The Economist - USA (2020-02-08)

28 The Americas The EconomistFebruary 8th 2020

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1

The reforms are imperfect. The Judicia-

ry Council remains in place, points out Hu-

man Rights Watch, an ngo. The new media

law still characterises the press as a “public

service”. Even so, the press and the courts

are less cowed than under Mr Correa.

These reforms and a crackdown on cor-

ruption brought Mr Moreno popularity, but

weak growth and austerity have taken it

away. The economy shrank last year and is

expected to grow by less than 1% in 2020.

Because Ecuador uses the dollar, it cannot

devalue to compensate for wage rises that

have outpaced productivity growth. After

protesters blocked the abolition of fuel

subsidies and the legislature weakened a

tax reform, the imfhas set easier targets for

the Moreno government. But it will still

have to cut spending and raise tax revenue

this year. Protests could resume.

The outcome of elections in February

2021 will depend on which forces can capi-

talise on the discontent. Mr Correa, who

now hosts a show on rt, a Russian state

broadcaster, on which he interviews such

left-wing luminaries as Oliver Stone, a film

director, and Nicolás Maduro, Venezuela’s

dictator, cannot run for the presidency. But

he no doubt hopes to be a kingmaker. If he

is convicted, he may hope to obtain a par-

don from whomever succeeds Mr Moreno.

The strongest challenger to correísmoin

a crowded field looks like Jaime Nebot, the

conservative former mayor of the coastal

city of Guayaquil. He has not announced

his candidacy but is acting like a presiden-

tial aspirant. If he runs and is elected, he

would probably continue Mr Moreno’s un-

doing project. The path to power may go

througha courtroominQuito. 7

C

olombians pay more for wine than

most Latin Americans. The price shoots

up as soon as a case reaches shore. Each

time a shipment arrives, importers must

submit at least eight forms to as many

agencies. Officials can take up to 15 days to

clear it. In the meantime, importers store

their bottles in climate-controlled ware-

houses. When a permit finally comes, bad

roads and high trucking charges mean that

merchants pay among the highest freight

bills in the world to ship the wine to Bo-

gotá, the capital, where most customers

are. By the time it reaches a dinner table a

bottle of wine costs eight times more than

in its country of origin. Its costly journey is

the rule, not the exception, for products

imported by Colombia.

It used to be easier. The government lib-

eralised the economy in the early 1990s

after decades of protectionism. At that time

Colombia depended on exports of coffee,

the price of which was plummeting. In an

effort to diversify the economy and make it

more productive, the government reduced

tariffs and eliminated lists of items whose

import was prohibited.

That openness lasted just a few years.

Owners of factories and sugar mills, dairy

farmers, rice growers and regional govern-

ments, which own distillers of aguardiente,

a local tipple, were hurt by competition.

They lobbied to restore protection. The

government could not reimpose tariffs, in

part because of its commitments as a mem-

ber of the World Trade Organisation. So it

put up lots of non-tariff barriers.

Colombia is now as closed as it was in

the 1990s, according to a new book*. Total

trade has increased fivefold, but the ratio of

trade to gdphas not risen much (see chart).

Non-tariff measures affect nearly four-

fifths of imports, up from 27% in 1992, says

the unConference on Trade and Develop-

ment. The government has created new

trade-related agencies, and has given exist-

ing bodies more power to meddle.

The coddling of domestic producers is

one reason why productivity has barely

grown since the 1990s. In 2012 farms pro-

duced less by value in real terms than they

did in 1990. Peru and Chile, which have less

CARTAGENA

Importers must run an obstacle course

Colombia

Wine whinge

Trade’s off

Exports and imports as % of GDP

Sources:DatastreamfromRefinitiv;IMF

Peru

Mexico

Chile

Colombia

80

60

40

20

0

191510052000951990

S

omewonderedif thebossesofVene-

zuela’s oldest rum company had been

sampling too much of their product. In

January, with Venezuela in one of the

deepest recessions in modern world

history, Ron Santa Teresa launched the

country’s first public share issue in more

than a decade. The new equity was priced

in bolívares, the world’s worst perform-

ing currency. Others speculated that the

rum-maker, which cheekily notes on its

website that its distillery in the Aragua

valley near Caracas has survived “wars,

revolutions, invasions, even dictators”,

had decided that change was afoot.

Evidence of the latter interpretation is

that the latest dictator, Nicolás Maduro,

has recently become a capitalist, sort of.

The disciple of Hugo Chávez (whose

“21st-century socialism” set Venezuela

on its road to ruin) has quietly lifted price

controls and restrictions on dollar trans-

actions. He now says firms can issue

securities in hard currencies. He is

thought to be contemplating a sale to

foreign investors of a stake in pdvsa, the

decrepit state oil company.

Ron Santa Teresa’s president, Alberto

Vollmer, a fifth-generation rum-maker,

says the company, whose shares were

already listed, needs the money to buy

barrels and build warehouses. It signed

aninternational-distributiondealwith

Bacardi in 2016. Mr Maduro’s tentative

pro-market turn is “a happy coinci-

dence”, he says. The sale of 1m shares,

which raised the equivalent of $300,000,

was a fillip for the near-dormant stock-

market, which lists just 31 companies.

Demand outstripped supply.

The investors are not as daft as you

might think. Although denominated in

bolívares, share prices tend to keep pace

with inflation. This has dropped, from an

annual rate of more than 2m% early in

2019 to a mere 9,500% for the year. That

is partly because the government has

increased the amount of reserves that

banks must hold.

But this has caused a shortage of

bolívares. The total amount of bank

loans is the equivalent of $225m, less

than 0.5% of gdp. Sanctions imposed by

the United States and euhave made

lending harder. The share issue raised

more money in a day than the large

banks could lend to Mr Vollmer’s firm.

No one expects a dramatic recovery of

the economy, which has shrunk by two-

thirds since Mr Maduro took over from

Chávez in 2013. But Mr Vollmer welcomes

the shift towards pragmatism. “That’s

what happens when you run out of mon-

ey to fund ideas that didn’t work.” 

Rumraisin’

Venezuela

CARACAS

In the world’s worst-performing economy, the stockmarket comes to life