Latin America's Legion of Doomed (part 2)
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[continued from part 1]
The last time a convoluted plot was hatched for the economic development of the Caribbean Basin, it ended in the Bayou of Pigs fiasco when in 1981, Dominica, now an ALBA member, was the target of a coup. North American white supremacists led by a gay vigilante conspired with local Rastafarians to oust staunch Reagan ally President Eugenia Charles. Their plans to “undertake an industrial project of considerable size” using millions from South Africa brokered through a Bajan agent fell apart when they were arrested on the Louisiana docks. Currently, the only plotter still alive is Steve Hammond who has since renounced his modern buccaneering ways and now resides in Blackpool, England as Andrea, a post-op transsexual.
Currently, Dominica wants to diversify its economy from hosting illegal websites by also selling water. Chinese and Venezuelan companies have rattled the US State Department’s gilded cage with offers of economic development and assessments of fresh water exports (which the government of the Caribbean’s wettest island claims could yield up to $3 billion in annual revenues). Yet, it appears that another Francophone company – Nestle (NASDAQOTH: NSRGY) – could be the one that swoops in and gets the contract.
While billions may seem fantastical, clever marketing could make those numbers work – after all, the luxuriously priced Fiji Water not only has higher transportation costs (especially if the coup-prone nation forces them to switch to their back up wells in New Zealand), but it is remarkable that Fiji, a country with one of the highest typhoid rates in the world (an illness born of contaminated water), can command such an image. Dom’ Perrier may be in the cards after all, though if the political hallmarks of an ALBA country don’t deter them, the environmental and logistical impacts required to obtain the water may.
Also, while ALBA members’ penchant for nationalization (or “re-nationalizations”) tend to get the headlines, theatrical displays like Bolivian President Evo Morales and his annual nationalization celebrations (beware the kalends of May) are not the real problem as companies like Repsol (NASDAQOTH: REPYY.PK) and Kinross Gold (NYSE: KGC) which operate through out the region will attest. It is the politicized bureaucracy, unnecessary uncertainty, and proud incompetence that poses the greater dangers in the new economic system being pioneered by the ALBA member states. While corruption is everywhere in the world, ALBA has some of the most inefficient corruption outside of Africa. As international mining consultant Joseph Cherrez recounts from his recent visit with officials in Ecuador (the country which was O. Henry’s inspiration for the term “banana republic,” and home of the two decades long Chevron lawsuit):
I was told that under the new mining code, a company that drills and proves up a deposit (which can be very costly) has no automatic right to progress to the mining phase and must re-negotiate with the ministry for a mining license. Until the very end the government can veto a company’s ability to monetise its investment.
I was told that to make progress I would need to buy a gold mine which [the friend of the government official] apparently part-owned. Upfront payment would be a few million dollars but the long-term commitment would be much greater. No evidence was provided that the mine was owned by him. I said I would think about it and needed some supporting studies. I was told this data would cost $2,000. When I refused to pay my contact stormed out leaving our negotiations hanging.
Also disturbing is the mounting evidence that the richest ALBA members, Venezuela and Ecuador, are supplementing their vast social welfare schemes with the production, domestic sale, and export of counterfeit pharmaceuticals – possibly taking a cue from fellow ALBA co-founder Cuba (which despite critical public health personnel shortfalls still insists on sending abroad over a third of its healthcare professionals on medical diplomacy missions, from which many defect.)
Many compare the reforms of Raul Castro in Cuba with those of Deng Xiaoping in China. More apt would be Mikhail Gorbachev whose one-two punch of perestroika and prohibition brought about a sobering end. A better five-year plan for Cuba would be to prepare for the raft of lawyers likely to be launched by Miami refugees still demanding their property back from its 1959 liberation. Another complication is that while the powerful Cuban-American lobby advocates a hard line, some of their supporters are making a good living brokering the sale of Midwestern agricultural products to Cuba using their connections to US politicians under the heavily restrictive embargo.
Membership in ALBA yields little and costs much. Their members are not value traps, they are just traps.
¡Viva the Bolivarian Revolution.
Nick Slepko has no position in any company mentioned here at the time of publication The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.