Uruguay benefits from humble but competent leadership

Let's take a break from the ever-increasing horrors of the jihadists(across the Arab world and in Africa), and Putin's undermining of its neighbor Ukraine.

Uruguay is a small country nestled between South American giants Brazil and Argentina. With its size similar to the US state of Washington, but with a population of just 3.4 million (half of Washington's), Uruguay does not exactly play large in world geopolitics. But it has a positive story to share.


Uruguay as a region was competed for by the two major European colonizers, Spain and Portugal who controlled Argentina and Brazil respectively. Spain gained the upper hand in the late 1800s, but the Spanish colonists and native population rose up and gained independence from Spain in 1811. Portugal made its move to occupy the country in 1817, but the Uruguayans regained independence in 1828 after a three year war. Part of the reason Uruguay was able to win against two superpowers of the day is that there was little apparent wealth that either colonial power found worth fighting too hard for. At the same time, England and Argentina (read Spain) both found it useful to "check" Portuguese power by supporting Uruguayan independence. Independence does not usually come independently! Graphic from twitter.com

Four highlights to help understand Uruguay

First, José Gervasio Artigas is considered Uruguay's founding father, similar to George Washington for the USA. He was instrumental in playing off forces of Spain and Portugal through their colonies of Argentina and Brazil. He was committed to the concept of republicanism vs the monarchy. To enter the Uruguayan view of life and the nation's history, he is a central figure.

Second, the composition and location of Uruguay's population is interesting. Approximately half of Uruguayans live in the capital city Montevideo and much of the rest live in 25 cities spread along the coast. The sparsely inhabited interior is mainly the terrain (and it is flat) of long time cattle ranchers, and a more recent not-insignificant acreage of tree plantations. Similar to Argentina, most of the population is ethnic European, with its most historic and native Indian tribe, the Charrua, now representing just .4 percent of the population.

Third, the country's economy and delineation is connected to one of its two major rivers - the Uruguay, which empties into the the Rio Del Plata.

The Uruguay river separates Uruguay from Argentina with its major urban center Buenas Aires not that far from Montevideo. Quite an urbanized region! Graphic from www.nature.com

Fourth, Uruguay had two large pulpmills planned in 2003 that have been at the center of a dispute with its neighbor Argentina for nearly a decade. The dispute began when plans for building the pulpmills at the river's edge, apparently did not adequately address Argentina's concerns over the shared river asset, in particular possible pollution. The disagreement moved from early official protests, to street protests, to presidential phone conversations, but the completion of the first pulpmill occurred in 2007. The two nations traded changing accusations before the Organization of American States (OAS), plans for the second mill were eventually dropped, but official blockades of the river and the building of concrete walls across highways followed. The simmering dispute over the operating pulpmill led to the eventual involvement of the Catholic Church as "dialogue facilitators," followed by appeals and opinions presented to the World Bank, the European Union, and MERCOSUR .


The disputed pulpmill under construction in 2006. Photo from www.talouselama.fi


One of the blockades involving the pulpmill. This one is on an international highway linking Gualeguaychu in Argentina and Fray Bentos, Uruguay where the pulpmill is situated. Photo from www.washingtonpost.com

The International Court of Justice in the Hague, Netherlands ruled in Uruguay's favor at one point noting that while Uruguay did not inform Argentina adequately regarding the pulpmill operations, in fact, fears over pollution were not valid as the mill was meeting all international standards. The conflict only ended in 2010, during the presidencies of Cristina Fernández de Kirchner (Argentina) and José Mujica (Uruguay), with the establishment of a joint coordination of the activities in the river.


In 2010, the then-new Uruguay president José Mujica made a great effort to end the dispute meeting with president Cristina Fernández de Kirchner four times in a few weeks. They subsequently signed an agreement concluding the dispute. Photo from http://en.wikipedia.org

Enter Uruguayan President Jose Mujica

From a recent article found here, we read that in March, the 79-year old president of Uruguay, Jose Mujica, finishes his five-year term . "Uruguay does not allow a president to stand for reelection, so later this spring, Mujica will take a seat in the senate. In the 60s and 70s, Mujica was a guerrilla leader, imprisoned and tortured by Uruguay’s repressive government. Freed in 1985, Mujica shed his violent past, opting instead to become the voice of pragmatism – the art of the possible. His Socialist leanings are apparent still. As president, he lives in a farmhouse with wood heat, saying it frees him from the shackles of consumerism."


From guerrilla or opposition activist to President (as many have elsewhere, including Czech Vaclav Havel, Pole Lech Walesa, Israeli Menachem Begin), Mr Mujica joins an even smaller list of stellar Presidents by all accounts. Photo montage from rafaelmartinez67.tumblr.com

From the beginning of his Presidency in 2010, he actively worked to end the tension-filled disagreement with Argentina regarding the pulpmill, and more importantly, from the article again, "on Mujica’s watch, the proportion of people living in poverty dropped from 40 percent to around 12 percent.

While many South American countries shun outside investment, local and foreign money has risen to 22 percent of GDP under Mujica. The U.N. reports that in 2014, direct foreign investment slumped by 23 percent in Latin America and the Caribbean while soaring 9 percent in Uruguay.

The World Bank ranks Uruguay ninth out of 32 countries in the region for “ease of doing business.” That is far higher than neighboring Brazil and Argentina, where nationalist policies have foiled foreign investors and local producers alike, and socialist Venezuela."


No lines of scarcity here as in Venezuela. Photo of city center and the Plaza Independencia, by www.happytellus.com

Let's savor that 40% to 12% reduction in poverty rate for a moment, something accomplished in just 5 years. It also fits in context with a series of seemingly miraculous accomplishments that were propelled, if not started by Mujica. From wikipedia, "Uruguay is ranked first in Latin America in democracy, peace, lack of corruption, quality of living,... and equally first in South America when it comes to press freedom, size of the middle class, prosperity and security. On a per capita basis, Uruguay contributes more troops to United Nations peacekeeping missions than any other country. It ranks second in the region on economic freedom, income equality, and per capita income. Uruguay is the third best country on the continent in terms of GDP growth, innovation and infrastructure.

The Economist named Uruguay "country of the year" in 2013 acknowledging the innovative policy of legalizing production, sale and consumption of cannabis. Same-sex marriage and abortion are also legal, leading Uruguay to be regarded as one of the most liberal nations in the world, and one of the most socially developed ..." Of interest for Americans, "Uruguay has no official religion; church and state are officially separated,and religious freedom is guaranteed" (This last sentence is a quote from Wikipedia.)

Finally and fittingly, Mujica's 5 year term ends as it began, with a connection to a pulpmill - in this case a "flagship" foreign investment from which the mill (Montes del Plata one of the largest in the world) was built in a free economic zone on Uruguay's Rio Del Plata at Punta Pereira. Starting operations in June 2014, the plant, which meets stringent European air and water quality standards, creates 5,000 direct and indirect jobs, with an annual payroll of over $100 million. It is also expected to contribute $844 million to Uruguay's GDP. The industry’s importance to Uruguay is equivalent to that of Boeing in Washington. (again from Brunnel's article)

The Swedish company, Stora Enso, built this one, and Teatree must admit, new pulpmills kind of look the same. (This mill and the one on the Uruguay River both get all their wood supply from sustainably managed Eucalyptus plantations.) Photo from brightmarketinsight.com

UK faces flareups in old tensions in Northern Ireland and the Falkland Islands

The United Kingdom (ie. Great Britain), after pulling off spectacular summer 2012 Olympics and rejoicing over the latest Royal pregnancy, suddenly has found itself confronting old tensions.

The closest to home is in Northern Ireland, where the insistence on parochial parades and the waving of flags has resulted in violence once again between Catholics and Protestants who typically represent the political perspectives of those wishing to remain loyal to the British crown, and those who want to unite with the Republic of Ireland.

The United Kingdom consists of England, Scotland, Wales, and Northern Ireland

Three days of violence began with the Belfast city council decided to stop flying the British flag year round. Protestors have converged on the council headquarters wrapped up in British flags demanding the decision be reversed. Counter protestors have reacted angrily, getting into fights with the flag waving protestors ... and away it goes.

Northern Ireland, with Belfast as the political and administrative center of the entity

Protestors started out at the City Council heaquarters in Belfast ...

... followed up with more strident parades in the streets

Fights, firebombs, and a few stray shots have increased the tensions and stakes between those wishing unification with Ireland, draped in Catholicism, and those clinging to Great Britain, with a tribal identification with Protestantism

Unfortunately, the flare-up of violence and tension cannot be dismissed with a roll of the eyes towards fringe individuals. The past three days are an altogether potent reminder of the "troubles" in Northern Ireland running from the late 1960s to the end - sort of - with the 1998 Belfast "Good Friday" Agreement. During those three decades, over 3500 deaths occurred (civilians and armed forces of police and army) with 45,000 injuries. And untold grief, trauma, economic cost, and opportunities lost.

Argentina again demands its right to govern the Falkland Islands (the Malvinas)

More than 7000 miles away from UK's concern with Northern Ireland, a tiny set of islands in South America is suddenly a repeat source of irritation. Over 30 years ago, as summarized at Wikipedia, "Argentine forces invaded and occupied the Falkland Islands and South Georgia. The British government dispatched a naval task force to engage the Argentine Navy and Air Force, and retake the islands by amphibious assault. The resulting conflict lasted 74 days and ended with the Argentine surrender on 14 June 1982, which returned the islands to British control. During the conflict, 649 Argentine military personnel, 255 British military personnel and 3 Falkland Islanders died."

A geographic look at the UK, Argentina, and the Falkland Islands.

The tension then, and now, is over the legitimacy of who should control the islands. Argentina bases its claim back to Spain's one time possession, the UK counters that that claim is not clear, and that those on the island should have the final say in what country they should retain citizenship.

Argentinan President Cristina Fernandez de Kirchner

The latest claim by Argentina's President Kirchner is the fourth in the past year alone. From a CNN article, "In February of last year, the Argentinian leader accused the British of militarizing the South Atlantic after the Royal Navy sent its warship HMS Dauntless to the region. Then, in June of 2012, Fernandez confronted [UK Prime Minister] Cameron at the G-20 meeting and tried to hand him a letter about the islands -- something he refused to accept.

The dispute flared again ahead of the London 2012 Olympics, when Argentina released a video boosting its Olympic team that was filmed on the islands. The advertisement showed Argentinian field hockey star Fernando Zylberberg training in the streets of Port Stanley in the Falklands. The video ends with the slogan: "To compete on English soil, we train on Argentine soil."

President Kirchner, with appropriate military officials in the background all orchestrated for the media, throws carnations into the Beagle Channel at a ceremony marking the 30th anniversary of the start of the Falkland conflict near the war memorial in Ushuaia Argentina on Monday.

The stance predictably ended with protestors burning UK flags, wanting their islands back

So, Teatree isn't sure of what Fernandez' game is. Perhaps it is deflecting criticism from her own governance issues to one mingled with patriotism, similar to her recent decision to nationalize a Spanish energy company's assets in Argentina (ironic that while that occurred, Argentina bases its claim on an agreement with Spain in 1833 ...)

Whatever the case, the world goes on a swirling with conflict, outrage, vows to remember and revenge, etc. Oh, and epiphany occurs tomorrow, January 6.

Argentina ready to nationalize Spanish oil company assets

The normally quiet - or ignored - South American continent has cropped up for the third time in a little over a week. We just covered the Summit of the Americas held in Colombia, which will most likely be remembered for US Secret Service agents cavorting in Cartagena. Earlier, we had noted that Argentina had raised a call for a return of the Malvinas (the Falkland Islands) to its jurisdiction on the 30-year anniversary of the UK wresting back control of the islands from an invasion by said Argentina.

Argentina again in the news - eighth-largest country in the world by land area and the largest among Spanish-speaking nations. Its population is over 40 million people.

This week, Argentina shredded amicable relations with Spain (the European nation from which Argentina maintains it received "title" to those Malvina islands, acquired when Argentina became independent from Spain itself in 1816 ...) along with confidence among many of the world's nations and institutions. It did so by announcing its intentions to nationalize assets of a foreign owned oil company, Repsol, that are operating on Argentinian soil under the name YPF. Technically, the country is expropriating (seizing) 51% of the shares of YPF, thus giving Argentina control of the company's decisions and handling of its assets and operations.

Cristina Fernández de Kirchner

As the UK Guardian newspaper put it, "Cristina Fernández de Kirchner, Argentina's president, introduced the new measure to Congress in a bid to recover sovereignty over its national hydrocarbon resources. Kirchner accused Repsol of failing to produce enough oil through YPF to meet Argentina's energy requirements. Repsol's alleged failure threatened to "practically turn us into an un-viable country," Kirchner said. ... Economic and political interest in the country's hydrocarbons has rocketed since the end of last year when YPF announced it had discovered a shale oil site that could potentially yield 1bn barrels. The move to seize 51% of Repsol's YPF business in Argentina sent the company's shares spinning down 18% on Wall Street and will worry other big foreign investors such as BP."

A YPF oil refinery in Argentina, on course to be nationalized by the country as soon as legislation now in the Argentinian Congress is finalized.

And so we enter the murky world of global assets, financial investment, national sovereignty and when it is appropriate to break or suspend prior agreements. Any given country with a military of sufficient strength can simply seize control over facilities within its territory. The repercussions are that usually those who built the assets won't like it, and will resist through legal and/or other means. Governments can either rush legislation through the system ahead of time to give a veneer or respectability to their actions, or make the new legality retroactive, and hope that will suffice.

When the action involves investors or owners of assets outside of the country - as in the case of this oil company YPF, based in Spain - seizure is usually modified and called "nationalization." "Expropriation" is another term which describes the government's recognition that there is value in the assets, and some sort of payment is made to compensate the owners for the loss of those assets. If the compensation is recognized as reasonably fair, that particular point of disagreement may be lessened, but the larger arbitrary action itself is likely to severely reduce the attractiveness of the country for further investments. And then, of course, most countries have agreed in numerous alliances and world courts that they will respect and follow a interlocking set of legal precedents and protocols for arbitrating disagreements. Nationalization (seizure of assets) is quite far down this list of accepted steps.

Argentina's expropriation of YPF's assets will likely be punished by a variety of actions from the G-20 group of nations, the International Monetary Fund (IMF headquarters shown here), and the World Bank.

Argentina's planned actions in this case have troubled the very nature of international relations - after all the country is not a small, shaky nation, but the second largest on the 10-nation continent. Nor is this latest announcement an isolated surprise. From a Business Week article, "[Since 2001] Argentina has been a pariah state with international creditors. At the World Bank’s International Centre for Settlement of Investment Disputes, Argentina has more disputes pending against it than any other nation."

Venezuela's Hugo Chavez and Argentine President Kirchner discussing something somewhere but before Chavez began his visible battle with cancer ...

Argentina seems to be following the path vaguely similar to Venezuela's Hugo Chavez. Some observers point to a charismatic, left-leaning economist in President Kirchner's cabinet, Axel Kicillof, who stridently champion's direct government control rather than corporate control over a country's resources, unfortunately often using bellicose rhetoric to frame his arguments.

Argentine Axel Kicillof, hopefully not another rising personality who will needlessly trouble the world in the decades to come. Teatree emphasizes the word, "needlessly" as the world could use some constructive shaking up of paths being trodden...

As a Reuters article puts it, "Government economist Axel Kicillof stormed the world stage this week when Argentina moved to nationalize energy company YPF, defending the plan he helped devise in a fiery speech worthy of Venezuelan President Hugo Chavez. Charismatic and polarizing, the 40-year-old Kicillof lambasted "free-market fundamentalists" as he defended the push to seize control of YPF from Spain's Repsol. Just four months after taking the deputy economy minister post, Kicillof has penetrated the small circle of trusted advisers to President Cristina Fernandez, who singles him out for praise in her speeches. Sporting sideburns and an open collar, Kicillof told Congress that only "morons" would think the state was stupid enough to play by Repsol's rules and make an offer to buy 100 percent of its shares. He blasted economic theories that "justify the looting of our resources and our companies."

These are not new political battles - capitalism, socialism, who directs, who controls, play out again and again on the global arena. This is just a rather abrupt eruption of the continuing debate. And it has serious consequences, as foreigners are often scapegoated for a country's troubles, and egos among leaders can do much more damage than simply being insufferable to listen to. Just look at Syria, Iran, North Korea to name three whose populations are trapped in the grip of destructive leaders.