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Summit of the Americas: WikiLeaks and Failed War on Drugs

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WikiLeaks: U.S. and Brazil Vie for Power in Peru

In their correspondence with the State Department, U.S. diplomats in South America have been exceptionally paranoid about the activities of Hugo Chávez and the possibility of a leftist regional alignment centered upon Venezuela.  That, at least, is the unmistakable impression that one is left with by reading U.S. cables recently disclosed by whistle-blowing outfit WikiLeaks, and it's a topic about which I have written widely in recent months.  Yet, with President Hugo Chávez's health now fading fast and Venezuela looking like a rather spent force politically, it would seem natural that Washington will eventually turn its sights upon other rising powers --- countries like Brazil, for instance.

 

Judging from WikiLeaks cables, the U.S. doesn't have much to fear from this South American juggernaut in an ideological sense, and indeed leftist diplomats within Brazil's Ministry of Foreign Affairs are regarded as outmoded and anachronistic relics of the past.  Nevertheless, Brazil is a rising player in the region and U.S. diplomats are keenly aware of this fact.  For the time being, Brazil and the United States maintain a cordial, if not exactly stellar diplomatic relationship.  As Venezuela fades and Washington struggles to maintain its crumbling hegemony in the wider region, however, Brazil and the U.S. will inevitably develop rivalries.

 

This geopolitical competition has fallen somewhat under the radar, but a close reading of WikiLeaks cables lays bare Washington's secret agenda.  As far back as 2005 American ambassador to Lima Curtis Struble wrote that the U.S. was enmeshed in an "undeclared contest" with Brazil for political influence in Peru.  "We are winning on most issues that count," Struble added, remarking that negotiations over a U.S.-Peru free trade deal had remained positive.   However, the ambassador noted ominously, "the government of Brazil is still very much in the game" and had met with some success in pushing for the so-called South American Community of Nations or UNASUR which would diminish U.S. influence.

 

Run-Up to 2006 Election

 

Further cables indicate that the Brazilian administration of Luiz Inácio "Lula" da Silva pursued narrow-minded self interest in order to advance Machiavellian geopolitical and economic goals.  In the run-up to the Peruvian presidential election in 2006, Brazilian foreign policy advisor Marco Aurelio García visited Peru where he met with members of the Alejandro Toledo administration.  During his discussions, García sought to spearhead moves to establish the South American Community of Nations in the face of internal difficulties. 

 

Chief amongst those "difficulties" was none other than Hugo Chávez, a regional rival.  In order for the South American Community of Nations to progress, its two constituent parts, namely trading blocs Mercosur and Andean Community, would have to be "stabilized."  According to García, however, the Andean Community was in "crisis" due to Chávez's "antics."  Speaking to the Peruvians, García recommended that the Toledo government simply "ignore his [Chávez's] diatribes" [privately, the Brazilian added, Lula had helped to "rein in" the Venezuelan leader]. 

Meanwhile, García opposed Chávez's so-called Bank of the South, an institution designed to counter large financial entities like the International Monetary Fund and World Bank.  According to a WikiLeaks cable, the Peruvians agreed that Bank of the South would not be suitable for the new South American Community of Nations.  Like García, Toledo officials saw the more conservative Andean Development Fund as a more appropriate mechanism to enhance regional integration.

 

Handling Humala

 

García also met with nationalist presidential candidate Ollanta Humala, a kind of Chávez protégé.  During the campaign, the Venezuelan leader had provocatively backed Humala while attacking the candidate's chief opponents.  At campaign events, Humala had taken a leaf from his political mentor by sporting red T-shirts, calling himself "comandante" and boasting of plans to assert greater state control over energy resources.   

 

None too pleased by Humala's tilt toward Venezuela, García reportedly told the candidate that Brazil disapproved of Chávez's actions which promoted "intranquility" in the region.  Moreover, the diplomat remarked that he did not agree with Chávez's notion of countries belonging to different "axes" of powers.  García added that he was very concerned about social, political and economic tensions in the Andean region and Brazil was intent on playing a larger stabilizing role.

 

The meeting took place at Humala's own house and the candidate's wife, Nadine Heredia, took great pains to graciously entertain the Brazilians [perhaps Heredia wanted to reassure her guests in light of her own reported links to Venezuela].  Humala meanwhile "was very polite, upright and not at all a firebrand."  The candidate added that he wanted Peru to peacefully co-exist with both the U.S. and Brazil. 

 

A More Assertive Brazil

 

In the event, Humala must have surely regretted his political associations with Chávez.  During the campaign, the Peruvian was widely criticized for his ties to Venezuela, and the connection may have even cost him the election.  The man who edged out Humala, former president Alan García, had a previous incarnation as a fiery nationalist.  However, García was extremely critical of Chávez during the campaign and as he succeeded to the presidency the veteran politician went out of his way to court Brazil.

 

According to WikiLeaks cables, Brazil viewed the election as a necessary corrective which would help to restore "regional equilibrium" and to curb Chávez's increased geopolitical profile.  In the wake of the contest, Lula met personally with García in Brasilia in what insiders termed a "love-fest."  Though both leaders had political origins on the left, García and Lula had long since jettisoned such ideals in pursuit of their respective careers. 

 

Perhaps, Lula sensed that Chávez's star had waned and that it was now time for Brazil to press its own strategic advantage.  The Brazilian president stressed the need for greater physical integration between Peru and Brazil, including the dreaded Inter-Oceanic Highway which stood to exacerbate deforestation in the Amazon (for more on this, see my book No Rain in the Amazon: How South America's Climate Change Affects the Entire Planet).  The project, which is being carried out by Brazilian construction giant Odebrecht, will ship Brazilian exports to China via Peruvian ports.

 

Lula also spoke of the need for a regional, military, and political alliance between Peru and Brazil.  Lest García get the wrong idea about Brazilian intentions, Lula stressed that his country did not seek regional "hegemony" but merely wanted to transform South America into "a global actor on a par with China and India."  Responding to Lula, García candidly admitted that he preferred Brazilian regional hegemony to that of the United States.  Peru, the new president added, would surely be interested in forming joint ventures with Brazil and benefiting from Brazilian technological know-how.         

 

Judging from other cables, García sought to extend cooperation in yet other areas.  In 2009, U.S. diplomats reported that Lima was interested in purchasing a dozen Super Tucano combat support aircraft manufactured by Brazilian aerospace giant Embraer.  Details of the deal were discussed during a Lula visit to Lima, "with a large commercial delegation in tow."  The Peruvians may have been prompted to turn to Brazil out of pure frustration with the United States.  According to leaked documents, the García government was dissatisfied with the "slow and complicated U.S. defense procurement process and high price tags for U.S. equipment." 

 

Humala Act II

 

Perhaps recognizing that Chávez's star was on the wane, Humala saw fit to remake himself politically by cultivating greater ties to Brazil.  Reporting on Peru's recent presidential election, the New York Times remarked, "in a transformation this year that points to the eclipse of Venezuela by Brazil, Mr. Humala has swapped the red shirts for dark suits, explicitly rejected talk of seizing private companies and celebrated Brazil's market-oriented economic model, while distancing himself from Venezuela's president, Hugo Chávez."  In addition, Humala even hired campaign advisers tied to Lula's Workers' Party and paid a whopping four visits to Brazil.      

 

Then, Humala went out of his way to praise Brazilian companies invested in Peru's mines, steel industry and hydroelectric projects, adding that the new boondoggle Interoceanic Highway connecting western Brazil to Peru's Pacific coast was a landmark achievement.   Toning down the rhetoric, Humala started to refer to himself simply as Ollanta instead of "comandante."  Perhaps, the more moderate image helped Humala, who edged out conservative challenger Keiko Fujimori.  As soon as he was elected president, Humala flew to Brazil and met with Lula protégé Dilma Rousseff.  It was Humala's first official trip abroad in his new office and sent a clear sign of Peru's geopolitical priorities moving forward. 

 

Vying for Power in Peru

 

Though Humala continues to forge a partnership with the United States, Brazil could overtake Washington in the Andes.  To be sure, Peru has an important free trade agreement with the U.S. and both countries collaborate on combating drug trafficking.  However, Humala sees Peru as a crucial Pacific gateway and strategic link between the two mammoth economies of Brazil and China.  For years, Brazil and Peru ignored each other diplomatically but now trade has mushroomed into the billions of dollars. 

 

A voracious energy consumer, Brazil is keen on building hydroelectric projects in Peru which would allow the South American juggernaut to stop importing diesel fuel and produce electrical power instead.  A proposed 600 mile natural gas pipeline meanwhile is due to connect Peru's Camisea field with a petrochemical plant proposed by Odebrecht.  Additional firms are operating port concessions and even steel operations.  The owner of Brazilian company Gerdau, which acquired Peru's largest steel plant, is a friend to both Lula and Rousseff.  What is more, an additional Brazilian operation has purchased Peru's largest metal refinery, Cajarmarquilla, which produces indium, a material used to manufacture flat-screen televisions and computer monitors. 

 

In time, might Peruvian nationalists turn against Brazil?  The more Brazil inserts its tentacles into the Andean region, the greater the risk that the South American giant will ruffle feathers and local sensibilities.  Already, one hydro-electric project has led to major opposition and some fear that Humala might favor the Brazilians excessively as 80 percent of the operation's 2,000 megawatt output would be allocated to its giant South American neighbor. 

 

Moreover, Brazil hardly has a sterling record when it comes to hydro-electric power (for more on this, recall the controversy swirling around Hollywood director James Cameron), and one proposed Peruvian dam on the Inambari River would flood 158 square miles of rain forest, displacing some 7,000 people in the process.  Old foreign policy hand Marco Aurelio García, who now serves as Rousseff's top foreign policy adviser, and who had earlier warned Humala about cozying up too much to Chávez, has declared that the project is "very important" for Brazil.  Humala meanwhile says that locals' needs will be respected when it comes to deciding whether to move ahead with the project.  That is, for the time being.

 

Christ Statue of Lima

 

Overlooking the Pacific cliffs of Lima hangs a potent symbol of Brazil's rise on the world stage: a towering statue of Jesus which at first glance looks remarkably similar to Rio de Janeiro's Christ the Redeemer, a famous icon lying on the Atlantic side of the continent.  The statue, which rises 118 feet into the air, was sculpted in Brazil at a cost of $1 million and the cost was footed almost entirely by Brazilian construction conglomerate Odebrecht. 

 

The "Christ of the Pacific" statue was erected even before Humala came into power by outgoing president Alan García, and there was no public consultation surrounding its construction.  For Lima Mayor Susana Villarán, the donated Christ statute is a tasteless eyesore, while Humala has diplomatically remarked that the structure "would improve the Lima panorama."  Odebrecht told the Associated Press defensively that it funded the statue because it "contributes to the diffusion of artistic expression" wherever it does business and because the statue could promote tourism for the poor who live in the vicinity.

 

In a tweet, Peruvian playwright César de María exclaimed, "I have nightmares in which I see that Peru's president is Odebrecht and all we do every five years is elect its representative."  Speaking to Caretas magazine, outgoing Brazilian ambassador to Peru Jorge Taunay remarked "there is not the least risk of Peru becoming a satellite.  It's not in Brazil's nature."  Others, including Guillermo Vásquez, a retired professor at Peru's Center for Advanced National Studies, is alarmed by Brazil's presence but is resigned to his country's fate.  "Brazil is coming," he told the Associated Press.  "What are we going to do about it?"

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WikiLeaks Peru: The Great Equalizer

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In Nicaragua, a Chavez Wave?

Initially, it seemed as if Chavez was perfectly poised to capitalize on a wave of anti-American discontent felt throughout the hemisphere. But then, a series of dramatic reversals cast doubt on Chavez's ambitions to become a truly hemispheric leader and a lightning rod against U.S. influence.

 

Over the last few months, I had begun to doubt whether Venezuelan President Hugo Chavez would indeed have the kind of political staying power that I described in my book, Hugo Chavez: Oil, Politics, and the Challenge to the U.S. (recently released by St. Martin's Press).

Initially, it seemed as if Chavez was perfectly poised to capitalize on a wave of anti-American discontent felt throughout the hemisphere. Throughout South America, Chavez exchanged oil for political influence with newly emerging leftist regimes in Uruguay, Argentina, and Brazil; the election of Evo Morales in Bolivia, a key Chavez ally, seemed to underscore Venezuela's rising influence.

 

But then, a series of dramatic reversals cast doubt on Chavez's ambitions to become a truly hemispheric leader and a lightning rod against U.S. influence.


Chavez's Reversals, from Peru to the United Nations

 

In Peru, Chavez openly endorsed the nationalist candidate Ollanta Humala in the country's presidential election. But Chavez's strategy backfired when Humala's opponent, Alan Garcia, charged that the Venezuelan leader was interfering in Peru's internal politics. Garcia successfully exploited the issue to his advantage and went on to beat Humala in last April's election.

 

In Mexico, pro-business PAN candidate Felipe Calderon ran a negative campaign against his leftist challenger Andres Manuel Lopez Obrador. In his TV ads, Calderon linked Obrador to Hugo Chavez, proclaiming "Lopez Obrador is a danger to Mexico." Though Lopez Obrador cried fraud in Mexico's July presidential election, the Electoral Tribunal ruled that Calderon had won the election and rejected Obrador's allegations. Calderon is set to assume office in December.

 

The next set back for Chavez came in Ecuador, where the Venezuelan leader's would be protégé, Rafael Correa, went down in defeat in the first round of the country's presidential election last month. A Correa win would have added another oil-rich country to Chavez's anti-American alliance.

 

Correa, a leftist economics professor, denied that Chavez had funded his campaign and the Venezuelan leader, chastened by his defeats in Mexico and Peru, was uncharacteristically quiet about the Ecuador election.

 

However, it's no secret that the two had a personal rapport. Correa in fact visited Chavez's home state of Barinas in August, where he met with the Venezuelan leader and spent the night with Chavez's parents. Correa, who opposes an extension of the U.S. lease at an air base in Manta, which serves as a staging ground for drug surveillance flights, has nothing but contempt for George Bush.

 

When he was recently asked about Chavez's "devil" diatribe against the U.S. president at the United Nations, Correa remarked amusingly, "Calling Bush the devil offends the devil. Bush is a tremendously dimwitted President who has done great damage to the world."

 

But Correa was shocked by a strong last minute showing by his challenger, pro-U.S. banana magnate Alvaro Noboa. Like Lopez Obrador, Correa has cried foul and declared that his campaign might have fallen victim to electronic fraud on the country's voting machines. He will face off with Noboa in another runoff election in November.

 

Then there was Venezuela's failed bid to secure a non permanent seat on the United Nations Security Council. When the United States proposed its own candidate, Guatemala, things turned ugly. Chavez characterized the race as a struggle against U.S. domination throughout Latin America; Venezuelan diplomats went so far as to describe Guatemala as a U.S. stooge.

But in the end, Venezuela failed to come up with the requisite votes. Chavez could take some satisfaction that Guatemala too failed to come up with the necessary votes at the United Nations, and had to withdraw in favor of Panama.

 

The reality, however, is that despite Chavez's frenetic shuttle diplomacy throughout Africa and calls for Third World solidarity, he could not muster more votes than a small Central American country with very little regional influence and an appalling human rights record.

It was hardly an impressive showing.


The Chavez-Ortega Alliance

 

Events in Nicaragua, however, suggest that it won't be so easy for the Bush administration to roll back Chavez's ambitions. It now seems as if the Sandinista candidate Daniel Ortega will cruise to victory in the country's presidential election and avoid a run off. As of Monday night, preliminary results show Ortega with about 40 percent of the vote, more than enough to avoid a future runoff.

 

For the White House, it's a nightmare that officials had long sought to avoid.

 

Though Ortega, who was president from 1985 to 1990 during the U.S.-fueled Contra War, is a pale shadow of his former self, having jettisoned his leftist rhetoric and hostility towards his northern neighbor, nevertheless Washington must now recognize that it has patently failed to isolate Chavez diplomatically. Nicaragua now seems poised to join the wave of left leaning regimes throughout the hemisphere inspired by Chavez.

 

When Ortega traveled to Venezuela for a meeting with Chavez last year, the friendship between the two began to bear fruit. During the meeting at Miraflores, the presidential palace, Ortega remarked that Latin American unity was necessary to confront globalization. He added that Chavez's electoral victory convinced him that revolutionary change could be achieved through the ballot box. "I thought that they were going to overthrow Chavez," Ortega remarked, "and that he would meet the same fate as Salvador Allende."

 

Ortega later alarmed Washington by remarking that if he won the election he would make sure that Nicaragua would join ALBA, Chavez's Bolivarian Alternative for The Americas. Chavez's trading plan, which is designed to sideline traditional corporate interests and Bush's Free Trade Agreement of The Americas (FTAA), is based on barter agreements between Latin American countries. Recently, to the chagrin of U.S. policymakers, Bolivia joined Venezuela and Cuba in ALBA.

 

Chavez, Ortega and ALBA

 

"Without a doubt," Ortega declared during a Cuban summit meeting with Morales, Castro and Chavez, "we have to look towards the south, we have to look towards integration, and ALBA is an open door, it is Latin American and Caribbean integration."

 

Ortega later added that he opposed U.S.-backed trade deals. "Central America's trading future lies not with the U.S. but with Venezuela, Brazil and Argentina," he said.

 

Ortega, smarting from three successive electoral defeats after the fall of the Sandinistas from power, added that he was "convinced after 16 years of neo liberal policies in Nicaragua that the conditions are ripe for the Sandinista Front to retake power, now via the ballot box."

In the Plaza de La Revolucion in Havana, Chavez approached Ortega and remarked, "Daniel, we are inviting you next year to come here as the president of Nicaragua."

 

According to Ortega, Chavez followed up on his promising words by offering to help Nicaragua join in ALBA. Speaking before hundreds of workers in Managua, Ortega said that Chavez and the president of the Venezuelan Economic and Social Development Bank (known by its Spanish acronym Bandes) had pledged to help open a development bank in Nicaragua. "Venezuela is willing to provide support so that this bank will become a reality and campesinos will have credits and a secure market," Ortega told supporters.  According to Ortega the Venezuelan aid formed part of ALBA.


Chavez, Ortega and CAFTA

 

In seeking to recruit Ortega for his ALBA scheme, Chavez found a willing ally in Ortega. Indeed, Nicaragua's experiment in "neo-liberal" economics since the fall of the Sandinistas in 1990 has not been a very happy one. Like Venezuela, which experienced political unrest as a result of neo liberal policies pushed by Washington, Nicaragua has been buffeted by "savage capitalism," as Ortega has put it.

 

Today, Nicaragua is a bleak place. Per capita income is a paltry $700 and more than 70% of the population lives on less than $2 a day. Successive governments have failed to restore Managua from a 1972 earthquake. Within yards of the presidential palace lie slums and empty buildings; beggars and barefoot children splash around in the gutters of Managua instead of heading to class.

 

Like Chavez, Ortega has spent a lot of time over the past years criticizing U.S.-led free trade deals. For example, the Sandinista led the charge against CAFTA, the Central American Free Trade Agreement. Ortega pledged to pull Nicaragua out of CAFTA and "end savage capitalism when we win." CAFTA, Ortega argued, was an effort by the U.S. to exploit poor countries in a rush to the bottom and cheap labor.

 

"Bush is taking up CAFTA," Ortega remarked in an interview with the Christian Science Monitor, "because it is his way of keeping Central America from looking south." Ortega furthermore suggested that Washington was seeking to splinter Nicaragua's solidarity with the Left in Latin America such as Chavez's regime.

 

CAFTA was pushed ruthlessly by U.S. trade representative Robert Zoellick over the objections of labor, environmentalists and human rights groups [for more on Zoellick, see my profile of the diplomat in my book].

 

"CAFTA is the opportunity of a lifetime," Zoellick remarked in an address given at the Heritage Foundation. "If we retreat into isolationism, Daniel Ortega, Hugo Chavez and others like them, leftist autocratswill advance."

 

Zoellick's efforts to link Ortega and Chavez in order to ram through CAFTA were echoed by paranoid, red baiting Republicans in the House and Senate. Oklahoma Republican James Inhofe warned his fellow Senators: "These Communists, these enemies of the United States, Chavez, Ortega, and Castro, are all in opposition to CAFTA. If you want to be on their side, you would vote against CAFTA."

 

In the House, Republican Rep. Mike Kirk of Illinois took the fear mongering prize by arguing that Chavez was "Venezuela's Mussolini." Chavez, claimed Kirk, was purchasing weapons in order to fight a new war in Central America. "Let us enact a free trade agreement with Central America to lock in democratic growth and stability," Kirk exclaimed, "and let us make sure that President Hugo Chavez's Venezuelan agents find no fertile ground in America's back yard."

 

In the end CAFTA passed narrowly in Congress. In Nicaragua, CAFTA was opposed by the Sandinistas in the National Assembly as well as key figures in civil society, including the president of the country's largest agricultural organization, who warned that the agreement would give rise to greater poverty in the countryside.

 

According to experts, CAFTA stood to encourage the growth of more maquiladora assembly plants, but any positive benefit would be offset by the loss in farm jobs as a result of the influx of cheap U.S. agricultural goods. Despite domestic opposition, Nicaragua passed CAFTA in October 2005.


Efforts to Demonize Ortega and Chavez

 

Despite its CAFTA public relations victory, the Bush administration was clearly still worried and kept up the pressure on Ortega during the run up to the presidential election. Paul Trivelli, the U.S. Ambassador to Nicaragua, warned that Ortega's victory would signify "the introduction of a Chavez model" in Nicaragua.

 

Meanwhile the conservative press flew into a tirade against Ortega, with the Washington Times remarking that "Ortega will take Nicaragua out of CAFTA and into Mr. Chavez's Bolivarian Alternative for the Americas, and almost synonymous with this is a move to nationalize industry, much like Evo Morales did in Bolivia."

 

The Washington Post was similarly hostile, remarking in an editorial that Ortega "is about to return to power and increase the alliance with non-democratic countries [such as] Venezuela." The Post, interestingly criticized the Bush administration for reacting too slow to the Chavez and Ortega threat.

 

On the pages of National Review, Otto Reich, a former State Department official who dealt with Venezuelan opposition conspirators in the run up to the coup against Chavez in 2002, remarked that "The emerging axis of subversion forming between Cuba and Venezuela must be confronted before it can undermine democracy in Nicaragua."

 

As per the case in Peru, the Nicaraguan right sought to link its Sandinista opposition to Chavez in an effort to instill fear in voters. Presidential candidate Jose Rizo remarked that Chavez and Ortega were "a threat to regional and hemispheric stability," and claimed that the Venezuelan leader was financing Ortega's campaign [both Venezuela and Ortega deny the accusation]. "Ortega will become Chavez's lieutenant in Central America and the Caribbean in the same way that he represented the extinct and failed Soviet Bloc," Rizo added.


Ortega Unlikely to Radicalize

 

Unlike Peru however the opposition's strategy of trying to scare Nicaraguan voters proved unsuccessful and at long last Ortega has prevailed in his drive to reach the presidency. Despite the hyperbolic claims by the U.S. and conservative politicians in Nicaragua however, Ortega is hardly in a position to become Chavez's steward overnight. Unlike Venezuela, Nicaragua is poor and foreign investment and aid accounts for 35 percent of the budget. That money could disappear if Ortega started to radicalize the country and expropriate industry.

 

In an effort to appease jittery investors, Ortega recently signed a pro-business pact in which he pledged to promote the private sector. Though he has spoken about the need to renegotiate aspects of CAFTA, Ortega now says he will build on free trade agreements. Ortega will have to tread lightly: the U.S. is Nicaragua's largest trading partner and accounts for about one fifth of the country's imports and approximately a third of its exports. About 25 wholly or partially owned subsidiaries of U.S. corporations operate in Nicaragua.

 

With so much at stake, Ortega has predictably moderated his rhetoric by stating that he would work with the International Monetary Fund, the World Bank, and Inter American Development Bank.

 

Carlos Fernando Chamorro, son of former president Violeta Chamorro and editor of the weekly Confidencial newspaper, is not too concerned about a radical Ortega agenda. He argues that Ortega is a pragmatist and will try to appease the United States. Observers believe that the right wing Liberal Constitutionalist Party (known by its Spanish acronym PLC), the main opposition to the Sandinistas, will hold onto its many seats in the National Assembly following this election, which would further complicate any radical agenda.

 

But, Chavez's Oil Diplomacy in Central America Could Be a Factor

 

Nevertheless, Chavez seems to be trying hard to bring Nicaragua into its political orbit. Chavez has enhanced his stature in South America by trading oil for other goods, and seems to be pursuing a similar strategy in Nicaragua. Venezuela has in fact already provided cheap fuel to Nicaragua through Sandinista mayors. Speaking on his television and radio program Alo, Presidente!, Chavez told Ortega that Nicaragua could pay for Venezuelan oil with meat, milk, cheese and other goods.

 

Ortega and Chavez have held personal discussions about setting up a mixed Venezuelan-Nicaraguan company that would import the cheap oil. Chavez is apparently willing to invest in Nicaragua to set up necessary oil infrastructure. Best of all, Chavez's offer could prove politically beneficial to Ortega since restive students have protested any move to raise transportation costs. Farmers meanwhile would not have to increase their production costs.

What does it all add up to? Despite some setbacks, Chavez stands to at least gain some diplomatic and political leverage in Central America. Ortega will be hampered in bringing about radical change, but will at least look upon Venezuela as an important regional ally and friend. Try as it might, the Bush administration has not been able to isolate Chavez. To the contrary, the U.S., through its efforts to demonize both Chavez and Ortega, has unwittingly brought them together.

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