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Takes Two to Tango: Why Washington Can’t Win in South America

Perhaps one of the more unlikely but compelling stories to come out of South America in recent years has to do with the budding strategic relationship between Venezuela and Argentina. Together, the two countries constitute a formidable bloc that could make all the difference in defining South America's future geopolitical trajectory.  


But now, Chávez is testing the revolutionary fervor of his Argentine counterpart, Cristina Fernández de Kirchner.  


The Venezuelan President has set his sights on Sidor, an Argentine-owned steel plant.  The firm is one of Latin America's most important steel factories and was Venezuelan state property until 1997 when it was privatized and sold to a consortium of corporations.  The largest majority stakeholder is currently Argentine company Techint.


As part of his assault on the neo-liberal economic policies of the past, Chávez has long sought to "nationalize everything that was privatized" by previous Venezuelan administrations.  Having already taken over the cement industry, several milk producing plants, dozens of large farms, as well as the electricity, telecommunications and petroleum industries, Chávez is now moving on to the strategically important steel sector.  


On April 9th, Venezuela put its incipient alliance with Argentina to the test by announcing the government's decision to nationalize Sidor.  It was the first time that Venezuela had acted to nationalize a company from an allied nation.  Rubbing salt in the wound, Venezuela's Vice President Ramón Carrizalez denounced Sidor's management for its "colonizer attitude" and "barbarous exploitation" of workers.  "This is a government that protects workers and will never take the side of a transnational company", Carrizalez added.
Despite Nationalization, Argentina and Venezuela Still on Track


Chávez's moves put Kirchner in a tight bind.  Paolo Rocca, Techint's President, is close to the Buenos Aires government and has pleaded with Kirchner to "confront the Venezuelan government in defense of national capital."  Thus far, Kirchner has been tight lipped about the imbroglio, which has made other Argentine investors jittery.  In the wake of the nationalization, some Argentine firms in Venezuela said they would "think a little more" and called the Sidor nationalization "an alarm."  


However, Rocca is unlikely to persuade Kirchner to take tough action against Venezuela.  Fundamentally there is just too much at stake in the relationship for either country to sever ties.  The Argentine President herself has admitted that Venezuela has been an important ally, helping Argentina "at a time when no one else did."  If it weren't for Chávez, who has bought more than $5 billion in Argentine debt in the last two years, Argentina might still be struggling to cope with economic troubles associated with the financial meltdown of 2001.  


What's more, energy strapped Argentina badly needs fuel and Chávez has generously agreed to barter oil for meat and ships. While in Buenos Aires researching my new book, Revolution! South America and the Rise of the New Left (Palgrave-Macmillan), I interviewed Cristian Folgar, the Undersecretary of Fuel.  Speaking with him at his office off the Plaza de Mayo, Folgar explained that energy links between Venezuela's state oil company PDVSA and the Argentine government were quite solid.  Indeed, the Venezuelan firm now has an office in Buenos Aires.  


"Today," he remarked, "the president of PDVSA Argentina was here asking for information about Argentine gas.  This month, I spent 10 days in Caracas.  I have made 15 trips to Caracas in total."


Chávez's energy benevolence has paved the way for closer economic integration: currently Venezuela and Argentina barter and trade everything from ships to oil to cattle to agricultural products.  According to Folgar, energy integration has been "fundamental" in enhancing Argentine-Venezuelan ties.  "Venezuelan and Argentine businessmen view each other as potential partners in many areas," he remarked, "which was not the case before."


Radical Hotel Inspires Venezuelans


Even as Venezuela and Argentina encourage business ties, workers in the two countries have also begun to coordinate their efforts.  Venezuelan laborers have been inspired by their counterparts in Argentina, who took over companies following the 2001 economic collapse.  Currently there are some 250 "recuperated" enterprises in Argentina, providing jobs to more than 10,000 workers.  


Encouraged by the Argentine example, Venezuela has hosted conferences dealing with the future of worker-owned firms in South America.  Argentine experts have participated in the conferences, providing crucial expertise to Venezuela.


An interesting example of the reciprocal exchanges between Argentine and Venezuelan workers is Hotel Bauen, located next to the headquarters of the Communist Party along a busy Buenos Aires thoroughfare.  A cooperatively-owned, three-star hotel, Bauen has served as a political symbol to many Venezuelan workers.  Indeed, some Bauen employees have even traveled to Venezuela in order to speak about their experience in setting up a cooperative system.


Argentines' Changed Political Consciousness


Because of these increasingly more frequent day-to-day exchanges between Venezuelans and Argentines, it would prove politically problematic for Kirchner to suddenly switch gears and reduce her country's ties to Chávez.  The Venezuelan leader continues to remain popular amongst Argentina's radicalized poor.  Kirchner, who has been busily trying to build up her populist credentials, and who holds mass rallies denouncing the agro-export elite in her country, cannot afford to alienate this key constituency.


For many, Chávez's anti-imperialist rhetoric resonates because of Argentina's unfortunate experience with the International Monetary Fund and neo-liberal economic policies backed by Washington.  Psychologically, the country has changed immensely from the go-go free market years of the Carlos Menem administration.  Politicians who fail to recognize the new underlying reality do so at their own peril.  


Therefore, notwithstanding the recent buffeting, the Venezuela-Argentina alliance looks like it will continue on track.  What's more, if the bloc manages to attract smaller countries such as Ecuador and Paraguay, it could prove to be a formidable force indeed.  Washington may find the consolidation of this left bloc unappealing, but there is little that Beltway foreign policymakers can do at this point to halt the rising political tide in South America.  

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