Left or Right? – The mining headache in Latin America

Posted on February 22nd, 2012 by danielgarcia.
Categories: Uncategorized.

It’s very easy to say what sounds good and what you think people want to hear. When talking politics many of us identify ourselves as a “leftist” or as “tending right”. The eternal democratic and republican approach to politics does not only exist in the United States but stretches to the entire world and it creates not only electoral conflict but also moral and ethical dilemmas in society.

South America is a fascinating example of a rising power and a group of nations that was at one point in time home to one of the worlds strongest and most successful civilizations, the Incas. South America then was overpowered by stronger European nations and became relegated to thirld world status for over two hundred years of development. Today, South America once again has awaken and is realizing the immense amount of potential for success, development, capacity, resources, and the newly found energy in many politicians and leaders.

This is where the left and right debate turns from white and black… to grey.

Mining is the most profitable industry in Bolivia, Chile, and Peru. Mining is also the one industry that has seen incredible divisions of social classes and inequitable distribution of wealth. Employees of mining corporations are normally well paid and create a strong middle class but what is the price we are paying for this? Social revolts sometimes seem extreme and are hard to understand. Just why do people not want mining? Would mining not bring in more jobs and only positive impact to the region?

The latest debate in this mining headache is water.

A Peruvian February demonstration was named the “March of Water” which more clearly translates to “Water Protest.” Radicals in Peru, possibly paid by Chilean authorities have created a buzz in poorer towns that mining will take away their water privileges and subsequently destroying their only source of income: farming.

This couldn’t be further from the truth. In fact most modern mining companies want to create a reliable source of water, energy, and personnel. Experience in Southern Peru shows us that a well funded mining company invests heavily in the infrastructure of the city in which it operates. They reinforce water systems, electrical systems, and create a sub division of labor that trains personnel to fill necessary spots in the company, usually well paying jobs. Heavy machinery operators and hard laborers earn decent living wages that include overtime and access to healthcare that is unavailable to the regular Peruvian population. The benefits of mining far outweigh the negatives and hampering mining to observe small procedural problems is not the liberal, democratic, and capitalistic answer.

Mining is currently our lifeblood. In Saudi Arabia its oil, in Peru its copper, gold, zinc, and molybdenum. If we kill that bloodline, then opponents better come up with a new alternative and the funds and companies willing to invest in their ideas.

 

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A short case for Capitalism

Posted on February 22nd, 2012 by danielgarcia.
Categories: Uncategorized.

Capitalism is a vital component of modern society and the lifeblood of the American economic system. While many perspectives on Capitalism exist and economists, politicians, historians, and citizens have not yet struck a clear balance in the definition of a perfect capitalistic society, we must study and understand the just benefits the market system and voluntary exchange of goods has brought to nations that adhere to capitalistic ideals.

A strong argument in favor of capitalism is the one brought forth by Ludwig von Mises. Von Mises introduced the economic calculation problem of how to rationally distribute resources in a fair and just economy. Capitalism and free markets allow price mechanism and the economics of supply and demand to put a price on goods and services. Average citizens carry a voice that creates a system of checks and balances along with government intervention and the economic system.  I would argue that this strong differential from socialism and the welfare state situates Capitalism as a much more just and fair system than the previous two.

A second argument in favor of Capitalism stems from Friedrich Hayek and his “Denationalization of Money” ideals. Hayek advocated that instead of following the government mandated gold standard, a free market can develop a healthier and more stable currency by creating competing standards of money and wealth. In “The Use of Knowledge in Society” he also created a strong case for central banks lack of knowledge and capacity to govern the supply of money. This I understand as a Capitalistic idea that would eliminate a central bank and create even more competition in the market.

A third argument in favor of Capitalism comes from Milton Friedman. Even though his idea about how the Federal Reserve should operate distances him from Hayek, his ideas of economic freedom surely support free markets and individual rights. Peruvian economist Hernando de Soto received the Friedman Prize in 2004 by advocating property rights a way to accelerate a just and fair system and eliminating poverty in third world countries. This social component to Capitalism is vital to creating a strong healthy free society.

The strongest case against Capitalism are competing class struggles and human nature, pioneered by Karl Marx. Capitalism, I believe, does create well defined lower, middle, and higher classes and while this can lead to class struggle, it also allows for upward mobility between classes. As an eternal optimist, I see class differentiation as a positive aspect in Capitalism. However this is still the strongest argument against free markets and Capitalism.

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How did this happen to Peru?

Posted on May 24th, 2011 by danielgarcia.
Categories: Uncategorized.

We are less than 2 weeks away from the Peruvian Presidential elections. Sunday June 5’th either Ollanta Humala or Keiko Fujimori will win the hard fought battle to reach the most powerful job in the country.

Peru’s weak governmental institutions and frail economy have seen a surge in the past 10 years thanks to high copper and metal prices. Implementation of Free Trade agreements has skyrocketed exports from 8% of Gross GDP to an impressive 17% of GDP. Let’s keep in mind mineral prices have also skyrocketed, so ignoring copper and gold, exports have actually risen more than 250% every 5 years.

Peru has a major problem in its growth: Division.

Social classes are so divided in the country that higher and lower ectelons of society react in drastic ways. Not only do extreme segments of the population understand change differently, but citizens within the same higher ectelon have also found themselves changing positions and innacurately portraying reality.

What does this mean?

Higher and middle income neghborhods in Peru account for 30% of the voting population. In years past this sector has consistently been liberal, democratic, open, fluid, and attached. This 30% block of people voted the same way. In 1992-93 this group of people supported a self-coup by Alberto Fujimori. Many now like to attack the self-coup and consider Fujimori a “dictator” but they forget that a survey by IPSOS in 1993 given by Alfredo Torres, part of the peruvian consular team in Washington D.C. at the time, actually gave Fujimori’s self-coup a 75% support percentage with a margin of error of 1%. 75% of the country supported the self-coup. Peru was under constant threat by the MRTA terrorist organization and Shining Path, a deadly terrorism gang lead by Abimael Guzman.

Many again like to point Fujimori as the creator of corruption in Peru but forget that the country was in shambles and was already so corrupted that no police commisary had any of the necessary equipment to deal with emergencies or attacks. The army had no effective weapons. Lawyers and magistrate judges were killed in the streets. Dogs were hanging from light posts. Buildings were blown up. The term “COCHEBOMBA” was extremly common and appeared on the news EVERYDAY. Do people forget this?

Fast forward 19 years and today’s election has a convoluted scenario of Keiko Fujimori, Alberto Fujimoris’ daughter against Ollanta Humala, a leftist disgruntled soldier kicked out of the military for acts against the will of the army and the commander in chief. Keiko Fujimori is in fact surrounded by some of the same people her father was surrounded by and Ollanta Humala is also surrounded by some unique characters. One of them is Carlos Tapia, and ex Shining Path sympathizer who frequently visited Abimael Guzman, considered the country’s most deadly criminal and the icon of terrorism in Peru.

So how did this happen?

The corrupt Fujimori regime that defeated terrorism now faced against an apparent corrupt Humala campaign financed by unknown sources and surrounded by controversial leftist individuals.

What will happen to Peru on June 5’th?

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