What’s Really Growing in Argentina?


Traveling through Argentina recently I was taken aback by the abject depression that seems to have taken the country and the people in its grip. Even after spending barely two days in the country I left with a negative taste in my mouth. More than the many buildings, modes of transport, streets and sidewalks in severe states of disrepair the overall feel of the place really stood out in my mind. And it is not that I was expecting to see a prosperous, bustling country either.

Moneda_ArgentinaFor some time now it has been clear that the Argentine economy is rapidly disintegrating. The people are struggling to cope with an estimated inflation rate of over 50 percent, a rate the Kirchner administration has been stubbornly underreporting to the point to where international authorities have openly questioned the numbers. Other persistent problems include seemingly permanent fiscal deficits, international reserves drying up, and the ongoing devaluation of the peso. Government spending as a percentage of GDP now hovers around 50 percent, contributing to last month’s second sovereign debt default in a mere 13 years. Meanwhile the previous one is still haunting the state budget.

In late 2001 the Argentinian government declared the world’s largest sovereign default, triggering the worst economic recession in history. Unemployment spiked to 20 percent causing widespread riots and looting, not to mention political instability– five different presidents held office in a mere two weeks. Eventually the debt was restructured and most bondholders agreed to a debt swap even if the new bonds were worth only 35 cents on the dollar. A small minority holding some 9 percent of Argentine debt did not take the deal. Consequently these hedge fund “holdouts”, in Argentina less affectionately referred to as “vultures”, have been involved in a legal battle with the government that has gone all the way to the U.S. Supreme Court.

While this year’s default differs from 2001 in many ways it is impossible to truly grasp the former without understanding the far-reaching ramifications of the latter. Former Economy Minister Roque Fernández even goes so far as to argue the government has effectively been in default since 2001 as it never resolved that situation. Whatever the case may be, the common denominator is the victim: the Argentinian people. Historical evidence of its many defaults suggests they typically result in at least a 10 percent drop in GDP.

Nonetheless, the Kirchner administration has had the audacity to place signs at sites of taxpayer-funded projects proclaiming “Aquí tambien la nación crece” (here too the nation is growing). The sad truth is the only indices indicating growth in Argentina are the ones that should show the opposite; think government spending, the money supply, and the fiscal deficit. Unfortunately the Kirchner administration has been too busy childishly denying reality and trying to shift the blame for the economic malaise on the “vultures” to do anything constructive for the people they claim to represent.

But there is hope. In the midst of all the chaos Bitcoin is making headway as an inflation hedge. A Subway franchisee in Buenos Aires recently decided to start taking Bitcoin, and the country’s first Bitcoin ATM is now a reality. The old adage holds true in Argentina today: you can fool some people sometimes, but you can’t fool all the people all the time. Especially in the information age.

Saving the Amazon from Socialism


As reported by the BBC last week, Brazilian authorities have dismantled a criminal organization believed to be the “biggest destroyer” of the Amazon rainforest. The gang stands accused of invading, logging and burning large areas of public land to put up for sale for farming and grazing. Their crimes, said to be worth more than $220 million, could land them up to 50 years of jail time if found guilty on all charges of invading public land, theft, environmental crimes, forgery, conspiracy, tax evasion and money laundering.

AmazonRepresenting more than half of the world’s rainforests the Amazon is the largest and most biologically diverse tropical rainforest on the planet. Its millions of square miles are home to the largest collection of living plants and animal species in the world. While the Amazon is largely contained within Brazil, its 2.1 million miles span a total of nine countries from Peru on the Pacific side of the continent to French Guiana on the east coast. Given the vast size of the area it is little wonder that some (illicit) activity goes unnoticed. In the case of the Amazon, however, there is a major contributing factor.

One of the aforementioned charges likely to catch a libertarian’s eye is invasion of public land. The real underlying problem, then, becomes readily apparent: no one owns the Amazon! Even the BBC’s correspondent in Brazil is quick to point out that political and police corruption coupled with the federal government’s ineptitude allows loggers and illegal miners “to operate with impunity”. So here we have a situation in which a lack of real ownership of land predictably leads to poor conservation of the area and its natural beauty. The solution, then, should be equally obvious. And it is.

Contrary to mainstream environmentalist thinking examples of successful private management of nature reserves abound. A recent National Geographic article for instance, details how the Lapa Rios private reserve in Costa Rica plays a critical role in sustaining a connected and healthy population of large cats. Funded by low-impact ecotourism these reserves are not dependent on the whims of politicians and offer more reliable protection from illegal hunting and forest degradation.

Much closer to the Amazon region is an area known as the Pantanal, the world’s largest tropical wetland area. Located mostly in the Brazilian state of Mato Grosso do Sul it is almost entirely in private hands, namely those of indigenous cattle herders. Though much less famous than the Amazon the Pantanal is known as a must for any and all who like to see wildlife up close – better than the Amazon according to many a traveler. The same sort of ecotourism commonly seen in Costa Rica enables the highly successful preservation of natural flora and fauna.

The objections commonly voiced against the private ownership of parks and reserves can be easily refuted using basic economic laws of supply and demand and the profit motive. In addition we can point to plenty of successful real-world examples to build a convincing pro-liberty case. Besides, if everyone is so worried about preserving the environment and maintaining biodiversity, how much more successful will voluntary action aimed at doing just those things be?

The key to proper management and preservation of our beautiful planet is nothing more or less than good old-fashioned property rights. Absent the recognition of those rights and the incentives inherent therein we can only expect environmental degradation.

Brazil: Time For a Property Rights Revolution!


During the Language of Liberty Institute’s Liberty Seminars in the south of Brazil last May, the attendees were treated to a talk about freedom and human prosperity. Using the Economic Freedom of the World report CATO’s Latin America expert Juan Carlos Hidalgo made a convincing case for (economic) freedom as a prerequisite for human progress. One of the points he made about underdeveloped countries relates to how poor protection of property rights stifles economic growth.

In Brazil this lack of recognition of property rights is most pronounced in the infamous favelas. In the years and months leading up to the World Cup the evictions generated some press, but now that the international spotlight has shifted elsewhere it is business as usual. While major sporting events in third world countries have become somewhat notorious for leading to these practices, they certainly are not a requirement.ForcedEvictions

One state over from Rio de Janeiro is Minas Gerais, epicenter of Brazilian coffee and milk production. Its capital and largest city Belo Horizonte boasts the third largest metropolitan area in the country after Rio and São Paulo and is a major financial hub in South America. Consequently it has attracted swaths of lower-class jobseekers who, lacking the financial resources necessary to buy a home in the city, opted to build their own communities on the outskirts of town. Now, local authorities are threatening to forcibly evict the 8,000 families who have taken up residence there.

Leaflets spread over the region announced military police would – absent a court decision – follow their orders to repossess the land “in accordance with the constitution and the fundamental principles of human rights”. Residents of the three communities, however, have unanimously decided to stay in their homes after the state government pulled the plug on negotiations with them. The land is said to be wanted for development and projected to be worth $6.5 billion, providing plenty of incentive to evict the locals even if it means rendering them homeless. Without any legal recourse they are left with two choices: leave, or face the jackboot of the state.

Reports from human rights organizations confirm the situation in Belo Horizonte is hardly the exception. Since the 1970s many people from Brazil’s poorer north have been migrating to the south and southeast in search of opportunity. Needless to say, the majority ended up in much the same situation as the aforementioned 8,000 families. For decades the issue was of no importance but as we know, multi-billion dollar deals have the power to make politicians dance to a completely different beat. The poor they always profess to care so much about cannot be allowed to obstruct lucrative projects that can be used to one’s political advantage.

Ending the current situation of legal ambiguity with regard to property rights is paramount both to the lot of the poorest in society and to the cause of liberty. Left-leaning critics of libertarian thinking often accuse proponents of the free market of being mere shills for corporate interests. While many Brazilians are still unfamiliar with libertarianism injecting issues like these into the public debate can do a lot to take the wind out of the sails of those detractors. After all, if there is one thing that makes our attitude towards the poor unique it is our focus on empowerment rather than dependence. If the most down-trodden can be reached with that message real change can be made.

Privatize Water!


In recent days reports have been coming out about authorities’ struggle to battle a water shortage in Brazil’s two major cities of Rio de Janeiro and São Paulo. Ostensibly caused by a severe drought, the crisis has even sparked fears of an impending “water war”. Measures taken earlier this month to reduce the water flow at a major dam were unsuccessful to say the least, cutting off running water to families in some neighborhoods for as long as 12 hours a day.

Unsurprisingly, the vast majority of the water system is government-run without much debate. After all, for all its ubiquity, government incompetence does not always overtly affect people’s daily lives. Now that it does, it might bOLYMPUS DIGITAL CAMERAe an opportune time for Brazilian freedom advocates to voice their opinions.

While some market reform has taken place in recent years, the process has been severely stifled by jurisdictional conflicts fueled by Constitutional as well as other regulations. Besides establishing a national system of water resources management the Constitution also defines criteria for granting rights of use, and it regards surface water and groundwater as property of the states. The National Water Resources Policy even specifies many uses of water that require government permission.

A World Bank publication analyzing market reform in urban water supplies in Santiago de Chile found “surprisingly large” net benefits in economic welfare despite significant price hikes. After years of losses largely imposed by regulatory obstacles the Santiago Metropolitan Works Enterprise had become so underfunded it could no longer perform basic maintenance on its systems. Some of the positive results included almost 100 percent coverage of expanding demand, better water pressure, fewer interruptions of service and higher wages for employees. The outcomes were so positive, in fact, that full privatization of the entire urban water supply and sanitation sector was eventually implemented.

Studies on market reform of the water sector in other South American countries have also found positive results. In Argentina the privatization of local water companies – covering approximately 30 percent of the country’s municipalities – reduced child mortality on average 5 to 7 percent, preventing 375 child deaths per year. It is worth noting also that the effect was most pronounced (24 percent) in the poorest areas, offering empirical evidence that runs contrary to oft-heard claims about increased inequality. Overall the number of households connected to the water network increased by nearly 12 percent.

In Bolivia privatization was shown to increase water access relative to both the existing trend and the non-privatized areas. The results also concurred with the aforementioned that the relative benefits of were larger for the poorest segments of the population, who gained from the largest increases in access. Some of the same findings have been reported in Brazil, if only on a small scale.

Notwithstanding those positive results generated by market reform, the current legal framework is a severe impediment. These obstacles will have to be dealt with if Brazilians are to reap the full benefits of voluntary – rather than compulsory – human action in the provision of such a basic need as water. Empirical evidence clearly confirms it can be done, giving liberals and libertarians plenty of arrows in their quiver to build a convincing case for liberty and against statists’ fear mongering. If successful that could be a big step toward a freer Brazil.

 

 

 

 

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The State of Firearm Freedom in Brazil


Walking down the street here in Brazil it quickly becomes apparent political campaigns are in full swing. Signs displaying the slick smiles and hollow rhetoric of (would-be) politicians abound, and the same rhetoric emanates from megaphones on small vans driving around town. But besides the more high-profile presidential elections there will also be state elections injecting more specific issues into the public debate.

Recently one such sign immediately caught my eye. With an image of a firearm and the text “contra o desarmamento” (against disarmament) it was impossible to miss. A firm believer in the right to self-defense, I felt compelled to find out more about a gun debate I was unaware even existed here. Having found out that gun laws are very much like the ones in my native country of the Netherlands I figured the issue would not even be on the table. Fortunately I was wrong.

StateofGunRightsIn 2003 the Brazilian government passed a law dramatically restricting gun sales while all but outlawing their carrying by civilians. Termed the Disarmament Statute it forces potential legal gun owners to go through a litany of paperwork, checks, and tests just to own a firearm and keep it at home. A carry permit can still be denied if it authorities determine “genuine reason” was not provided. Yet in terms of bringing down crime rates the Statute has been a dismal failure; a decade after its adoption Brazil has 50 percent more gun deaths than the United States despite having110 million fewer citizens.

Undeterred, Brasilia put forth another initiative to further clamp down on gun ownership in 2005. Luckily this time lawmakers at least had the decency to call a referendum – the first of its kind in the world. The proposed law was meant to entirely ban the sale of firearms and ammunition to anyone except security firms, sports clubs, and the government. Much to the surprise and chagrin of its proponents, however, it was met with a resounding no. Based on early polls ostensibly indicating overwhelming support for the ban they were expecting a win, but equal time on television in the final weeks prior to the referendum resulted in more than 60 percent of voters opposing it.

Now it seems the debate has come full circle and gun rights advocates have the upper hand. It will be interesting to see how this plays out during the campaigns and subsequent elections early October. If fought well this battle might go a long way toward winning the victim disarmament war. Then again, leave it to politicians to talk a good game about something on the campaign trail and then suffer from acute memory loss after taking office. Perhaps a grassroots campaign focused on educating people about natural rights would help keep their feet to the fire.

Given the corrupt reputation and consequent distrust of the police it goes without saying that Brazilians don’t feel protected by uniformed gunmen. Rather than further the case for gun control, the 2005 referendum might well have backfired. Anti self-defense groups were forced to begrudgingly admit that the other side had successfully linked owning a firearm with freedom, using images of Tiananmen Square and the Berlin Wall. Furthermore, current restrictions are (predictably) leading to much different outcomes than predicted. Residents of São Paulo and Rio de Janeiro can attest to that.

Pacification and Brazil’s War on Drugs


For decades, Brazilian favelas (slums) have been under the control of highly organized, well armed gangs. Financed by the drug trade and armed with weapons often bought from the police the gangs rule their territory, rivaled only by other gangs trying to win turf. Up until a few years ago even law enforcement officers dared not enter. But spurred by the pleas of a large voting bloc and especially this year’s World Cup and the 2016 Olympic Games a change in policy was deemed necessary.

In an effort to polish up Brazil’s image abroad a new policy of pacification of the favelas was adopted in 2008. Aimed at Favelaeliminating the gangs’ control the policy can be divided into three phases: (1) reclaim territory formerly lost to drug gangs, (2) expel them from those areas and (3) integrate resident communities with the rest of the city. This last phase theoretically includes long-term government initiatives to improve quality of life in pacified favelas, although this has been called into question by residents. Besides, when being a bureaucrat becomes as lucrative as it is in Brazil, one should not be surprised to hear would-be politicians make any and all campaign promises necessary to win political office.

As mentioned in a previous article Brazilian police is notoriously corrupt and consequently distrusted by many people, particularly in the states and cities of São Paulo and Rio de Janeiro. Perhaps that is why two special police departments were set up to establish closer ties between them and local residents: the Batalhão de Operações Policiais Especiais (BOPE) and Unidades de Polícia Pacificadora (UPP). Although often referred to as “community police” these forces can call for military support – as they did most recently in 2010 and 2011.

In select slums gang members were successfully chased out and life has returned to a relative normal. But returning peace to once crime-ridden slums has also had other, unforeseen consequences. Built on the outskirts of Rio overlooking the world famous bay, the areas are attracting interest from the upper classes. As a result real estate prices have skyrocketed to where poor residents can no longer afford to live there, and now it is not only the drug gangs that are having to relocate to other favelas. Yet even the pacified slums did not necessarily turn into thriving communities.

While sending armed forces into an area to arrest or kill drug dealers is easy enough; actually solving the underlying problem is another issue. Given conservatives’ stance on drug legalization or decriminalization the war on drugs in Brazil is unlikely to end anytime soon. Never mind the fact that stray bullets wound and kill many non-gang members including children, or that many drug traffickers would likely take a much different career path by their own volition if given the opportunity. Though the arbitrary outlawing of certain substances is directly responsible for the death and misery suffered on a daily basis by those least able to defend themselves, proponents of the war on (some) drugs seem unfazed.

With only a few dozen out of some one thousand favelas pacified so far, it could be argued the jury is still out on whether the policy has been effective. So far it has become clear that so long as law enforcement includes prosecuting people for meeting the demand for certain “dangerous” substances many lives are lost or ruined in the process. Meanwhile, a study conducted by Amnesty International found Brazil to be the country where people feel most unsafe in the hands of authorities. Or in the words of one resident to Smithsonian Magazine, “It’s the same thing as before – a group of different gunmen is taking care of this place.”

Brazil’s Most Controversial Government Program


A common characteristic of developing nations is the high rate of urbanization and subsequent disparate development between regions. Brazil being no exception to this rule, the effect is quite far-reaching in the healthcare industry. More than 90 percent of medical professionals are concentrated in areas that cover less than 10 percent of the country. A program launched by the federal government in 2011 to address this problem failed to attract but one third of the required number of doctors to address this problem. Consequently, it was replaced with a new program: Mais Médicos (more doctors).

Overseen by the World Health Organization, this three-year program aims to alleviate the unequal geographical distribution of healthcare professionals by bringing them in from abroad. Fifteen thousand doctors from Cuba, Portugal, Argentina, and Spain were to work in these remote areas. Yet while government initiatives with such laudable goals generally tend to garner plenty of popular support among Brazilians, Mais Médicos has been shrouded in controversy from its inception. Industry representatives, students and the Ministry of Labor have taken aim at the program, A conservative magazine even went so far as to accuse Cuban doctors of being “communist spies” infiltrating the country.

Mais_MédicosIn a mere 12 months (Mais Médicos went into effect in July 2013) the program has become arguably the most controversial one implemented by the Dilma administration. While the Cuban healthcare system has a relatively good reputation the fact that a significant chunk of Brazilian tax money directly funds the communist Cuban state makes some feel quite uncomfortable. The Brazilian Medical Association and the Federal Council of Medicine have been encouraging healthcare professionals to voice their opposition in the form of protests and strikes. They even went to the Supreme Court last August in an attempt to roll back the program, stating foreign doctors were illegally practicing medicine without a license.

When the Court ruled in favor of the government, critics started taking another angle, claiming Cuban doctors were being exploited and comparing them to feudal serfs. At a university ceremony in Fortaleza where newcomers were to take classes for three weeks prior to becoming part of the public healthcare system, the doctors were harassed by a group of unionized healthcare workers calling them “slaves” and “incompetents”.

Controversy and name calling aside, the solution is really very simple. Extraordinarily high tuition fees for Brazilian medical schools have largely restricted access to the medical profession to the upper class. Though annual fees ranging from approximately $18,000 to $54,000 may not seem exorbitant to a Western mind, a GDP per capita of only $12,100 makes going to medical school a pipedream for the average Brazilian. Without a university degree, however, one is not licensed to practice medicine. It should be no surprise, then, that graduates start their careers in the major cities where demand for their services – and consequently the monetary incentive – is the highest.

Given the Brazilian government’s close ties with the pharmaceutical industry one might not be surprised to find out that the playing field is heavily tilted in favor of those doctors taught to adopt the “pill for every ill” mentality. But it’s curious to see how the Brazilian government – just like many or all other governments – restricts competition on the one hand through a system of licensure, while artificially introducing competition from abroad through the Mais Médicos program. After all, if people did not have to ask permission to be compensated for helping others heal there might not be any need for foreign doctors. Besides, the fact that wages are relatively meager would be less of a concern if Brazilians did not have to spend a fortune on a medical degree.

As usual, freedom is the answer. The only problem is there is no special interest group lobbying politicians for more freedom, because who but the ordinary man or woman benefits from that? As liberty-loving folk it is our job to inject this line of thinking into the public debate.