October,2009. Volume 11 Number 4
Dramas in Pyjamas
It was José María Torres Caicedo, a Colombian writer, who in 1856 popularised the term “Latin America”. But as in the case of Dutch-speaking Suriname, it is not necessarily the Spanish language that dominates the region. Suriname’s immediate neighbours, for example, do not use Spanish as the official language, namely, French Guiana (French), Guyana (English) and Brazil (Portuguese). It is not just the US that can claim the title of melting pot.
The French immediately warmed to the expression “Latin America” when it was first used because it distinguished the region from the US at a time when France was trying to establish its own sphere of influence. This eagerness would lead to the disastrous attempt by Louis Napoleon to install Maximilian, a Habsburg prince, as emperor of Mexico. Brazil can relate to France’s motives in the 19th century and when reflecting on doctrines of American exceptionalism, one should also think of Brazil; many Brazilians don’t even feel part of Latin America. This sense of separateness and proud independence has led Brazil to believe that it is entitled to a permanent seat on the United Nations Security Council. The North American Free Trade Agreement signed by Mexico and the US is not seen by Brazil as a unifying step for all of the Americas; quite the opposite and it prefers to encourage unity within South America itself.
Brazil’s uniqueness has several strands – besides the fact that, unlike anywhere else in South America, it was a constitutional monarchy for the first seven decades after its independence. The country is the largest on the continent and both language and geography (the forbidding boundaries being the Amazon rainforest, the Pantanal swamps and the powerful Paraná river) serve to reinforce this isolation. It has, however, a dark (literally) past. It is thought that out of approximately 8 million Africans who survived the passage to the Americas, well over 3 million were shipped to Brazil in the four centuries to 1850 – much more than the number shipped to the US. Slavery was not abolished until 1888 (the same year as it was in Cuba) and it was that decision that would lead to the end of the monarchy.
Brazil’s drive for unity is not shared in Central America where in June there was a successful coup against Manuel Zelaya, president of Honduras, who was unceremoniously removed wearing his pyjamas. But let’s be clear and realise that the coup did not originate in a military barracks but was the direct result of a court order issued by a competent judge of the country’s Supreme Court. President Zelaya, a member of the axis of “21st-century socialists” headed by the president of Venezuela, warmed quickly to the idea of extending his presidential mandate, just as Hugo Chávez has done. But Hugo Chávez did so by first holding a Constituent Assembly and changing the constitution. Mr. Zelaya, on the other hand, and whose ambitions were not shared by parliament, the Supreme Court and even his own Liberal Party, decided to start the ball rolling by holding a referendum to test the waters. The army refused to distribute the ballot boxes and subsequently the head of the armed forces, General Romeo Vásquez, was sacked by the president and resignations followed from the Defence Minister and the heads of the army, marines and air force. The Supreme Court had already declared the referendum illegal but the president chose to ignore this.
Although at this stage the eventual outcome – and the level of civil unrest – remains uncertain, it is felt that most of wind has been taken out of Manuel Zelaya’s sails. In my opinion it is not taking sides to say that the coup is hardly a return to the 1980s with its spate of civil wars across Central America. Just as the US Supreme Court determined the fate of a presidency in December, 2000, arising, in part, from considerations of judicial power, so the gavel, and not the grenade, was used in Honduras to defend that country’s constitution.
Coming Home to Roost
“No nation is fit to sit in judgement upon any other nation”. Thomas Woodrow Wilson’s sentiment is one shared by Brazil. Reports have caused a stir outside the country after Brazil’s central bank and aides to President Luiz Inácio Lula da Silva announced that Brazil and China will move towards using their own currencies, rather than the US dollar, in future trade transactions. There are several reasons why the greenback’s prominence should be questioned, a status that was established from the remnants of the Bretton Woods system created after the Second World War. Today, however, the dollar is no longer fixed to gold and the US is no longer the world’s largest creditor; there are those who argue that it is an empire that can only maintain the upper hand by military, rather than economic, strength.
Brazil’s move just reflects an increase in demand for emerging markets currencies that complements an existing effort to change the monetary system by promoting the use of other currencies; it will, however, result in a dilution of the dollar’s dominance rather than its imminent demise. At the moment central banks’ international reserves represent approximately US$7,000 billion of which up to 75 per cent is thought to be in US dollars. But change must come because emerging markets represent at least a third of world output at current market prices and could represent as much as half within the next 10 years whereas their currencies are virtually unrepresented in the international reserve portfolios of central banks.
During the Brazilian president’s two-day trip to Beijing in May, China confirmed a loan of US$10 billion to Petrobras, Brazil’s government –controlled oil company, in exchange for guaranteed oil supplies over the next decade. China’s involvement with the region is growing and bilateral trade has increased 10-fold since 2000, reaching US$143 billion in 2008. It already buys more copper from Chile than the US does and so it is a sign of the times that China replaced the US as Brazil’s biggest trading partner during the first four months of this year. It’s possible that Brazil is now the second-largest economy in the Americas, after the US.
Sigmund Freud once said, “America is a mistake, a giant mistake”. Whatever your view of that, as far as mistakes go, Washington’s failure to foster closer ties with Brazil is a big one and as Brazilian chicken begins to be exported to China for the first time, perhaps other chickens are coming home to roost in Washington, D.C.
Additional relevant commentary will be found in the September and October issues (available on our website) of the British professional business journal, Offshore Investment.com which features our regular column, Latin Letter.
