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Leave aside one or two rogue results and the pattern of recent opinion polls points clearly to a government triumph in next Sunday’s election in Venezuela. Recent polls by Zogby International and Carolina Bescansa (of the Universidad Complutense de Madrid) all show President Hugo Chávez in the lead by about 20 percentage points. It would be surprising if it were otherwise. Historically, incumbent Venezuelan governments have done well in elections during periods of high oil prices. And Mr Chávez has been blessed with a boom unparalleled in the country’s history. Indeed, high oil prices, high government spending and spiralling bank credit are fuelling close to double-digit economic expansion. Signs of ebullient consumerism are everywhere. In middle class areas of Caracas, bars and restaurants are heaving. Even in smaller cities like Merida the streets are clogged with imported new cars.
Even so, Mr Chávez may not have everything his own way for much longer. Even if oil prices stay high, there are already signs that Mr Chávez’s economic and social model is coming under strain. Polls show that even government supporters are concerned about corruption, inefficiency and crime. There are indications too that the impressive network of social infrastructure built up in the last three years has been badly stretched of late. During a visit to two peripheral areas of Caracas – El Junquito and Santa Eduwigis – the FT found evidence of shortages of doctors and medicines in the small clinics – or modulas – that serve as centres for Barrio Adentro, the primary health programme.
The campaign of Manuel Rosales, the opposition candidate, has successfully highlighted some of these concerns. Indeed, his campaign has been impressive. More than any other opposition leader since Mr Chávez first won power in 1998, the governor of Zulia has extended his support beyond the middle class into a broader social base. Even so, after several years of disastrous opposition politics, culminating in last year’s decision to boycott legislative elections, victory is probably out of Mr Rosales’ reach. His challenge will be to build on his advances and establish an effective opposition during Mr Chávez’s next term in office. All the indications are that the economic and social terrain looks likely to become more favourable for such a movement in the next couple of years.
More meddling in Argentina
In President Néstor Kirchner’s eagerness to drive Argentina’s inflation down to single digits by the end of the year – after it doubled during 2005 to 12.3 per cent – his economic interventionism is pushing delicate relations with farmers to the limit once again.
High international prices for agricultural produce have been a mixed blessing for the sector, one of Argentina’s biggest exporters and a key motor of growth – but also of inflation, due to the heavy weighting of agricultural produce in the basket of goods used to track prices. While business has been good for farmers, it has been marred by bitter clashes with the government over a near-complete ban on beef exports, hikes in export duties on dairy produce, restrictions on wheat exports, and severe diesel shortages that have disrupted planting for next year’s harvest.
Farmers are now threatening to strike for a second time this year in protest at the latest round of government meddling, which includes export restrictions on corn – the international price of which has been rocketing – and renewed restrictions on beef exports, designed to shield the domestic market from international prices while ensuring adequate supply.
However valid their complaints, farmers are not exactly suffering. But persistent government intervention will only cause distortions in the economy to mount and the business climate to deteriorate further. Controlling prices may produce the desired effect on inflation: the target of pushing it below 10 per cent this year looks achievable, yielding significant political dividends before presidential elections due next year. But Mr Kirchner could be around long enough to regret such short-termism.
Brazil’s package of wind …
Guido Mantega, Brazil’s finance minister, has promised to provide more details this week of a package of measures announced on November 23 that include tax breaks of R$12bn ($5.5bn) for industry and a new fund for popular housing of a further R$15bn.
While welcoming the measures in principle – they are designed to promote investment, which Brazil badly needs – many observers remain puzzled over how they will work. Take the housing fund. It will pay two thirds of the value of housing-loan repayments for poor house-buyers, who will pay the remainder themselves. The subsidy will come from the FGTS, an unemployment insurance fund to which workers and employers contribute each month. The trouble, said Miriam Leitão, a radio commentator, is that money in the FGTS is not the government’s to hand out – it belongs to the workers. Similar doubts surround financing of the other measures, which Ms Leitão summed up as “a package of wind”.
The confusion is typical of the policy hiatus in Brazil since President Luiz Inácio Lula da Silva won a second four-year term (from January 1) in October’s elections. The president has called for “daring” proposals to get the economy growing by at least 5 per cent a year from 2007 – double the average of the past 15 years. Most economists agree this will only happen if the government first enacts deep spending cuts including reform of the bankrupt pensions system. But this is one truly daring proposal the president has so far refused to sanction.
… yet to take off
Hardly had Mr Mantega flagged his proposals when the planning ministry announced another downward revision of expected economic growth this year, to just 3.2 per cent – embarrassingly short of the 4 to 4.5 per cent promised during the election campaign but still optimistic compared to the less than 3 per cent expected by most market economists. Mr Lula da Silva shrugged off the news, saying he was “tired of predictions” and adding: “If what we expected hasn’t happened, we can’t cry over spilt milk. Let’s get working to make sure it happens next year.” He promised to “unlock” the economy but delayed any announcement of how he will do it: “The idea is to get everything ready by December 31 so that we can announce [our plans] in the next government.”
The beginning of the end for Mexican monopolies?
Is the game finally drawing to a close for Mexico’s private monopolies? For years, a handful of business groups have dominated vital sectors of the economy, setting prices more or less as they wish and stifling competition whenever it tries to surface.
But a ray of hope shone bright last week when Felipe Calderón, Mexico’s president-elect, named the six cabinet members that will comprise his economics team including, most significantly, Luis Téllez as his transport and telecommunications secretary. Mr Téllez, a member of the Institutional Revolutionary Party (PRI) and a former energy secretary under President Ernesto Zedillo, said Mexico must inject competition into its economy to reduce prices for consumers and make the country more efficient.
Better still, he identified the telecommunications sector as one of the most troubled areas and stressed the need for more competitors to reduce unacceptably high prices. For years, market concentration in the sector has stifled competition and kept Mexico’s telephone charges among the highest in the world. Mr Téllez’s comments must have sent tremors through the offices of Carlos Slim, owner of Telmex, the privatised telecommunications company which controls more than 90 per cent of fixed lines, and Telcel, which accounts for about 80 per cent of the cellular market.
What makes Mr Téllez’s stance on competition more promising is the fact that this year Mexico finally put rules in place to make life uncomfortable for any company indulging in monopolistic and anti-competitive practices, giving Mexico something resembling the anti-trust authorities of fully developed countries.
Admittedly this is Mexico, where things often move slowly. But there finally appear to be both the legal framework and political will required to put an end to one of Mexico’s most insidious problems.
Invalided since the end of July by stomach surgery, Fidel Castro looks set to make an appearance at his delayed birthday celebrations next Saturday. But all the indications are that the Cuban leader is extremely frail and that his appearance will be brief. The platform at the Plaza de la Revolución, where Fidel is expected to oversee a military parade, has been designed to allow him to enter and leave without being seen. And from the positions allocated to them photographers will find it hard to see the president, forcing them to rely on official footage presumably prepared to show Castro in the most favourable light.
By Richard Lapper, Benedict Mander, Jonathan Wheatley, Adam Thomson and Marc Frank.
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