March 2001

South America, assesssed

Introduction

The South American continent has experienced many ups and downs in its history and big political changes in its recent history. Internal struggle, coup d’etats by the militaries, subsequent political suppression and a return to democracy have been the common history in South America. The northern part of South America have been thereby, after the political struggles, confronted with criminal organisations combined with leftist guerilla organisations who undermine the society. These countries have experienced a new kind of intra-state conflict. Guerilla movements who have become relatively independent from outside support through the involvement in criminal activities. Beside kidnappings and tax extortions in the territories they control they have found a new and very profitable source of revenue. The protection of criminal organisations who grow, process and transport illegal substances, read cocaine, heroine and marihuana, in the territories they control.

The drugs producing, processing and transporting criminal organisations have corrupted many societies, governments, in these regions and these organisations have been more than willing to use violence to reach their goals. The free flow of narcotics and free access to the profits of their trade.

The leftist guerilla organisations have become a great problem in some countries. Especially if they could connect their political case with the financial possibilities of the drugs trade. This have made those guerilla groups very powerful as they can buy the weapons they want and they can even take care of their soldiers and administer the territories they control.

The country most under threat by leftist guerillas and narco-organisations is Columbia. The country is facing incredible problems which will continue in the foreseeable future as they are essentially independent in their policy and financing.

A diplomatic solution will be very difficult as the concerning parties do not trust eachother and maybe more importantly, they both want to have their maximum demands fulfilled, e.g. the take over of power.

The activities of the Columbian based guerilla organisation even start to cross the borders with neighboring countries to increase their revenues and fighting power.

Other countries are also experiencing problems with the combination of criminal organisations and guerilla movements. But not on the scale as in Columbia.

The South America continent is facing other tensions on a different level. At least three countries have differences about the exact demarcation of the border. These problems have been kept under control but any unexpected action or even an increase of internal political problems could lead to an increase in external tensions to take the pressure of the internal problem.

The border differences are in the northern part of the continent which also face the biggest problems with the economy and problems with leftist guerilla organisations.

The countries further to the south are more stable internally and externally. They do not have problems with guerilla organisations nor other organisations which want to change the political landscape by the use of violence. They have like the majority of the countries on the continent some problems with the economic development, national account and monetary / currency problems but they are still more or less controllable.

Argentina

After the military junta in Argentina had been replaced by an elected government, the political internal problems have disappeared. All political parties are in the position to be part of the system and operate in it.

The problems of Argentina are of another dimension, they are of an economical nature. The economy of Argentina has been improved but remains weak. The government has problems to keep the cost under control, the currency is under pressure, even if it is, and partly because of it, connected to the US dollar and the economy is to one sided directed at agriculture.

Argentina failed to create a significant middle class with the the accompanied industrial base. The modernisation of Argentina is lagging behind.

Chile

Chile is the economical bell weather of South America. The economy has shown a admirable development in the last decade. The change to an elected government has also increased the political stability in the country. There are therefore no movements who want to change the government by the use of violence.

The government is stable and the military is not showing any will to become involved again in the running of the country. Chile is the most stable country on the South American continent.

Paraquay

The situation in Paraquay is also pretty stable, but the economic development is slow and is more or less undermined by smuggle activities into Brazil and Argentina. The government is however able to keep the situation under control.

The government of Paraquay is however facing some problems with former generals who have some support in the armed forces and the population who disagree with the current government. They are however not yet strong enough and bold enough to try to replace the government by force.

Uruguay

Uruguay has become a stable country after the military dictatorship had been replaced.

The political situation is very stable and seems not be under threat by any vilent opposition movement. The military is also showing none what so ever ambition to become involved again in the running of the country.

An additional advantage is that the current president, Jorge Battle Ibenez, is very popular and is largely responsible for the current positive political and economical development of the country.

Brazil

The largest country of the continent, Brazil, is a very diversified country. It is very rich in natural resources and has a large population. The country is more or less stable, there are no political opposition movements which could challenge the government with violence.

The economic situation is however more concerning, there is a very large gap between the rich and poor part of the population. The economy is also very much based on agriculture and lacks any large scale modernisation policy.

There is also, like in Argentina, a lack of growth in the middle class with an industrial base. The better off, the elite, is to much focussed on the agriculture. The elite controls vast tracts of the countryside which is very often not cultivated but only in their possession out of culture, inheritance, and as a collateral to finance an abundance lifestyle or business activities. The business activities are then mostly trade or some other kind of relatively quick money kind of business activities.

The economic development is further hampered by government regulations and problems with the national currency.

The only bigger problem in Brazil are the criminal organisations which control the slums in the big cities of the country. They use the slums as a safe haven to run their criminal activities, especially drugs trade. But these organisations are to small and not interested in government affairs and pose no threat to the political stability a such.

Bolivia

The landlocked Bolivia is politically relatively stable, there are no political organisations which are undermining the government with the use of violence.

The problems of Bolivia are also of economical nature. The development is slow and seems to be unable to get an impetus from the government or from abroad.

Bolivia is only facing some problems with the increased activities of criminal organisations and guerilla organisations out of Columbia who are increasing their working territory to the neighboring countries.

The incursions out of Columbia are at the moment of small scale but if they get any hold they will quickly increase. This will undermine the government as corruption will increase and will be bad for the stability in the country.

Peru

Peru is a typical South American country with a history of suppression and a return to democracy. The Peruan society is like many of its neighbors divided into a small elite, of wealthy people, and a large group of poor people with little to none possesions. The elite is living from the natural resources the country can deliver, the poor are living to support the elite. There has been none to little modernisation in the country. A middle class has not been given the chance to develop therefore no creation of a small to medium scale industrial structure. The country lacks any substantial modernisation policy which will damage any bigger development.

The recent abdication of former president Alberto Fujimori, which had to leave office after a dubious running of the presidency and more importantly black mail attempts by his former SIN intelligence chief, Vladimori Montesinos, of parliament members left the country in a weak position. The new interim president Valentin Paniagua, is doing his best to consolidate his position against possible coup d’etat attempts by the armed forces and the Montesinos clan.

The weak economy and new president is a problem but Peru has three other problems. One external, one in and external and one internal. Peru has a territorial conflict with Ecuador, and both even had a small fight about the disputed territory. This dispute is at the moment under control with support of the United Nations but it remains to be seen if both are satisfied with the current arrangement on the longer term.

The internal and external problem of Peru are the increased activities of criminal organisations which are engaged in the production and processing of illegal substances, read cocaine. These organisations are supported and sometimes even controlled by the Columbian FARC, guerilla movement. The FARC is increasingly using Peru as a new territory to increase its revenues and as a support base for its activities in Columbia. These activities undermine the security in Peru and more important it will create an uncertain situation in Peru. The drugs business will create more corruption and will damage the stability in the country.

The internal problem of Peru has become less in recent years through the successes of the armed forces againt the Sendero Luminoso, Shining Path, left wing guerillas and the MRTA, the left wing city guerilla. The activities of both are severly contained but they still exist and their threat could increase in the future.

Ecuador

Ecaudor the relatively small country is facing a difficult future. The oil wealth with which Ecuador has been blessed has not delivered the development and wealth it promised. The economy in Ecuador is in a bad shape, there has been also none to little modernisation and no creation of a middle class. The country is divided into a wealthy elite and a large poor group.

Ecuador has been further undermined by an internal and a external problem. The internal problem is about new subservice / terrorist groups in Ecuador which became visible by a number of bombings in the country against foreign countries, especially the U.S.A. and installations of foreign companies. These small groups do not now and on the short term pose a threat to the government. But they are highly irritating and might hinder the econoic developmet of the country.

The external problem, the territorial disaagreement with Peru, is at the moment under control, but there is still a problem with the exact demarcation of the border with Peru. This will need extensive negotiations to solve the problem forever.

Columbia

Columbia is facing the biggest problems of all , the country is being undermined by several criminal organisations and even more threatening leftist guerilla organisations who already control substantial parts of the country. The situation in Columbia is further complicated by the AUC, a rightwing militant organisation. The AUC is an answer to the leftist guerillas at first supported by the wealthy elite and the government but at the moment more or less independent.

Columbia as a country is severly limited in its actions, souvereinity, the country is effectivily under siege. And it does not have the abilities to change this situation on the short term. At best they can stabilise the situation. The armed forces of Columbia are not able to defeat the guerilla movements. The armed forces are to occupied with protecting important installations and persons and the absolute bare minimum of training. This leaves only a relatively small part of the armed forces free to be used effectively against the guerilla movements.

The main opponents to the Columbian government are two leftist guerilla movements. The largest is the FARC, Fuerzas Armadas Revolucionaries de Colombia, or in English the Revolutionary Armed Forces of Colombia. The FARC has occupied large parts of the country and has been given a refuge by the government in exchange to join negotiations of 40.000 square kilometers. The FARC is financed by taxes they collect in the territory they control, smuggling of narcotics and protection money from narcotic growers and organsations. The steady flow of revenue from own resources has made the FARC very independent. They cannot be influenced by outside parties and forced into a deal.

The second opponent is the ELN, National Liberation Army, the second strongest opposition party / force in Columbia. The ELN is smaller than the FARC and is also funded by tax collection, smuggling, protection money and by kidnappings. The ELN have established their name by these kidnappings and by the destruction of oil pipelines and electricity masts. The ELN also requested a refuge from the government of about 20.000 square kilometers, but the government declined to accept that demand in exchange for negotiations. Because the ELN is a lesser threat and the bad experiences they made with the FARC territory.

It is estimated that the FARC and ELN control approximately 40 % of the territory of Columbia but operate in an even larger area, at least the double of that.

To make the situation even worser, Columbia is also undermined by right wing paramilitary organisations. There are several right-wing paramilitaries which are leaded and funded by rich landowners and also narco organisations to combat the leftist guerillas and the narco organisations which operate without their permission. With extreme violence they suppress the rural population and the guerillas and the competing narco organisations. One of them, AUC, Autodefensas Unidos de Columbia, or in English the United Self Defence Forces of Columbia, has grown larger and became more independent.

As the left wing guerillas they quickly found out that they can earn enough to have their own business and do not need the funding of the elite and/or government. There are still some covered contacts with some government officials, read military officers, but they have none to little influence over the AUC.

The AUC has become something of a unwanted organisaton to the government at first they came in handy but as they became uncontrollable and even an important opponent of the FARC and the ELN all want to get rid of the AUC. The cruelty with which the AUC operates and the threat they pose to the FARC and ELN make them unwanted.

All calls of the AUC to be involved in any negotiations was therefore refused by all parties. The FARC even occasionally demanded of the government to eliminate the AUC before to continue negotiations.

The much publicised and many negotiations between the government and FARC have until now led to nothing. It were mere exchanges of demands, especially the FARC uses the negotiations to ventilate their wishes but do not really negotiate with the government. The FARC still has the impression that they can get what they want, e.g. a change of government, with the use of violence.

The continued fighting in the country between the different sides has devasted the Columbian economy. The small business sector has been undermined by the activities of the guerilla movments, which levy taxes and make doing business extremely difficult. Columbia relies on its revenues on the export of oil and other raw materials. The most succesful commodity, export product, of Columbia still remains cocaine and other illegal substances. The narco organisations even produce at the moment their own heroine and slowly move into designer drugs.

Columbia will remain in the foreseeable future very unstable as none of the parties involved is able to change the situation to their advantage. All are simply not strong enough to defeat eachother nor are they willing to cooperate to defeat one or two opponents.

Venezuela

The situation Venezuela is different from the one in Columbia. It is largely an economic problem. Many years of government mismanagement has created a very bad economical situation. Another problem is that Venezuela is, like Brazil and Peru, targeted by the Columbian FARC as a new area for revenues, read drugs, and as a support base. This will bring all problems related to the drugs problem to Venezuela. Government corruption and the destruction of the local farm business and country structures will become more common. The production, processing and transport of cocaine is much more profitable thus easily accepted by the poor farmers in the outback of Venezuela.

Venezuela has however a much more threatening problem which could destabilise the region. Venezuela has a claim on large parts of neighboring Guyana.

The election of Hugo Chavez as president, which promised to bring economic progress and an end to the governmental mismanagement and corruption has not brought prosperity until now. Chavez introduced some regulations, popular with the population and promised to do more things like those but all he did and promisses to do in the future has not been really beneficial for the country, and he changed the law and constitution rather illegally. This all has not brought any larger improvement. The rise of the oil price was more benefiacial than anything Chavez has done until now.

To worsen the situation even further Chavez called on an old claim on territory of Guyana. This to rally support in the population and as a kind of scape goat to draw attention away from the worsening economy.

The increase in the oil price improved the economic situation of Venezuela and the position of Chavez but this increase in revenues will only have temporary effects.The price of oil might fall and you get used to easily to the increased revenues and expenditures.

The claim on Guyana will be on the table again on the short term. Worsening the regional stability and consequently the economy of the whole region. Venezuela remains an uncertain place to invest. To many threats to any investment., from a legal, economical and from a security perspective.

Guyana

Guyana is experiencing a lot of economical problems, the economic development is stagnating and to make things even worser it has been threatened by Venezuela. Years of governmental mismanagement has caused a lot of problems and will have effects in the years to come.

If the threat out of Venezuela could be eliminated Guyana could have chance of getting into better and safer waters but until then it will remain an uncertainty for Guyana and the attractiveness for investments.

Surinam

Surinam is also experiencing an economical crisis, the growth has been very slow, non existent to negative, the inflation has risen and the currency in a free fall. The political stability has been under threat by a possible coup d’etat by former president Desi Delano Bouterse. A threat which has been lessened after the recent elections and rumors of financial difficulties of Bouterse but it remains uncertain at which level the relations with the military and his political party are.

There are sign of improvements in Surinam but the economy is still having difficulties to restart and show some bigger growth figures. The new government has a chance to change the situation but will need support from abroad. An improved relation with the former colonial master, the Netherlands, and if the last tranche of the money set aside after the liberation is set free, there are some possibilities. Especially with a prudent policy and restrained spending.

Conclusion

The South American continent is a very differentiated continent, from wealthy and stable to relatively poor and unstable. The countries in the south of the continent, Chile, Argentina, Uruguay and Brazil are more or less politically stable countries. Argentina and Brazil face some problems with the expenditures, high debts, modernisation and currecny stability, but they can be brought under control if all efforts are put to it. Chile is economically the most succesful with Uruguay on a good second.

Then there is a large group of countries in between, countries like Paraquay, Bolivia, Ecuador and Surinam. These countries are more or less politically stable, the chances on a change of power through the use of violence, or even that there will be any violent actions of one or more groups will be negligible or on a very small scale. The problems with these countries are about the lack of economic development and pressing problems with the country’s finances and currencies.

Then there is a group of countries on the edge, which are at the moment politically stable but this just happened or a new development could change the current situation. The economy of these countries is troubled which could easily lead to political instabilty. Countries in this group are Peru and Venezuela.

Finally the last group of countries is the smallest and consists out of one country, Columbia. Columbia is politically and economically unstable. The country is under threat, it needs to fight for its existence, by three dangerous movements which want to change the current government. Criminal organisations involved in narcotics are worsening the climate in the country. The economy is undermined as rebel movements are weakening the infrastructure and businesses. The export of raw materials and illegal substances are the only means of income for Columbia.

In general it can be stated that South America, with the exception of Chile and possibly Uruguay, is having a number of problems. The majority of the countries are politically stable, the governments are elected and the democracies are functioning more or less. The problems of South America are of an economic nature.

The societies in South America are divided in a very wealthy elite and a large group of poor people. In most countries the middle class is very small. The economy is still to much dependent on agriculture and raw materials. There has not been any, or just a little, modernisation of the economy.

The industrial development has been neglected and the middle class has not been given an opportunity to develop and grow. The majority of the countries lack any dynamic development of an industrial and service sector. Everything has been limited to agriculture and raw materials. The elite could live very well on those two sources but this has not created any progress for the people or the country for that matter. All institutions, including the government and legal system, were aimed at maintaining the current situation. Any new development especially in the business sector has been very difficult in this situation.

The continent has to do a lot to change this situation of slow development. The governments should stimulate the development of the economy, read the modernisation of the industry and the society. The government should start with the creation of a balanced budget, restructuring of the debts, have a stable currency and a clear development policy.

The development policy should include new legislation, including property rights, education and housing for the population. The new legislation is necessary to make it easier to start new businesses and property rights to make sure that the new ventures belong to the people who started it. This will make it also easier to get financing if it would be necessary. Another advantage would be that the poor people will be finally be able to get, build, houses on their own property. At the moment it will take over 20 to 30 permits in some South American countries to get a property title.

The government should also have a housing policy to eliminate the often very bad circumstances in the slums. Which are very unhealthy and are often the headquarters of criminal organisations and in the slums they are nearly untouchable for the police forces.

Probably the most important factor will be the education of the population. A large group of youths need to be educated in the new sciences to stimulate the creation of new companies and attract foreign companies and investments.

This potential large pool of workers and the entrepeneurs could become the new middle class. Economic growth could be attained by this policy. All this can be done at relatively low costs, especially if compared by the cost of an insurgency. Which might happen if the current structures in the society will last and hinder any economic development. The unemployed youths will become dissatisfied and become targets of small groups who want to change the society by the use of violence.