Wintery Knight

…integrating Christian faith and knowledge in the public square

What causes Colombia’s economy to grow? What causes Venezuela’s economy to shrink?

Political Map of South America

Political Map of South America

Would you like to have a growing economy? Then follow the lessons of Colombia.

Excerpt:

Colombia expects lower fiscal deficits in 2013 than in 2012, while economic growth is projected at 4.8 percent for both years, Finance Minister Juan Carlos Echeverry said on Thursday.

Latin America’s No. 4 oil producer has seen a strong recovery from the global economic crisis, recouping three investment-grade credit ratings and continuing to reap strong inflows in the mining and oil sectors.

Presenting the latest fiscal plan, Echeverry said the government had revised down the 2012 central government fiscal deficit target to 2.4 percent of gross domestic product from 2.8 percent previously, and the consolidated deficit to 1.2 percent of GDP from 1.8 percent. The consolidated deficit includes the central and regional governments.

The central government deficit target is seen at 2.2 percent of GDP in 2013, with the consolidated deficit at 1 percent.

“This fiscal plan is serious, reasonable, we’re not extracting liquidity from the economy, but injecting liquidity into the economy,” Echeverry told reporters.

The government expects the economy to grow 4.8 percent this year and next. Economic expansion was 5.9 percent in 2011, the fastest growth rate in four years, helped by high foreign investment and strong consumer spending growth.

Colombia has attracted billions of dollars in foreign direct investment over the past decade, mostly into the oil and mining sectors after U.S. military aid helped security forces deal crippling blows to leftist guerrillas and cocaine cartels.

Consumer prices have remained at steady levels in recent months, and economists expect 2012 annual inflation to fall within the central bank’s target of 2 percent to 4 percent.

The fiscal plan forecasts full-year inflation at 3 percent this year and next.

Under Obama, the United States has been running deficits of between 8-10% GDP. Revenue is the same as usual, but spending to reward reckless, irresponsible behavior has skyrocketed.

Would you like to avoid a shrinking economy? Then avoid the policies of Venezuela.

Excerpt:

Venezuela has devalued its currency, joining Iran, Argentina and others whose wars on math brought the same result. Some call this a “restorative.” It’s not. It’s what happens when big government hits a wall.

Venezuela’s monster 47% devaluation from 4.3 to 6.3 bolivars to the dollar, reportedly ordered by President Hugo Chavez from his hospital bed in Cuba, marks the reckoning for his regime’s big-spending ways in Venezuela’s low-growth economy.

[...]This devaluation is characteristic of all tyrannies, which benefit by effectively expropriating the savings of the private sector through monetary means rather than the more common thuggery.

Chavez’s meltdown is coming for the same reason devaluations are also shaking Argentina, which is undergoing a new fiscal disaster of its own, Egypt, which is going through a slo-mo devaluation that’s pushing up the price of food and prompted its Islamofascist rulers to actually urge people to eat less food, and Iran, whose madhouse economics has triggered hyperinflation.

It’s how dictators do business. This is Chavez’s sixth devaluation in the last decade of his big-spending power, following devaluations in 2002, 2003, 2004, 2005, 2010 and 2011. Every one of these devaluations inflates away some of his debts — but at the expense of the country’s savings and investment, which are snapped away through inflation.

What’s more, this devaluation, which was done to plug his deficit spending and prop up the state oil company, will only cover 60% of the country’s deficit, meaning more devaluations ahead this year, likely to take the bolivar to 8 by year end.

Venezuelan officials, predictably, claimed it was “good” as well as an “improvement” that protects the middle class against “speculators,” echoing the party line of establishment economists such as Joseph Stiglitz, former Bill Clinton adviser and chief economist of the International Monetary Fund, who in the past has called devaluations an economic ” restorative.”

Tell that to the panic buyers across Venezuela. There, terrified consumers who are buying goods ahead of expectations of soaring prices, while the poor have seen their life savings wiped out.

When Obama took office, a US dollar was worth over 1.20 Canadian. Today it’s worth about 98 cents. He has been devaluing the currency in order to pay for massive government spending. Private savings of individuals have been devalued, as a result. Inflation is a hidden tax on those who earn and save.

In the United States, we are doing the exact opposite of Colombia. We are embracing Venezuela policies, and expecting Colombia results. Why are we stupid enough to believe words instead of results? Socialism doesn’t work. Capitalism does work. We should choose what works.

Filed under: News, , , , , , , , , , , , , , , , , , ,

FARC terrorist leader Alfonso Cano killed by Colombian armed forces

Map of South America

Map of South America

From the Heritage Foundation.

Excerpt:

The armed forces of Colombia have scored a major battlefield victory. They finally hunted down, confronted, and killed the leader of the narco-terrorist Revolutionary Armed Forces of Colombia (FARC), Guillermo Leon Saenz, widely known by his alias Alfonso Cano.

A guerrilla for decades, Cano assumed the top leadership of the FARC following the natural death of founder Manuel Marulanda (2008) and the elimination of senior figures Raul Reyes (2008) and Jorge Briceno (aka Mono Jojoy, 2010).

Seen by some as a modern-day version of the “good revolutionary,” Cano—a life-long advocate of armed violence and terrorism—fell in combat with the Colombian armed forces as they rappelled their way into his secret jungle hideout. Cano was also indicted in a U.S. court for drug trafficking along with dozens of other FARC leaders and had a $5 million price on his head.

FARC is a Marxist terrorist group.

The Economist reports that the Colombian economy is also doing well.

Excerpt:

WHEN the figures are finally tallied, Colombia may prove to have weathered the world recession better than any other of the larger Latin American countries. After a slight contraction at the end of 2008, the economy has been growing modestly this year. This resilience stems from continued foreign investment, an increase in government spending on public works and easier money: since December the central bank has cut interest rates by six percentage points, to 4%, a steeper drop than anywhere in the region outside Chile.

[...]President Álvaro Uribe’s security policies have helped to restore confidence. Investment soared, from 15% of GDP in 2002 to 26% last year, says Mr Zuluaga. Private business has retooled. After many delays, the government has issued licences to expand several ports; this month it hopes to award a contract for the first of four big road schemes, costing a total of $7.5 billion over four years. It hopes for investment of up to $50 billion in mining and oil over the next decade.

And liberal MSNBC has more on the booming Colombian economy.

Excerpt:

…Colombia’s revival is benefiting U.S. economic and political rivals as much as or more than the U.S. itself.

The long delay in signing the treaty allowed Latin America’s fourth-largest economy to strengthen ties with China. It also damaged U.S. credibility in the region, says Eric Farnsworth, vice-president of the Council of the Americas in Washington. “The delay in passing this called into question the United States’ reliability as a partner,” Farnsworth says. “There’s a strategic component to this. It’s not just about economics and trade.”

[...]As talks between the U.S. and Colombia dragged on, Colombia and China forged plans for a rail link between the Pacific and Caribbean that could draw freight away from the Panama Canal. Colombian President Juan Manuel Santos aims for a trade deal with South Korea. To tighten his connections to high-growth Asia, he’s also seeking membership in the Asia-Pacific Economic Cooperation group. “While Washington was debating whether the accord with Colombia was opportune, we advanced in our foreign policy strategy,” says Trade Minister Sergio Diaz-Granados.

Santos has cooperated more with his South American neighbors, organizing a meeting of finance ministers to discuss ways to protect their currencies and economies from the debt crisis in the U.S. and Europe. He supports a stock trading platform with Colombia, Chile, and Peru and wants to bring Mexico and Panama on board. Exports to Brazil have surged tenfold. While the U.S. remains Colombia’s biggest export market, with $16.8 billion in 2010 sales, up 30 percent from a year earlier, sales to China more than doubled last year, to $1.2 billion. Sales to the European Union are also rising, to $5.4 billion this year through August, more than in all of 2010. An EU trade accord could come next year.

The government has reduced cocaine cultivation 37 percent and halved the number of insurgents to about 8,000. Improved security has spurred enough growth to win an investment-grade credit rating from Standard & Poor’s as well as investment from billionaires. Colombia’s victories over the guerrillas opened up swathes of countryside to exploration for oil, gold, and coal. Mexican billionaire Carlos Slim’s push into crude has helped fuel foreign investment that the government says may reach a record $12 billion this year. The economy grew 5.2 percent in the second quarter.

The U.S. faces more competition from Colombia’s neighbors and Canada. In 2010, U.S. agricultural exports to Colombia fell more than 50 percent from 2008, to $827 million, as Argentina’s more than doubled, to $1 billion, according to a report by Senator Richard Lugar’s staff. Diaz-Granados attributes the U.S. setback to the delay in the free-trade agreement.

An August accord reduces or ends Colombian tariffs on Canadian wheat, paper, and machinery. Bank of Nova Scotia, Canada’s third-largest lender, agreed in October to buy 51 percent of Banco Colpatria Red Multibanca Colpatria for about $1 billion—Scotiabank’s largest international takeover. “This is not the Colombia of old,” says Brian J. Porter, group head of international banking for Scotiabank. “The more we looked at Colombia, the more excited we got about the economic potential.”

We really should have signed that trade deal 3 years ago – it would have helped out economy a lot.  But unions got Obama elected, and the unions decided that the trade deal needed to be held up for 3 years. And that’s one of the reasons why we’ve had over 9% unemployment. Our economic policy is being set by unions, not by economists. But in Colombia, economic policy is set by economists, not unions.

Filed under: News, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

House passes free trade deals with Colombia, South Korea and Panama

From Investors Business Daily.

Excerpt:

The biggest free-trade pacts since NAFTA were passed by the House Wednesday night, with the Senate likely to follow. As a result, America will reap 250,000 jobs and $13 billion in exports. Where are the celebrations?

The strangest aspect of the passage of free trade treaties with Colombia, South Korea and Panama, with final votes taken after five long years, is the disconnect between the big economic gains expected for the U.S., and the reticence of congressional Democrats and the White House, both of which finally got something right on the economy.

As we went to press, the pacts had been passed by the House, with the Senate expected to vote soon. With bipartisanship like that, lawmakers should be cheering loudly for a true “jobs bill” that costs nothing.

Yet as a Democratic aide told Roll Call on Wednesday, “Republicans don’t want to give the president a victory, Democrats are split and everyone is distracted.”

Excuse us, but this is some of the best economic news in three years. It deserves a victory dance.

It’s a fact these treaties will bring new orders for factories, save family farms, strengthen strategic alliances with countries well worth having as allies, and open up breathtaking new opportunities in fast-growing markets. It needs to be acknowledged.

[...]President Obama paid lip service to the treaties, but wasted nearly three years attaching protectionist amendments and dithering. It harmed the economy and never changed this fact: Free trade had to pass if there was to be a real recovery.

Economist Greg Mankiw of Harvard University lists free trade as the #2 top item that economists of all ideological stripes agree on. This is a no-brainer.

Passing the free trade deals is important because it would make up for other anti-business policies of the Obama administration.

Excerpt:

Obama appointees at the National Labor Relations Board (NLRB) have not only blocked Boeing from making planes in South Carolina, but they have greased the speed of union elections, made decertification votes impossible, changed the requirement that a majority of workers vote for a union, and required almost every workplace in America to put posters up advising workers of their unionization rights.

The Obama Administration claims to want to double exports and support free trade, but it took it nearly three years to send the pending trade agreements with Panama, Colombia and South Korea to Congress. Which means that in all this time American companies have been paying higher tariffs for exports.

The Obama Administration has proposed 219 new rules affecting industries, each of which will cost at least $100 million to comply. While the Washington legal business is growing, every industry and business is affected, scared, and confused by the massive new proposals. Small businesses are especially overwhelmed and must hire lawyers to understand and comply with the massive amount of new regulation.

The Obama crown-jewel “achievements” of the new health care and Dodd-Frank financial laws adversely affect almost every American business, totaled almost 3,000 pages of statutory language, and will result in huge costs on employers.

Let’s hope the Senate passes these deals and Obama signs it. We need lower priced goods in a recession, and we need more markets to sell into. If this passes, it will be the first pro-growth action taken by the administration in three years.

Filed under: News, , , , , , , , ,

GOP plan would create 1.2 million new jobs by expanding energy production

From the Pittsburgh Post-Gazette. (H/T Reuben, indirectly)

Excerpt:

Americans are angry and with good reason. They are hurting from unemployment, uncertainty in stock market investments and declining retirement funds. And they are weary of waiting for a real workable plan to get us out of this rut.

This is not a time to try the same failed policies of borrowing, debt and calls for tax increases. So we offer these ideas as President Barack Obama prepares to address Congress Thursday if he really wants to make some major bipartisan moves to get our country moving again.

[...]First, allow U.S. employers to repatriate $1 trillion sitting in overseas banks. The current tax rate of 35 percent is a huge barrier blocking those dollars from being invested in jobs, boosting the stock market and raising the value of retirement funds.

Some companies use armies of attorneys and accountants to find ways to cut those taxes, followed by the Internal Revenue Service tracking them down. Stop the nonsense. Offer a lower tax rate, perhaps 15 percent, for a limited time (maybe even a lower rate if the money is invested in job creation or in purchasing U.S. goods).

[...]Second, freeze the massive number of proposed regulations until Congress can review and approve them. Regulations cost U.S. employers more than $1.75 trillion per year. Federal agencies are moving forward with more than 4,257 new regulations that will add tens of billions in regulatory costs — more than tripling the burden of agency mandates from 2009.Employers are worried how this tsunami of new regulations will overwhelm their businesses so they are holding back on growth and hiring. Unless a regulation is absolutely necessary to protect the public’s health and safety, it should be stopped now. Enactment of House Resolution 10, the REINS Act, would require congressional review and approval for any mandate costing the economy more than $100 million annually.

Third, pass our bipartisan Infrastructure Jobs and Energy Independence Act (H.R. 1861), to expand safe offshore oil and gas exploration, create 1.2 million new jobs annually and launch $8 trillion in economic output. Our bipartisan bill dedicates a portion of up to $3.7 trillion in federal oil and gas revenues from the new exploration for investments in new energy technologies, power generation and grid modernization to help put us on a path to energy independence.

[...]Finally, to preserve a free global market for trade, we must hold foreign nations accountable to abide by international agreements. This year, America will lose its position as the global manufacturing leader to China, in large part because Beijing illegally gives its exports a 20 percent to 40 percent discount by manipulating and devaluing its currency.

Another good idea would be to sign the free trade deals with Panama, South Korea and Colombia. Heritage explains what would happen if we did.

Excerpt:

The Obama Administration—after allowing U.S. free trade agreements (FTAs) with South Korea, Colombia, and Panama to languish unapproved for nearly four years—lately appears eager to push Congress to ratify all three soon. The problem now is that some in Congress are trying to make their approval contingent upon an extension of the Trade Adjustment Act (TAA).

That would be a mistake. The three FTAs are intrinsically worth passing without any strings. Congress should act on them without further delay.

The Korea-U.S. Free Trade Agreement (KORUS) would be America’s largest free trade agreement in Asia. It would increase U.S. exports by an estimated $10 billion annually, increase U.S. gross domestic product (GDP) by $11 billion, and add 70,000 U.S. jobs—all without a dime in federal government spending.[1] The accord would also serve as a powerful statement of the U.S. commitment to East Asia at a time when many perceive declining American interest, presence, and influence in the region. The FTA would strengthen U.S. commercial ties and expand the bilateral relationship with South Korea beyond traditional military ties or the North Korean threat.

[...]Rejecting KORUS would disadvantage U.S. companies by locking in discriminatory trade barriers. During the four years the agreement was held hostage by special interest groups and congressional protectionists, the U.S. lost $40 billion in potential exports. American companies continued to lose market share to foreign competitors. The U.S. used to be South Korea’s largest trade partner, but in less than a decade it has been displaced by China, the European Union, and Japan. As Korea’s market opens further, it will be foreign competitors and not U.S. companies that will benefit.

[...]Until this year, the Obama Administration and congressional leadership took its orders on the U.S.–Colombia FTA from protectionist U.S. labor unions and U.S. anti-globalization groups, joined by far-left allies in the region, who succeeded in delaying congressional approval of the FTA. The cost of delay has been significant. So far, according to the Latin America Trade Coalition’s “Colombia Tariff Ticker,”[2] U.S. companies have paid $3.5 billion (as of this writing) in unnecessary duties to the Colombian treasury in the more than 1,600 days since the FTA was signed.

That $3.5 billion has translated into higher prices in Colombia for U.S. goods and services, which are now at a competitive disadvantage in the Colombian market. It has also meant reduced profits for U.S. companies and lost jobs at home.

There are plenty of good ideas from people who live in the real world where real economic laws apply. Keynesianism has been tried since Pelosi and Reid were elected in 2007. It has failed. We need to move on to what works.

Filed under: Commentary, , , , , , , , , , , , ,

Colombia’s war on terrorism and Chile’s war on poverty

Map of South America

Map of South America

A magnificent column about Colombia’s war on FARC.

Excerpt:

When Juan Manuel Santos came into office as Colombia’s president and emphasized economic issues over the fight against terrorist guerrillas, he was suspected of going soft on those he had combated as minister of defense under the previous administration. Little did his critics know that he was planning the “coup de grace” against the Revolutionary Armed Forces of Colombia (FARC).

The devastating Sept. 22 attack on FARC headquarters in Colombia’s central Meta province all but signifies the end of the five-decade-old conflict. It will take a little while for the official end to be declared, but this war is pretty much over.

[...]For decades, politicians, academics, human rights activists and journalists on both sides of the Atlantic failed to see that there was nothing romantic, “bien-pensant” or Robin Hoodesque about an organization that killed, maimed, kidnapped and extorted for a totalitarian objective.

Colombia’s solitude was such that even the U.S. began to lose faith in its ally a couple of years ago, refusing to approve a free-trade agreement that Bogota had negotiated at a major political cost.

Colombians did not give up and continued to reclaim territory for civilian rule. Much like the defeat of Venezuela’s Cuba-inspired terrorist guerrillas in the 1960s, Colombia’s victory against FARC is the result of civilians awakening to the evil of totalitarian terror.

We get to hear about spectacular military feats, but how many outside Colombia realize that peasants, factory workers, teachers, students and others joined the struggle to defeat FARC, beautifully symbolized by the hundreds of thousands who took to the streets inside Colombia and around the world in 2008 to clamor for the end of terror?

There are still many challenges ahead. The lesson in courage and perseverance that Colombians have given us suggests they are ready to meet them.

I wish that we could sign a free trade deal with them like Canada’s conservative government. Canada is led by a conservative business-friendly economist, and they are very supportive of capitalist democracies like Colombia. Stephen Harper is Canada’s prime minister. He has economics degrees from the University of Calgary. Like Santos, he is very, very tough on terrorism – favoring increased defense spending to protect Canadian interests abroad. And guess what? Canada also has a free trade agreement with another South American country – Chile.

And Chile is also doing very well, even after the massive earthquake.

Excerpt:

Chile’s peso rose to a 27-month high after a report showed the country’s industrial growth accelerated to the fastest since 2006.

The peso appreciated 0.2 percent to 485.23 per U.S. dollar at 11:43 a.m. New York time, from 486.17 yesterday. The currency touched 483.61, the strongest since June 11, 2008. The peso has risen 13 percent during the quarter and 3.6 percent this month.

Chile’s economy is accelerating after the fifth-largest earthquake in a century struck in February, delaying its recovery from a 2009 recession.

“Retail sales grew and industrial production was better than expected,” said Roberto Melzi, a strategist at Barclays Capital in New York.

Retail sales expanded 13 percent in August from a year earlier, and industrial output grew 6.9 percent, the National Statistics Institute said in Santiago. That’s the most since January 2006. Industrial production shrank 17 percent after the 8.8-magnitude Feb. 27 earthquake and its accompanying tsunami, which caused damage worth more than a sixth of Chile’s gross domestic product.

Chile and Colombia are my two favorite South American countries. Both are led by conservative business-friendly economists. Chile’s president Sebastián Piñerahas a Masters and a Ph.D in economics from Harvard, and is successful in the private sector. The Colombian President Juan Manuel Santos specializes in business and economics, with graduate degrees from Harvard and the London School of Economics.

Filed under: News, , , , , , , , , , , , , , , , , , , , , , , ,

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