with which to make interest payments, otherwise no one would have bought the bonds in the first place.

That's like saying all our highways in the U.S. have been paid for by the Chinese and Japanese, because we pay for it by issuing bonds, then pay back the bonds with tax money. That's how all countries work.
The point is - nothing is black and white.
Especially when you do something like equating issuing debt with forigeners having paid for all of a countries infrastructure.

The other point you made was complete supposition - that they probably hired outside firms. That's probably true to a certain extent, but it isn't a given and you have no idea how much work was done by outside firms. I mean you're literally just guessing. The U.S built it's power grid without outside help, it's not impossible for them to have done so.

Again, it's likely they had some outside help, but really you're just guessing about the extent.
Unless someone presents evidence one way or another you just can't say if this is a good things or a bad thing. And even then who the hell really knows.
Sure, you're not presenting any evidence to back up the claim that the grid was built by foreign countries and paid for with later defaulted on bonds.
No. This is not how natural monopoly assets in private hands work in any functioning state. There are always rules. Sometimes those rules are poorly constructed so you make more money than you should, but that's still not "Charging whatever you want"
Uh, sure. But if REE was following whatever rules the government set down, there would be no reason to nationalize.
Because the "asset" becomes nothing more than a place of employment for politically connected people, enjoying fantastic salaries without bothering to show up for work. Also the "asset" commands a public works budget, out of which a sizeable percentage is skimmed off the top regularly due to endemic corruption by the same politically connected people mentioned above.
So you're saying that giving away public assets would make a corrupt government less corrupt?

The idea that somehow corporations are somehow intrinsically less corrupt then governments here is kind of insane. Why would that be true. All the stuff you just outlined could still happen in a private company. In fact, there's no motivation at all to fix it, since it's just the shareholders who get hosed, rather then the "public".

When Eric Schmidt was the CEO he put one of his mistresses in charge of their NY advertising office. The link isn't to an article that talked about it – Schmidt has had too many mistresses for me to google up the exact story. If it happened at a publicly owned company, it would be a huge scandal. But so long as a private company makes money for investors, why would anyone care? "Corruption" at a private company isn't even corruption, it's just business. So long as money is made, no one cares.
posted by delmoi at 5:46 PM on May 1, 2012 [3 favorites]


JackFlash: "In fact, contrary to your belief, Argentina is doing much better than Brazil"

I'll won't debate this point further, because it's delusional. I know Naomi Klein told you the 2001 Argentinian crash was a foundational event. It wasn't. It sucked for Argentinians then and it pretty much still sucks now.

Ultimately, we're talking about the country whose government has been blatantly lying about its statistics since at least 2007. Whose government basically seized control of the central bank last month. So yeah - believe what you want to believe if you think the evidence is that strong. But the fact that you put Argentina as an example to be followed tells me much more about you than it will ever tell me about Argentina.

I'm bowing out of this thread as I don't want to hog it. Adiós.
posted by gertzedek at 5:56 PM on May 1, 2012 [1 favorite]


Yes, those pesky facts have a well-known liberal bias.
posted by mek at 5:59 PM on May 1, 2012 [1 favorite]


this isn't an extractive industry, exploiting Bolivia's natural resources, it is about distributing electricity. Something which requires technical knowhow and a lot of capital

What does that mean, exactly? Oil and gas exploration and production doesn't require technical knowhow and a lot of capital?
posted by ZenMasterThis at 7:25 PM on May 1, 2012


Except Neoliberization DID deliver

I don't think this book (Bad Samaritans, by Ha Joon Chang) is the be-all and end-all - Chang certainly cherrypicks his countries quite carefully. However one thing it certainly does do is demolish the argument that neo-liberal reforms are a universal good, and specifically demolish much of the neo-liberal cant regarding the seventies, eighties and nineties.

The record for neo-liberalism is at least as mixed, if not more so, than state-based reform.
posted by smoke at 8:15 PM on May 1, 2012 [1 favorite]


here's a graph of Argentina and Brazil's GDP since 1988. They both went through a decline in the late 1990s, and then a rebound after 2002. Brazil's growth looks more impressive, but numerically they both just about quadrupled their GDP from 2002 to 2012.

The only real difference is that Argentina crashed farther. Their GDP was cut down to 1/3rd from '98 to '02, while Brazil's went from $8.7T to $5T

Obviously both countries are doing better in the 2000s then they were in the 1990s. It's a bit wishful thinking to credit success in the 2000s with policies that were put in place in the 90s and resulted in disaster at the time.
posted by delmoi at 8:33 PM on May 1, 2012


or you could just wait for the free market fairies to depopulate all the places with failing water/sewer/transportation/energy infrastructure.

This is my bet.
posted by Reasonably Everything Happens at 8:55 PM on May 1, 2012


Brazil's growth looks more impressive, but numerically they both just about quadrupled their GDP from 2002 to 2012.

Sorry for the double post, but another point here is that Brazil has 3-4x as big population and it has significantly better climate/resources. It's not unlike US/Canada as far as comparisons...and Argentina is still doing ok.
posted by Reasonably Everything Happens at 8:59 PM on May 1, 2012


Delmoi, that graph you linked to is very misleading because shows raw GDP uncorrected for inflation and measured in U.S. dollars. The problem with that type of graph over long periods of time is that it is greatly influenced by fluctuating exchange rates between each of the country's currency and U.S. dollars. What you are seeing is mainly a devaluation of the dollar relative to Brazil and a devaluation of the Argentina peso after the default in 2001, moving in opposite directions. In other words, you are mostly seeing relative changes in the two measuring sticks rather than the thing you are measuring. These exchange rate changes do not reflect the actual change in living standards of domestic citizens since they buy goods in the local currency, not U.S. dollars.

A better measure is the per capita income adjusted for constant dollars using purchasing power parity. This indicates the change in actual living standards for the citizens because it measures the amount of goods a citizen can buy. As shown in my previous link from above, Argentina's living standards have improved 40% more than Brazil in the last decade. This is the opposite of the misleading impression given by your raw GDP graph.
posted by JackFlash at 9:10 PM on May 1, 2012


Argentina's living standards have improved 40% more than Brazil in the last decade.

Right, but Argentina still had a huge crash in 2001, even when measured in per capita GDP, whereas when you look at Brazil, there's actually no down turn in that measure. So from the perspective of the average Brazilian, things have been going smoothly for 20 years.

If you measure from Per-cap PPP-GDP 1998 you get a 41% increase for Argentina, and a 40% increase for Brazil. Only a 1% difference.

If you measure from 2002, you get a 50% increase for Argentina, and a 34% increase for Brazil. - so I don't really see how you can say Argentina did 40% better, there appears to be just a 16% improvement.

If you go all the way back to 1980, which is as far back as the slider goes you get a 66% increase for Argentina, and a 65% increase for Brazil.

So really, Over the past 30 years, Brazil and Argentina have both seen about the same level of growth. The difference is that Argentina's ride has been a lot bumpier, so it's easy to pick specific points in time that make it look really good - 2002 happens to be one of those years, due to the 2001 crash.

Certainly you could argue that the post 2001 policies did a really good job of getting it to bounce back to it's normal growth rate, but over the long term the two countries have performed about the same.
posted by delmoi at 9:45 PM on May 1, 2012


First of all, in the context of this discussion, the relevant period is starting in 2002, since that is the year that Argentina abandoned the IMF's neoliberal policies and defaulted on their debt, to the consternation of conservatives everywhere. The conservative argument is that abandoning neoliberalism damaged Argentina's economy in comparison to Brazil which stuck to the neoliberal reforms. But this ideological belief is belied by the facts as illustrated in your 2002 graph.

I think you are having some math problems. Note that Argentina increased from $8K to $16K. That is a 100% increase. Brazil increased from $7.4K to $11.2K. That is a 51% increase. Comparing the final values $16K is 42% higher than $11.2K indicating that Argentinians have a standard of living 42% higher than Brazil, starting from nearly equal levels in 2002.

What this illustrates is the falsehood of the conservative myth that abandoning the IMF and its neoliberal policies in 2002 would be bad for Argentina. To the contrary, it has been very good for Argentinians. Since then Argentina's economy has performed much better than the Brazil's economy.
posted by JackFlash at 10:21 PM on May 1, 2012


JackFlash, Argentina's government sacked the head of its statistics department back in 2007 when she refused to cook the books too blatantly. It has made it illegal to publish independent inflation estimates.
From that point on, any discussion involving standard of living statistics in Argentina is about as sensible as discussing whether Han Solo shot first: we are talking about works of fiction in both cases.
Meantime, in the real world, there are shortages even of its national beverage, Yerba mate.
posted by Skeptic at 10:50 PM on May 1, 2012 [2 favorites]


The history of privatisations in Latin America isn't exactly uplifting, but that of nationalisations is even more depressing.

you're right, getting overthrown by military juntas backed by the US is kind of a bummer :\
posted by p3on at 11:06 PM on May 1, 2012


From that point on, any discussion involving standard of living statistics in Argentina is about as sensible as discussing whether Han Solo shot first

And yet even given the complaints re: Argentina's inflation book-cookery, we can get pretty accurate information on their real inflation rate. It's almost like that kind of thing is difficult to conceal. Similarly, if Argentina's GDP, life expectancy, whatever was totally fictional, there would have to be a massive international conspiracy to conceal the dark truth, involving countless corporations, NGOs, UN affiliates, etcetera. But sure, let's go with that. Because they lied about inflation in 2007, obviously the entire nation is living a lie and everyone's in on it, just to conceal the relative success of neoliberal policy in Brazil.
posted by mek at 12:15 AM on May 2, 2012


Because they lied about inflation in 2007, obviously the entire nation is living a lie and everyone's in on it, just to conceal the relative success of neoliberal policy in Brazil.

They didn't lie about inflation just in 2007. They've been lying about it ever since, and suppressing conflicting reports. Now, JackFlash linked to data about the progression of Argentina's GDP measured on the basis of purchasing power parity. Obviously, if at least the data about inflation, and thus purchasing power, are fixed, any statistics based on purchasing power parity are pretty much worthless. The question is, on which inflation data are based the stats linked to by JackFlash? Apparently those stats come the World Bank, which is an international organisation, of which Argentina is a member state. Thus, even if the boffins at the WB are perfectly aware that official data from Argentina are utter bullshit, those are the data they have to work with. Unlike us.

Also, I'm sure that the quite leftist Workers' Party government of Brazil would object to your describing their policies as "neoliberal"...
posted by Skeptic at 2:03 AM on May 2, 2012 [1 favorite]


First of all, in the context of this discussion, the relevant period is starting in 2002, since that is the year that Argentina abandoned the IMF's neoliberal policies and defaulted on their debt
First of all, this is a derail. But that's ridiculous. You can't compare two countries using a starting point immediately after one of them had a crash. Yeah, it's possible that bad policies might dampen a recovery, and it's good that that didn't happen. But comparing Argentina's recovery rate with Brazil's normal growth rate is disingenuous.

In fact, I don't even get the point. Both countries have had conservative and then liberal governments. Trying to claim that one or the other is a vindication of one or the other ideology is kind of ridiculous.

Clearly over the long term, they have similar growth rates, with Brazil having a 'smoother' ride.
posted by delmoi at 2:03 AM on May 2, 2012


What I don't even get is why Brazil is held up as an exemplar of "neoliberal" policy. The Lula government was hailed worldwide as a great example of what 'liberal' (as in "progressive") government can do. A lot of his success comes from reducing income inequality and helping lift people out of poverty, and he was succeeded by his chief of staff. The whole "Argentina did better then Brazil, so that proves the left-wing viewpoint" argument makes little sense to me.

(The nomenclature conflict where 'liberal' means left wing in the u.s. but 'liberal' and 'neoliberal' mean right wing internationally (i.e. the Australian liberal party) makes it kind of difficult to explain this stuff :P)
posted by delmoi at 2:13 AM on May 2, 2012


What I don't even get is why Brazil is held up as an exemplar of "neoliberal" policy.

I get even less why the stridently nationalistic Peronist government of Argentina is held up as an example of "leftist" policy...especially considering that many in the current government were cheerleaders of Menem's privatisation drive.
posted by Skeptic at 2:18 AM on May 2, 2012


Some of us are talking about the 90s, and others are talking about the following decade. Understandably, that's causing some confusion. Anyway, it's ridiculous that some people in this thread want to simultaneously claim that statistics about Argentina can't be trusted and their statistics about Argentina can be trusted. That's flat-out stupid. You can't have your cake and eat it too.
posted by mek at 2:19 AM on May 2, 2012


Anyway, it's ridiculous that some people in this thread want to simultaneously claim that statistics about Argentina can't be trusted and their statistics about Argentina can be trusted.

mek, I hope you don't notice how much you are sounding like an evolution denier ("those are all theories!"). It isn't just that Argentina's official stats can't be trusted: they have long been proven as utter lies, not least by the Argentine government itself, which on one hand suppresses the publication of more accurate data, and on the other hand tacitly acknowledges those inofficial inflation estimates in wage negotiations with the trade unions which provide them with much of their political support.
posted by Skeptic at 2:27 AM on May 2, 2012


I hope you don't notice how much you are sounding like an evolution denier
He doesn't sound like an evolution denier to me. Denying something that some random person asserts with no evidence whatsoever is the opposite of an evolution denier. If you think Argentina is cooking it's books, and especially if you're going to insult people who disagree, you should really present some evidence.
posted by delmoi at 2:36 AM on May 2, 2012


you should really present some evidence.

delmoi, have you bothered to read my links and that of gertzedek?

If not, here's more.
posted by Skeptic at 2:45 AM on May 2, 2012


Yeah, I went back over the thread and did see those links. I was about to post a correction. That's an interesting problem. I don't know how much Argentina's membership in the world bank affects their stats, though. I wouldn't think they would just pass on bad data provided by member countries, although I suppose it's possible. It seems like it would make their data pretty useless.
posted by delmoi at 2:50 AM on May 2, 2012


I wouldn't think they would just pass on bad data provided by member countries, although I suppose it's possible.

They actually do. Even the IMF used official Argentine data until last September, when they decided that enough was enough.

For international organisations, questioning the official stats of their member countries raises a lot of difficult diplomatic and political issues. This is also why Eurostat and the European Commission accepted official Greek debt and deficit data, even though they perfectly knew those data were fishier than a bowl of taramasalata.
posted by Skeptic at 2:56 AM on May 2, 2012


Delmoi, you complain about the context of the argument. I didn't choose that context or time period. Conservatives did. The IMF, conservatives and neoliberals hold up Argentina as an example of why countries should not default on their debt as Argentina did in 2002 and invariably compare Argentina to Brazil. Except the real numbers don't support their argument. The same way conservatives ignore the numbers undermining their austerity policies.

This argument is the same argument they make about Greece defaulting and about underwater homeowners defaulting. They make up stories about the evil to befall you if you default. Those stories are designed to scare you because they want to protect the creditor class. If people realized that the world does not end if you default and your life might actually improve if you default, creditors would be worse off. They are desperate to prevent that and they tell lies to scare and shame people into struggling for decades to pay onerous debts they have no hope of paying. They want to suppress the fact that Argentina's economy grew faster than Brazil's after the default.
posted by JackFlash at 7:16 AM on May 2, 2012 [1 favorite]


They want to suppress the fact that Argentina's economy grew faster than Brazil's after the default.

Except that it didn't. Argentina's economy grew faster than Brazil only in Ms. Kirchner's mind, and the data which you cite are about as credible as North Korea's.
posted by Skeptic at 7:36 AM on May 2, 2012 [1 favorite]


Delmoi, you complain about the context of the argument. I didn't choose that context or time period. Conservatives did.
The problem is, if we are trying to figure out what actually happened, it doesn't really matter who said what first, what matters is what's actually true. Picking a starting point right after a collapse in one country that didn't affect the other is not a good way to compare. Ideally what you'd want to do is take the long-run trend (which is basically the same for both countries) and see how divergent they were. I just picked a couple arbitrary points (the last peak for both countries, for comparison, and the earliest point I could get on the chart).

Even the averaging function you use can cause some bias. The bottom line, at least from what I can tell is that there isn't really much you can say either way. Given the fact that both sides are claiming the data vindicates them, that seems kind of obvious :P

In a few years, I guess, we'll get the results of this experiment in Bolivia. If your country can run a surplus, or else sell bonds to it's own citizens, these foreign debt issues are not that big of a deal. The U.S. doesn't need to worry much because most of the people who buy bonds are US citizens. The same is true in Japan.
posted by delmoi at 7:56 AM on May 2, 2012


If look at countries by Debt/GDP Bolivia is pretty low on the list 36%. Compared to 69% for the US, 85% for the UK and 208% for Japan.

It looks like they ran a budget surplus for the past for years. 3.71% of GDP last year. If they did they do that for 10 years in a row, their debt will dissipate.

So it isn't like they have to worry about international credit markets at the moment.
posted by delmoi at 8:30 AM on May 2, 2012


It isn't just that Argentina's official stats can't be trusted: they have long been proven as utter lies

Which is fine, as far as that argument goes. Argentina lies about inflation therefore Argentina might be lying about anything. A bit of a stretch, but not totally insane. But why does it follow from that, that I should believe your now-baseless claims? Since you've already dismissed all the available evidence as biased, we could be discussing Argentina's secret hoverboard industry and their links to a race of shapeshifting lizards that live inside of Earth's hollow with equal merit.

I mean, if everything is suspect, what is your argument based on? Can we not believe Argentina's infant mortality rate? Its life expectancy numbers? Its literacy rate? And if it's all unknowable because they're lying about inflation, why are you trying to discuss it at all in a thread about Bolivia - let alone hold it up as a factual example of some argument, when you're going to flee from it as soon as you're questioned on the matter?
posted by mek at 12:27 PM on May 2, 2012 [2 favorites]


Argentina lies about inflation therefore Argentina might be lying about anything.

But that is not my argument. My argument is much more pedestrian and specific: you can't calculate per capita GDP growth correctly, in particular in Purchasing Power Parity terms, using completely bogus inflation data. Now, what am I doing discussing Argentine per capita GDP in a thread about Bolivia? Because upthread, JackFlash brought up Argentina's purportedly phenomenal per capita GDP growth as an example to follow. Not its infant mortality rate, not its life expectancy numbers, not its literacy rate, but its per capita GDP growth in PPP terms. Which is, as it happens, a completely meaningless measure without reliable inflation data.
posted by Skeptic at 1:53 PM on May 2, 2012


Evidence Argentina is Manipulating GDP data as well?
posted by JPD at 12:57 PM on May 8, 2012


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