Lula's UNASUR Summit

Southern Pulse Intel Brief | 27 August 2009

republished here with permission from Southern Pulse editors.

Brazilian President Luis Inacio “Lula” da Silva generated the most interesting news this week, ahead of the 28 August UNASUR summit, to be hosted by Argentina in the ski-resort town of Bariloche.

On 22 August, Lula signed a raft of agreements with Bolivian President Evo Morales in Bolivia’s Chapare region. An agreement worth US$332 million underpins the construction of a 306-kilometer highway from Villa de Tunari in the Chapare to the eastern Bolivian department of Beni.

Brazil has also agreed to import tariff-free textiles worth some US$21 million, which is the same amount of money Bolivia lost due to Washington’s decision not to renew the US-Andean Trade Promotion and Drug Eradication Act (ATPDEA) last year. The two leaders also discussed changes in the Brazil-Bolivia natural gas deal, as well as cooperation for bilateral efforts to combat the drug trade, but no solid agreements surfaced.

By many accounts, this meeting was a significant win for Morales, who has been under pressure to find alternative markets for Bolivia’s textiles. The highway construction will also please Chapare leaders, who are Morales’ closest political supporters. He will need them later this year for the run up to Bolivia’s 6 December 2009 presidential elections

For his part, Lula has assured support from Bolivia, despite Morales' anti-US stance, at the UNASUR summit, which promises to be contentious with both Venezuela and Colombia in attendance, and with Ecuador currently holding the president’s chair, which Colombia will likely view as an unfair arbiter.

While Lula has voiced some concern about Colombia’s agreement to allow the US military access to seven military bases in Colombia, he does not side with Chavez, nor can he take such a hardened position against Colombia. UNASUR is widely considered Brazil’s initiative and the strongest effort towards unifying South America under Brazil’s leadership. Lula cannot lean too far to the left in criticizing Colombia and the US at the risk of distancing himself from regional moderates and Washington.

The concern over US bases in Colombia does signal that the United States can still tilt the balance of soft-power in the region, but Lula’s deft diplomacy will likely win out. He did invite President Obama to attend the summit, and while Obama will likely not attend, Lula can at least maintain an open posture towards Washington, signaling that as the de facto regional leader, Brazil has nothing to fear from the US’ increased military presence in Colombia. He also did receive assurances from Obama’s National Security Advisor, Jim Jones, in early August that there would be a “good explanation” for the US’ presence in Colombia.

But Brazil would like a commitment: Obama will not use the Colombian bases to launch missions into other countries. This request is also one made on behalf of all of Colombia’s neighbors - a conciliatory geopolitical stroke ahead of the summit to make sure that Ecuador, Colombia, and Venezuela can at least agree on something.

What was lost with Reyes' Death - one year ago

Colombia's weekly news magazine, La Semana, recently published an interesting and insightful piece about the five things the FARC lost with Raul Reyes' death.

At the time of his death, one year ago on 1 March, 2008, Reyes was considered the FARC's number two leader; he commanded a considerable amount of respect around the world as a moderate, well spoken, and deeply committed member of the FARC's leadership council.

What was lost:

1. The FARC lost Reyes' international contacts. Reyes was close with a number of older members of Germany's Stasi - secret police from the Communist days in Eastern Germany. Through many of these contacts, Reyes was able to procure arms through the black market.

He was also the FARC's spokesman with many international organizations, and was responsible for rallying international support for the FARC's position when it came to negotiating with the Colombian government.

2. Many of the organizations that kept in touch with the FARC through Reyes were exposed when the Colombian government reviewed files recovered from his computer. These groups were subsequently forced to retreat from their supportive role, further isolating the FARC on the international stage, especially in Europe.

3. Also through a thorough review of Reyes' files, the Colombian government learned how the FARC communicated on both a domestic and international level. The guerrilla organization's communications protocols, what the leaders knew, and what the leaders didn't know was also disclosed. Without this knowledge, the deception used to rescue Ingrid Betancourt and the US captives, among others, would not have been possible.

4. The information on Reyes' computer also alerted the Colombian diplomatic corps to the linkages between the FARC and a long list of illegal organizations around the world. With these proven ties, Colombia's international efforts to stymie the FARC's support within illegal realms, especially the black market, have received a boost.

5. Colombia attacked Reyes in a FARC camp located within Ecuador, disrespecting that country's sovereignty while maintaining that if the Ecuadorians had been in on the operation, then the FARC would have found out. Colombia's relations with Ecuador have been severely damaged well into the future with a poor prognosis for any improvement, at least during Correa's mandate.

One year after Reyes' death, on 1 March, 2009, we still find two Andean countries with no diplomatic ties. But the FARC has been forever crippled.

If you ask Uribe if it was worth it, he would not hesitate to tell you yes.

Hutchinson-Whampoa Drops Manta Concession

The world's largest container-terminal operator, Hutchinson-Whampoa, will drop its concession to modernize and operate Ecuador's deep water port at Manta, according to a 6 February Bloomberg report.

This news comes after a 3 January speech by President Correa, who said Hutchinson would have to leave the country if it did not develop Manta according to the government's wished.

It is an "unacceptable" position, according to Hutchinson.

This is an interesting turn of events. On one hand, I believe Correa was speaking to a domestic audience, eager for him to make nationalistic statements.

On the other, Hutchinson doesn't need Manta. It is the closes port to China across the pacific, but apparently ports in Peru, Chile, Panama, and Mexico are just as if not more attractive.

I suspect Correa may be lobbying to win back his Chinese investors. We'll see if he does or not.

Correa's Tightrope

Ecuadorian President Rafael Correa announced on 19 July radio show that Iran and China may invest in the planned refinery to be constructed in Ecuadorís Manabi province on the Pacific coast.

It was an announcement loaded with political innuendo yet takes a step in the direction toward Correa's pragmatic plan to make Ecuador a regional hub of international trade between Asia and South America.

The refinery, named ìEloy Alfaro Delgado is the result of a joint venture between Petroecuador and PDVSA, with 51 and 49 percent shares respectively. Presidents Correa and Chavez were present for the ground breaking ceremony on 15 July, the same day the accords forming the joint venture were signed.

Construction on the US$6 billion refinery is expected to end in 2013, with the refinery supplying 300,000 barrels of oil a day to foreign markets and quite possibly to China alone.

China's involvement is more pragmatic than political. Ever eager for South American natural resources, China's involvement in the refinery is a clear-cut business decision, one that will lock up more refined petrol products for China and increase the likelihood that the refinery will actually be built.

Money from both Iran and Venezuela, however, remains in question.

Just three days prior to his radio announcement, Correa had met with a high-level member of Iran's Trade office, Majid Salehi. The two discussed trade cooperation and bilateral relations, according to a presidential office announcement. This meeting came on the heels of a May agreement for both countries to open trade offices in Quito and Tehran. Political ties between the two countries seem to have tightened, but itís not clear if this will translate for an real economic upshot for Correa.

Iran's ability to lend strong financial support to Ecuador's blossoming trade position is limited, according to World Markets Research, but the country's name on the project allows Correa plenty of rhetorical space, allowing him an opportunity to stoke nationalistic fires.

When announcing Iran's involvement Correa stated that "Iran has a lot of experience in the oil field, it has been a producer for a long time, almost a century.

Somebody may say: Iran, Axis of Evil, but what do I care what other countries think? We have to be masters of our own destiny. We have nothing against Iran. Iran has done nothing to us," Correa said.

Venezuela's participation in this project is under an equal amount of financial uncertainty, generating a level of instability in both this project and Ecuadorís overall trade relationship with its South American ally.

According to testimony heard on 17 July before the US' Congressional Committee on House Foreign Affairs Subcommittee on the Western Hemisphere, PDVSA had to borrow some US$16 billion in 2007 to maintain operations. The company is under a number of international lawsuits for its inability to keep up with the deliverables as stipulated by supply contracts. And the company has in some cases sold off international assets to assuage its cash flow problem.

Meanwhile, Ecuador's Central Bank published in early February trade figures revealing that Venezuela has surpassed the United States as Ecuador's leading supplier of fuel. The small country does export crude oil, but has no refining capability, forcing it to import diesel, petrol, and other refined products.

In 2007, Ecuador imported some US$262 million diesel from the US, down from US$628 in 2006. Venezuela filled this gap with some US$423 in diesel exports in 2007. This growing dependence on Venezuela is yet another reason why Ecuador has pushed ahead with plans for a refinery.

Despite Venezuela's possible financial shortfall, Ecuador may find all the project financing it needs from China. The small South American country is an increasingly interesting position vis-a-vis its geographic advantages. And the Manabi refinery is but one development.

When the US military's lease on Manta terminates in 2009, Ecuador will likely use the Manta port and heavy-duty runway to construct a regional import/export center. If plans for a cargo rail line that will link Manta with Manaus in Brazil's Amazonas state come to fruition, Manta would indeed become a regional hub of trade activity, and with the refinery, make Ecuador that much more attractive in Asia's eyes.