Colombia: Fire In The East

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April 13, 2017: With FARC disarming and ELN negotiating a similar deal there is far less violence and crime in the country. But there are residual problems. As expected some of the FARC factions went rogue rather than surrender. Some of them have formed alliances with like-minded ELN factions and are continuing to work with drug gangs. The “work” consists of coercing reluctant farmers to continue planting coca (the raw material for cocaine) as well as providing firepower to protect drug labs and large shipments headed out of the country. While most Colombians oppose the drug trade (because of the corruption and lawlessness it leads to) the money is very attractive. Farmers can earn more growing coca than they can with legal crops. Even when the police come around and destroy their crop the drug gangs consider it a cost of doing business and will pay the farmers to immediately replant. The gunmen will also interfere with government efforts to find and remove the thousands of landmines the drug gangs have planted around areas where coca was planted. FARC and ELN also used landmines to protect their base areas.

Some 7,000 FARC members are eligible for disarmament. But about seven percent of those belonged to FARC factions that refused to comply and as per the peace deal FARC declared these factions not eligible for amnesty and still outlaws. The government was not surprised when they went to seize the known assets of the rogue FARC members and found that it came to about $200,000 per outlaw FARC fighter. This was mostly in cash and property. It was known that FARC had done well as a business, at least in terms of acquiring real estate and property. That plus the profits from providing muscle for drug cartels created a temptation for many FARC members and it was never clear until now how many FARC would refuse to surrender. Now it is known and while it is less than the expected ten percent that are also some demobilized FARC members who will eventually return to the outlaw life. Some FARC members were expected to go back to working with the cartels or other gangster operations because many FARC members will realize that their true vocation has become getting rich any way they can. The leftist revolution was something many FARC members had already ceased to believe in. It was expected that some demobilized FARC would join other criminal gangs because those gangs engage in some of the same outlaw behavior (theft, extortion and smuggling) that many FARC members are familiar with. That’s been the pattern in past amnesties for anti-leftist militias. Already some of the drug cartels are openly recruiting demobilized FARC men, offering high monthly pay (compared to what most FARC veterans can make right away) and the usual bonuses and benefits of the thug life. The first order of business for these recycled gangsters is intimidating (threatening, kidnapping murdering) the rural folk and their leaders who seek to get their property back. While the country is now more at peace than it has been in over half a century the government has to cripple the drug gangs otherwise the violence will return.

The leftist revolution FARC has supported since the 1960s had, by the 1990s, degenerated into a constant hustle for money. At that point the revolution became more about money for the FARC members, not “the people” they theoretically fought for. The FARC peace deal is supposed to deal with the many rural victims of FARC. These people are not all that concerned about the cash the leftist rebels made from drug operations. That was largely foreign money. But in many parts of the countryside FARC members were unwilling to give up billions of dollars in property stolen over decades of virtually ruling vast rural areas. A lot of the stolen property was subsequently sold by FARC. The original owners want their assets back, as well as cash for damage done to structures and improvements. The FARC leaders (of all levels) who got rich on these deals don’t want to become poor again. The final peace deal provides more restitution to victims of these FARC confiscations but only if the government can ensure transfer of property back to the original owners. FARC leaders, especially those planning on forming political parties, have an interest in preventing FARC members from getting amnesty and then joining other criminal organizations. That will cost you votes. So there was a lot of arguing, shouting and even some shooting among FARC factions in late 2016 and early 2017. The demobilization process is to be completed by the end of 2017 but lawyers, government officials and rural victims of the FARC revolution will be still trying to untangle the mess (who owns what) into the next decade.

ELN Lingers

During early 2017 peace talks with ELN, a smaller (fewer than 2,000 gunmen) and more diehard leftist rebel group finally got underway in neighboring Ecuador. By early April these talks had made progress. ELN agreed on details of a landmine removal program and began working out details of a ceasefire. The government knows from past experience with FARC that ceasefires only work if both sides are very close to a final deal. The government is pressing ELN to accept terms similar to what FARC got and do it quickly. That is proving difficult but primary negotiations didn’t get going until early February. The next round of talks begins on May 3rd and both sides are confident progress will continue. Discussions about even starting negotiations did not take place until November 2016 and that came after months of delays because some ELN factions refused to release kidnapping victims, which both sides agreed was a pre-condition to talks.

ELN has released the most famous captive but there are still reports from rural areas of ELN gunmen trying to take over from FARC in areas where FARC has left or halted operations. ELN is apparently waiting to see how the FARC agreement works out before agreeing to any final peace terms. ELN has been less active recently, in part this is because the FARC ceasefire means the security forces can now concentrate on ELN and ELN is trying to adapt to that. In 2016 at least 46 ELN members were killed in combat, 388 were captured and 252 have voluntarily surrendered voluntarily. That’s over a third of estimated ELN strength at the beginning of the year. ELN has had some new recruits, but not enough to make up for losses.

Venezuela And The Oil Curse

Along Colombia’s eastern border it has become obvious that the situation across the border is getting worse. Violent anti-government demonstrations in the last week have left four dead and the security forces unable to quickly shut them down as they have in the past. Public protests like this have not been seen since 2014 when the government was forced to accept free (and scheduled) elections for the legislature. The government lost the 2015 vote and found itself with a hostile legislature. By 2017 the government tried to use the pro-Maduro Supreme Court to declare the legislature illegitimate but many senior government officials balked at that, realizing that the result would be a police state and a very unpopular and bankrupt one at that.

The government has run out of sufficient cash to import basic food items and will not admit what the real problems are. The government blames growing bread shortages on corrupt bakers. But the bakers cannot get the flour they need to meet the demand. That’s because the government can only afford to import a quarter of the flour needed. A lot of that somehow disappears and shows up on the black market. Bread is available from black market sources but at higher prices. Bakers operating by the rules lose money selling the bread they bake at government controlled prices. The government has arrested some bakers and charged them with hoarding flour or using flour for more expensive cakes and cookies. But that is not the case, as a cursory examination of bakery shops will show. The government does not want to admit that it cannot afford to buy sufficient imported food or that its corrupt officials are stealing a lot of what is imported. President Maduro apparently is willing to create a dictatorship but too many of his key officials point out that will get Venezuela declared an outlaw state and increase the financial problems.

Maduro had hoped that the price of oil would rise and provide sufficient cash to get out of the current mess. His oil advisors (both local and foreign) now point out that this is not going to happen. Moreover the low oil prices since 2013 are causing many countries long-term problems that have to be accepted. The primary cause of this long term problem has a name; hydraulic fracturing, or fracking. The persistent low oil prices are the result effective fracking technology developing, and evolving, in the United States. This created a sharp increase in oil and natural gas production in North America. But fracking is expensive compared to just drilling and as the oil price declines a growing number of oil and natural gas operations dependent on fracking had to be shut down until the price increased again. The Saudis and Russia hoped the lower oil prices would soon kill off fracking but that didn’t happen.

In the past rising oil prices always made it feasible to go after expensive to extract (like very deep or off-shore) oil and natural gas. As prices decline, these high cost operations have to be temporarily shut down, not eliminated entirely and forever. When some firms go bankrupt other firms buy up the assets and resume production when prices rise again. But it was worse than that with fracking because the lower prices simply encouraged the producers using fracking to improve their relatively new technology. That has happened before but it is happening faster and on a larger scale because most of the frackable oil and gas is in North America where the voters and their governments encourage its use.

Meanwhile most nations with conventional oil reserves are being practical and adapting. This is especially true for those with the largest reserves. The majors include Iraq (153 billion barrels), Iran (158 billion barrels) and Saudi Arabia (266 billion). But not Venezuela, which has the largest reserves (300 billion barrels). These four nations have the largest conventional reserves and those four comprise about 60 percent of the world total. These four nations and many of the lesser producers belong to an oil cartel (OPEC) which has, since the 1970s, kept oil prices high by controlling what is made available on the world market. What is keeping the world oil price low now is fracking and the standard OPEC production controls do not work. That new technology is making much more oil and gas available and it is expected that the U.S. and Canada will soon have “proven reserves” equaling a third of the current world total conventional reserves. The fall in oil prices since 2013 (from over $100 a barrel to as low as $30) is expected to get no higher than $50 to $60 a barrel. For the moment the record high of $132 a barrel (in mid-2008) is gone and even with OPEC states agreeing to cut production many are losing enthusiasm for that. To make matters worse the Venezuelan oil is the most expensive to get out of the ground and because it is “sour” and tar-like it is more expensive to refine. No foreign investors are willing to commit the billions need to update and revive the Venezuelan oil operations, mainly because of the massive corruption and the sense that the government is not rational nor dependable.

Many Venezuelans also notice that they are suffering a lot more than the worst GDP declines would indicate. There is still a lot of wealth in the country and people are realizing where much of it is disappearing to. It is no secret that a lot of it is lost to corruption. Government officials take bribes, steal when they can and have taken the lead in plundering government reserves of foreign currency. The biggest offenders in exploiting the official (far below the black market) exchange rate between dollars and the local currency are government officials. The black market rate for a dollar is now over 4,400 bolivars, way up from 800 at the end of 2015 and 400 earlier in 2015. In 2013 it was under 30 bolivars. Before the 1999 socialist revolution inflation was much lower and you could buy a dollar for six bolivars. The average inflation in neighboring countries is still at 1999 levels while it has soared in Venezuela. At this point the official exchange rate is 10.2 bolivars per dollar but that is only available to government officials and well-connected businessmen. The Venezuelan government seems paralyzed. One reason the government no longer releases economic data they collect is because it would show the skyrocketing poverty rates. Lowering the poverty rate was the main justification of the leftist government to take control of the economy. But private surveys in Venezuela see the current poverty rate at a record high of 73 percent. The rate was 48 percent in 2014 and 27 percent in 2013. It was about 50 percent when the leftists took power in 1998 on promises that they would drive the rate down. They did, until they ran out of money. Current cash reserves are about $10 billion and most of that will be gone this year to pay off old debt ($3 billion this month and $3.5 billion in October). If those debt payments are not made Venezuela is in default and unable to get new loans.

And then there is the murder rate. Although the government stopped releasing inflation and murder rates in 2016 there are other ways to collect data. Thus it’s no surprise that the Venezuelan capital (Caracas) has become the murder capital of the world with 130 murders per year per 100,000 population. On a list of ten cities in the world with the worst rates four are in Venezuela (ranging from 72 to 84). All ten cities are in Latin America, with number two being Acapulco Mexico with 113 per 100,000, mostly because of drug gangs. In Venezuela the reasons are mainly economic and political.

April 12, 2017: In Venezuela president Maduro suffered a major setback when he attended a pro-government rally in an area of eastern Venezuela (Bolivar state) that had long been supporters of Maduro and his predecessor Hugo Chavez. Presidential staff read the local mood incorrectly because once Maduro showed himself the heckling and thrown objects (whatever was handy) began. Maduro was quickly taken away to safety by his bodyguards but not before several cell phone videos were made and distributed online showing a surprised Maduro fleeing. That led to more anti-Maduro demonstrations all over the country, many of them in what had long been pro-government neighborhoods. Maduro’s approval rating has fallen to record lows (less than 20 percent). That approval rating was 25 percent in late 2016 and 33 percent in February, but the continuing efforts to block reforms and neutralize the anti-Maduro legislature has angered even more people. In mid-2016 nearly 70 percent said Maduro should quit before the end of 2016. Now it’s over 80 percent demanding that he quit immediately.

April 8, 2017: In central Colombia (Guaviare province) a rouge FARC faction used a roadside bomb to kill one soldier and wound four others.

April 3, 2017: In the northeast (Norte de Santander) an airstrike killed at least ten ELN members. When soldiers got to the site they found that some of the armed ELN members were women and that others apparently fled and some were wounded.

The OAS (Organization of American States) members took a vote and agreed that democracy had ceased working in Venezuela and called on the president Maduro to halt his efforts to rule like a dictator. A year ago OAS officials admitted that the Venezuelan government had misbehaved to the extent that it should be expelled from the OAS. But enough of the 34 members of OAS still held out hope that the Maduro government will find a solution that action on expulsion was delayed. This “wait and hope” group largely consists of countries headed down the same socialist path as Venezuela and really would like to see a solution that works. These OAS supporters are themselves too broke to help Venezuela so they do what they can to “protect” the reputation of the Venezuelan leadership. Cuba and Bolivia remain staunch supporters but most of the other nations who were hopeful a year ago are despondent now.

March 30, 2017: In Venezuela the Supreme Court, which is controlled by president Maduro, declared the elected (and largely anti-Maduro) legislature in contempt of court and its powers transferred to the court. Three days later the judges were apparently told by Maduro to back off and the judges put their ruling on hold but did not reverse it.

March 23, 2017: As part of the FARC peace deal some FARC members have to submit to criminal prosecution for known crimes. The special courts for this already have 179 FARC members to prosecute and those found guilty will, per the peace deal, receive reduced sentences. But the worst of them will serve up to seven years in prison and those trials are now underway.

 

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