Article Courtesy from Trust Services S.A.

Letter From Panama
July, 2006.
Volume 8
Number 3


Season of Uncertainty

June saw the start of this year’s hurricane season in the Atlantic, the Caribbean and the Gulf of Mexico that will only finish at the end of November. It is the season of uncertainty for those within the hurricane zone who will not associate the abbreviation WMD with Iraq; in their minds, until after November, it will be short for Winds, rather than Weapons, of Mass Destruction. At the time of writing it has not happened, but if one or more devastating storms do strike North America, the White House’s attention will be diverted temporarily to strictly domestic affairs.

Many Latin American commentators, however, feel that with or without hurricanes, President Bush has not given sufficient attention to Latin America during the last few years. The outcome of this year’s presidential elections in Latin America will have a significant political impact for the region so it is important for the United States to not only look east but south as well. The Iranians have consumed much of Washington’s time and are advocates of Benjamin Disraeli’s aphorism that in politics nothing is contemptible. They have employed the tactic of ’a’ziyat (which in Persian means “systematic annoyance”) in dealing with the West over their uranium enrichment plans; they have stalled, stepped back and presented fresh arguments which have frequently wrong-footed the White House in particular.

The approach to politics may be different in Latin America but not the element of surprise. Several years ago no one would have imagined that a leftist, former lathe-operator and trade-union leader, Luiz Inácio Lula da Silva, could become president of the world’s fourth-biggest democracy, Brazil; that a socialist woman, Michelle Bachelet, in Chile, and a radical indigenous leader in Bolivia, Evo Morales, would become presidents in their respective countries.

It is Brazil, however, that is likely to steer the continent’s future course at a time when its own foreign policy has been difficult to get right due, in large measure, to the activities of Mr. Chávez in Venezuela and Mr. Morales in Peru. Both have been a challenge for the pragmatic Brazilian president who prefers consensus to confrontation. Brazil has its own problems, of course. It has a population of 186 million (equal to the total for the rest of South America) with a land area larger than all 25 European Union countries combined; but when its economic performance is compared with other big emerging economies, the results look disappointing. Over the last three years the economy has grown by an annual average of 2.6% and despite booming times, growth of only 4% is expected for 2006. The problems are manifold and the country is saddled with a fractious Congress where no party enjoys a majority.

But the Brazilian president, born into extreme poverty, is used to adversity and has displayed the intestinal fortitude that today sees him occupying the Planalto Palace. He was one of 23 children of a farmer from the north-eastern state of Pernambuco. The family moved to São Paulo in the 1950s in search of jobs and as a teenager he worked in a screw factory where he lost the little finger of his left hand. In his mid-20s he was a leader of the metalworkers’ union and organised the first strikes under the military government in the mid-1980s. He campaigned for the presidency three times before triumphing in 2002. The next presidential elections are this October but his rivals know that this is a man not to be under-estimated.

Putting out Fires

Venezuela has elections in December where Hugo Chávez represents the other face of South American politics. Unlike his moderate social democrat counterpart in Brazil, he is a radical populist. In fact, the future of the continent is in the hands of two distinct political philosophies: liberal democrats (a mixture of both right and left persuasions) and autocratic populists. Hugo Chávez model’s himself on his mentor, Fidel Castro, who has no election concerns. This doyen of dictators will celebrate his 80th birthday next month and the Cuban revolution, which brought him to power, is in its 48th year.

The United States no longer enjoys the same regional influence that it did back in 1823 when several Latin American countries had just gained independence from Spain and the US president, James Monroe, announced his doctrine to deter any future European ambitions of dominance (especially from the combined efforts of France, Russia and Spain). Today, by contrast, China’s influence is palpable as it applies its “peaceful rising” policy which is being promoted in Latin America (and Africa as well). China is replicating the approach adopted by the US that created successful economies in Taiwan, South Korea and Chile where sound institutions were established despite harsh dictatorships. Cuba is one of the beneficiaries. China (as well as Venezuela) is helping Cuba slowly emerge, after losing the sponsorship of the former Soviet Union 15 years ago, from an economic wilderness. Help has also come from an unlikely source. In 2005 the Governor of Louisiana sold rice and dairy products worth $15 million to Cuba (she took advantage of a loophole in the US trade embargo against Cuba) and celebrated the deal by going to Cuba and eating lobster with President Castro. The March visit may have caused a political storm, but nothing as devastating as the one nature delivered (Hurricane Katrina) and which struck her state that August, the same month that Fidel Castro celebrated his birthday.

Who will replace this indomitable septuagenarian? “Leaders should lead”, H. G. Wells once said, “as far as they can and then vanish. Their ashes should not choke the fire they have lit”. Regardless of the season, there is no uncertainty about the fact that there are many who would want the Cuban president’s ashes to extinguish the fire he lit.

 

Letter from Panama is published by Trust Services, S. A. which is a British- managed trust company licensed under the banking laws of Panama. It is written by our Managing Director who is a former member of the Latin America and Caribbean Banking Commission as well as a former offshore banking and insurance regulator. He has over 35 years private and public sector experience in the financial services industry. Our website provides a broad range of related essays.

Engaging an offshore representative is an important decision and we advise all persons to seek appropriate legal and tax advice from professionals licensed to render such advice before making offshore commitments.


Article Courtesy of Trust Services S.A.
Physical Address: Suite 522, Balboa Plaza, Avenida Balboa, Panama, Republic of Panama.
Mailing Address: Apartado 0832-1630, World Trade Centre, Panama, Republic of Panama.
Telephone: +(507) 269-2438 – Telefax: + (507) 269-4922
E-mail: fiduciary@trustserv.com Website: www.trustservices.net

Back To The Panama Info Page