The economics of Latin American populism

The financial policies of men like Chavez and Kirchner are costing Americans millions.

Latin America has long ceased to be a primary concern for U.S. foreign policy makers.  Two separate European wars in the last century, as well as the decades-long Cold War, shifted American strategic focus outward, away from the region that had once been foremost in the minds of American strategists.

This trend continues today.  With U.S. policymakers consumed with the fight in Iraq or the fight about Iraq, there is precious little attention being paid to the political radicalism that is on the rise in Latin America.  Recent events show, though, that events in an otherwise marginalized region can have a profound effect on Americans.

[More]For example, in 2005, Argentine President Nestor Kirchner announced that in the face of more than 100 lawsuits over his country’s broken loan contracts, he was repudiating 20 billion dollars foreign debt.  He did so despite Argentina’s documented capability to honor its financial obligations.

The American Task Force Argentina (AFTA) reports that because of Kirchner’s actions, "America’s teachers and educators lost $100 million in retirement savings, because their pension funds held Argentine bonds."  With no word from Buenos Aires that it plans to reconsider its decisions, it seems as if, as AFTA noted in a Wall Street Journal ad, "America’s teachers have learned a harsh lesson in international economics — thanks to Argentina’s unprecedented debt default."

What makes this development all the more worrying is that Kirchner has close ties with Venezuela’s Hugo Chavez, who has been the standard-bearer for anti-Americanism in the region.  Indeed, AFTA claims that they are "one and the same."

In Latin America, Chavez sets the precedent for burning economic bridges to America – he is in the final stages of nationalizing his country’s oil industry, in which American firms like ConocoPhillips, ExxonMobil, and Chevron have a heavy stake.   He has announced that Venezuelan troops will occupy the oil fields beginning May 1^st, and has warned foreign companies not to seek "excessive compensation" from his government.

One of Chavez’s cronies, Bolivian President Evo Morales, has taken similar actions.   Last year, he assert state ownership over his country’s natural gas industry, making foreign businesses pay much higher taxes, and dramatically lowering the returns on their investments.

This financial toll of this burgeoning anti-American economic populism is probably going to get worse.  Countries like Nicaragua and Ecuador, both run by men with close allegiances to Chavez, are already heading down the path of anti-foreign statism, with predictable effects on American economic interests in those two countries.

In a disappointing but unsurprising turn of events, many of this country’s social and political luminaries nonetheless have embraced Chavez and his call for quasi-communist populism as a boon for Latin America and America’s working class.  Figures like Cindy Sheehan, Danny Glover, and former U.S. Congressman Joseph Kennedy II have all made pilgrimages to Caracas to boost their credentials as so-called "progressives."  They do this while studiously ignoring that Chavism will only worsen the retirement fund shortfalls many American workers are expected to face.  

These "progressives", along with the Washington policymakers who are doing little to nothing to counter Chavez and his ilk, need to get their priorities straight.   To do otherwise will end up costing American workers dearly.