Banks: Who Needs Them? Or, Do We Really Need Banks?

This recent article published in the Guardian really got me thinking about my own experience using debit or credit cards and about how rotten the banking system has become. I realized that my life could probably go on indefinitely without a single dollar in my wallet. Nowadays, I pay all my expenses with that strangely tangible and yet intangible currency represented by plastic cards. Bills? I pay them online. Eating or drinking out? I pay with a card. Shopping? Card. I even use a card to pay the meter when parking my car. I simply don’t ever need to hold those smelly, germ-carrying bills anymore.

I am certain that I am not the only one experiencing this total transition to plastic, which makes me wonder: Is the actual currency represented by all those electronic transactions even available? What if Eric Cantonas’s campaign were to succeed, what if the massive coordinated withdrawal of money from banks were to take place on December 7? I decided to explore this by making my own inquires. I called a few banks in Washington, DC. The (rudely communicated) response was that the withdrawal of a large amount takes more than a week to process. So let’s say you decide to withdraw $100K, if they approve it and allow you to walk away from their branch with all your money—a big if, given that the money is essentially a part of their capital. The “easy” option would be for you to accept a certified check, which returns us to my initial point about strangely tangible and yet intangible forms of currency. Now, let’s suppose that all US accountholders are able to withdraw their total savings—a grand total in the billions or trillions. Would that amount really exist in cash? Is it really readily available? The obvious answer is, no. So how dependable and indispensable are banks these days?

Consider the case of CreditAnstalt, an Austrian bank backed by the Austrian government that collapsed nonetheless when depositors withdrew all their money. It turned out that neither the bank nor the government actually had the resources to protect those savings. Banks in general are asked to comply with only two things: “Allocate savings and manage credit risk.” Full stop. Now consider what happened in the United States and Greece, what is now happening in Ireland and Spain, and what will soon happen in Portugal. In these countries, the banks did not do either of those two things. The lesson here is that weak and irresponsible banks deserve to be abandoned to their own risk. They deserve to collapse, and not a single dime of taxpayer money should be spent to bail them out. This is globalization in all its glory: the strong, the capable, the innovative deserve to survive, to compete in global markets, and to earn some back-up from governments. Globalization and protectionism try sometimes to hold hands, but they always make an odd couple. It is like going to a wedding reception, where the gossip centers on how long the marriage will last.

What we are seeing or experiencing right now is merely a shifting of global powers. The West is fighting tooth and nail to keep its global dominance against emerging global power centers in places like China and Brazil. Global economic decisions are no longer made solely by Germany, France, Unites States, or Great Britain. Remember, money makes the world go around—seriously around, not around the few. Don’t forget to keep an eye on yours on December 7, whether you look at it on a computer screen or join the Cantonas campaign and (try to) hold it in your hand.

Mario Vargas Llosa y Yo

[ENGLISH VERSION BELOW]

Espero que después de leer este articulo, usted no piense que yo estoy haciendo alarde de haber conocido a Mario Vargas Llosa. Pero el haberlo conocido me hace sentir una sensación de honor y orgullo por un escritor ilustre, por un ensayista y, por un político (aún más raro) honesto quien inspiró mi interés en política.

Caí bajo el encanto de Vargas Llosa en 1990, cuando él era líder del Movimiento Libertad. En ese entonces, yo vivía en Perú, y yo fui voluntario para trabajar como organizador de grupos estudiantiles en la región de Ucayali. Poco después de haber empezado la campaña política, fui a una conferencia dirigida por el mismísimo Mario Vargas Llosa, en la capital, Lima. Así fue como lo conocí a él por primera vez, e inmediatamente quede impresionado por su comportamiento, su tono relajado, y su pasión por querer ayudar al Perú a salir de una crisis severa—una inflación de más de 6.000 por ciento, altísimo desempleo, y el terrorismo que amenazaba seriamente. Su discurso político hacia parecer que todo era posible. Yo, simplemente estaba anonadado. Mario Vargas Llosa tenía un plan de gobierno bien estructurado y documentado cuidadosamente, de manera que se pueda deshacer se de los males que destruían Perú. Esencialmente era una guía paso a paso de cómo curar “al hombre enfermo”.

Como político primerizo, Vargas Llosa fue muy honesto como para tener éxito en un país donde los políticos más experimentados y de trayectoria antigua, ya estaban destinados al infierno, sin posibilidad de redención. Sus más cercanos aliados fueron políticos incompetentes que los peruanos no querían ver de vuelta al poder. Y en un país tan católico y mojigato como lo fue/es Perú, decir en pleno debate televisivo, que cuando era joven él hizo cosas por diversión, puso a mucha gente sonrojar o gritar en horror. Era como contarle un chiste rojo a una pobre viejecita que rezaba ante la imagen de la Virgen María.

Lo curioso fue que aún que Vargas Llosa perdió la elección presidencial ante Alberto Fujimori, últimamente su plan de gobierno todavía pudo beneficiar al Perú. Fujimori implementó mucho de los planes económicos de Vargas Llosa—Aunque, lamentablemente, Fujimori lo hizo sin considerar el respeto de Vargas Llosa por los derechos humanos.

Después de los resultados a las elecciones de 1990, los peruanos expresaron sentimientos encontrados por Vargas Llosa. Para algunas personas, él es un hombre muy bien considerado y querido, para otros… sólo dimagos que ellos no piensan de él con admiración y cariño. Muchas veces él fue tratado como un extranjero en su propio país; incomprendido por la gente que se dejo cegar por extremado nacionalismo. Pero estos días, yo asumo que Vargas Llosa debe sentirse inmensamente complacido, haber sido galardonado con el Premio Nóbel de Literatura, y sentirse finalmente muy querido por el país que una ves sintió disgusto por él—aquel país que nunca dejo de ser mencionado en casi todos sus libros. Vargas Llosa nunca dejo de amar el Perú.

No sólo el Perú se siente con mucho orgullo y felicidad por tener un laureado del premio Nóbel, único en su clase; también América Latina puede sentirse orgulloso y feliz. Y realmente, Vargas Llosa representa América, desde los árticos del Canadá hasta la Tierra de Fuego en Chile—no simplemente por esa pequeña división nombrada por astutos padres fundadores, aquella patria que se hace llamar “América”, tampoco por divisiones particulares definidas por tendencias raciales o económicas. América es como dos niños que fueron criados por dos distintos padres.

Muchos años después de la campaña política de 1990, yo me encontré otra ves con Vargas Llosa en la universidad de Georgetown. Había tantos cosas que yo le quería decir, quería conversar con él como compatriotas que somos fuera de nuestro país, y talvez compartir recuerdos en común; pero al final, me quede corto de palabras, y simplemente le dije cuánto lo admiraba a él y cuánto gusto de sus libros. Que yo pienso que él es realmente un gran escritor. Pero entonces, él ya lo sabia. Inclusive, ahora el comité de los premios Nóbel lo ha reconocido así.

Espero tener el privilegio de encontrar lo algún día, otra vez.

[ENGLISH VERSION]

"MARIO VARGAS LLOSA and Me"

After you finish reading this, I hope you will not think that I was bragging about knowing Mario Vargas Llosa. But I feel a strong sense of pride and honor in having met this illustrious writer, essayist, and (even rarer) honest politician who inspired my interest in politics.

I first fell under the spell of Vargas Llosa in 1990, when he was the leader of Movimiento Libertad. I was living in Peru at the time, and had volunteered to work as the student group organizer in the region of Ucayali. Soon after the campaign began, I went to a conference in the capital, Lima, with Mario Vargas Llosa himself. That was the first time I met him, and I was immediately impressed by his demeanor, his relaxed tone, and his passion for helping Peru get out of a severe economic crisis—inflation was over 6,000 percent, unemployment was very high, and terrorism was a serious threat. I was, quite simply, in awe of him. His political speeches made everything seem possible. Mario Vargas Llosa had a carefully structured and well-documented plan for ridding Peru of all its maladies. It was essentially a step-by-step guide for how to cure “the sick man.”

As a fresh politician, Vargas Llosa was too honest to succeed in a country where the more seasoned, old-school politicians were already destined for hell without redemption. His closest political allies were incompetent politicians whom Peruvians didn’t want back in power. And in a country as Catholic and as prudish as Peru was/is, for a politician to confess during a televised debate to things that he had done for fun when he was young makes many people blush or almost cry out in horror. It’s a little like telling a dirty joke to an old lady while she’s praying before the Virgin Mary.

The funny thing is that although Vargas Llosa ultimately lost the presidential election to Alberto Fujimori, his plan still benefitted Peru. Fujimori went on to implement most of Vargas Llosa’s economic plans—though, sadly, he did so without Vargas Llosa’s respect for human rights.

In the aftermath of the 1990 election, and even today, Peruvians have mixed feelings about Vargas Llosa. For some people, he is a beloved and well-regarded man; for others . . . well, let’s just say that they don’t think of him with fondness or admiration. He was treated like a foreigner in his own country. He was misunderstood by people who were blinded by extreme nationalism. But these days, I assume that it must be immensely gratifying for Vargas Llosa, having been awarded the Nobel Prize for Literature, to feel loved at last by the country that had once so disliked him—the country that never stopped appearing in almost all his books. Vargas Llosa never stopped loving Peru.

Not only can Peru feel pride and happiness at having the Nobel Laureate as one of its own, but all Latin America can also feel proud and happy. And in truth, Vargas Llosa represents America, from the Arctic in Canada to the Tierra de Fuego in Chile—not merely one small division outside the portion named “America” by clever founding fathers, and not a particular division defined by economic or racial trends. America is like two kids raised by two different fathers.

Many years after the 1990 campaign, I met Vargas Llosa again at Georgetown University. There was so much I wanted to say to him. I wanted to address him as a fellow Peruvian abroad, to share common memories. But in the end, I fell short of words. I simply shook his hand and told him how much I admire him and his writing. I told him that I think he is truly a great writer. But then, he already knew that. Now, even the Nobel Committee has recognized it.

I hope I will have the privilege of meeting him again someday.

Elections in Brazil, a Mess in Ecuador

As BBC Brasil observed today, the presidential election has divided the country. Roughly half of all Brazilians endorse Dilma Rousseff’s plans to continue Lula’s policies, while the other half endorse Jose Serra’s proposal to introduce strong market regulations. The skepticism about Rousseff’s candidacy--in Brazil and abroad--centers on the prospect of maintaining continuity with a different face. In less than a month, the results of a run-off ballot will determine the winner. And so both candidates are currently wooing Marina Silva’s voters, 19 percent of the Brazilian electorate.

If I were Brazilian, my vote would go to Serra because electing Rousseff would be tantamount to reelecting Lula Da Silva. A Rousseff government could even resemble the current situation in Russia, where Putin seems to be pulling the strings of a puppet president. Can Brazilians really know for sure whether Rousseff would be the puppet or the puppeteer? With Serra, by contrast, the answer is clear.

The outcome of the presidential election is important because Brazil still needs to solidify its market economy. The implementation of sound economic policies, which would help ensure a well-regulated market, are needed in order for Brazil to show it’s serious about becoming a hegemon in the region and increasing its influence in the international arena. The economic policies pursued by Lula were, more or less, an extension of the policies of his predecessor, Henrique Cardoso. And those policies were optimal for the times, giving good results--reducing poverty, for example, and improving education and literacy rates. However, I believe Serra has made a compelling case for following the same economic recipes but with some important new ingredients, including an improved financial regulatory scheme.

Yet most Brazilians are not primarily focused on economic issues in this election. Instead, the voters are divided based largely on questions of political style and the personalities of the candidates. In the end, Marina Silva’s voters will make the difference on October 31st.

Meanwhile in Ecuador . . . what a mess!! Or should I say, the mess continues. I wonder whether Ecuadorians have really grasped the concept of democracy or the consequences of military action taken against their own democratically elected government. Ousting Rafael Correa would not have solved Ecuador’s internal problems. What’s so sad is that it’s the indigenous population that suffers most due to the ineptitude of both the left and the right. Don’t be surprised if a candidate with an indigenous background emerges as a viable candidate in the next presidential campaign. Such a candidate could make a huge difference, simply by appealing to the solidarity of his or her fellow indigenous people.

Sustainable Tourism

I recently visited Costa Rica and Panama, which are in Central America—all right, correction, Panamanians feel more a part of the Caribbean region. I know that. In any case, both countries enjoy innumerable resources for attracting tourists and keeping them happy. However, Costa Rica is on the road to losing its national identity. Its economy can no longer sustain the cheap prices that once made the country a paradise, and it is alienating its citizens by pushing them into ghettoized areas where tourism is not rampant. Now, Costa Rica is not cheap for either the locals or the tourists. Its precious ecological resources are being exploited with few restrictions and without sensible policies to ensure the balance between economic development and environmental sustainability that had earned pacific Costa Rica its reputation as the Switzerland of Central America.

If you visited Costa Rica more than five years ago, you would be shocked by the current decline of a nation that was almost as exotic and virginal as the Amazon could be. Today, the country is almost another American state. The day tourists stop thinking of CR as cool and fun—as they have stopped thinking of Cancun as fun—it could become like Detroit has become since the car industry evaporated. Devastating! The Costa Rican economy would be in tatters, unemployment and social insecurity would destroy the nation, and major economic adjustments would be needed. Devaluation would be necessary, and its external debt would increase at least ten fold. This is an exaggeration, you might say, but keep one thing in mind: tourists are always looking for a place where they can avoid other tourists. This is ironic, but true. Currently, many Ticos complain that they cannot afford the market prices that have resulted from the massive influx of tourists. Crime is on the rise in Costa Rica, and the infrastructure is in decay—especially the transportation system. Ticos generally blame tourists for the rise in their cost of living.

On my way to Panama I couldn’t help noticing how polluted Puerto Viejo was. This Caribbean beach town on the Costa Rican side of the border has been “invaded” by U.S. Marines, prostitution and drugs are everywhere, and one gets a generally unsavory and unpleasant feeling while strolling through the town. Some people might differ with this assessment, but that would probably be because those people were either wasted to the point of not remembering anything or because they got laid as a token of Tico hospitality and are now biased.

Costa Rica must begin immediately to address the issues that are damaging its precious environment and threatening its economy. And please do not confuse sustainable tourism with ecotourism, which Costa Rica promotes assiduously—and rightly so. These are two entirely different things.

By contrast, I found Panama invigorating, charming, and very pleasant overall. Plus, Panamanians are much friendlier and eager to be hospitable. Panama has adopted the U.S. dollar as its currency, but the cost of living is relatively cheap. Some things are expensive in Panama, like anywhere else, yet you can buy a beer for 50 cents and dine very well for $2.50. The Panamanian economy is relatively well insulated against currency fluctuations—or at least so one hopes! Switching from the dollar to the balboa would not cause massive chaos. Further, through a UNESCO program, Casco Viejo (old town) is being restored to its original splendor. In addition to promoting private enterprise, this project enables virtually anyone to buy property in the old city and provides free advice on how to build or maintain the French and Spanish colonial architecture. The beautification and restoration of Casco Viejo goes on in parallel with high-rise construction in the financial district à la Miami.

While in Panama, I had the great pleasure of meeting fantastic and brilliant people—one Australian, a lovely Seattleite, and a Californian—all of whom were, like me, backpacking in the region. Although we might have had different social, economic, and political perspectives, the most important thing was what we had in common: concern for people, the environment, our futures. And we all disapproved of the malaise that affects us all thanks to bad public policies and the consequences of capitalism in its most hardcore form. You might say, “Hello? Did you need to travel miles away to find that out?” But this is the funny thing: when you live, eat, and pretty much breathe politics in Washington, DC, that innocence, idealism, or even naiveté that once was within you can be transformed by obsession, ambition, and cynicism. And so, I dedicate this post to Chrissy Shimizu, Collin Smith, and Daniel Lonard. Thanks for the good times, guys!

LATAM

In an article published in O Globo of Brazil, TAM Airlines (Brazil) and Lan (Chile) have announced their intention to merge and, thereby, to create the largest airline business alliance in the South American region, if not the entire Western Hemisphere. If everything goes as planned both airlines will be fused into LATAM, though they will keep their individual names and separate headquarters.

I have seen many articles on the Web speculating about which global alliance LATAM might choose to join—Star Alliance, of which TAM is already a member, or One World, of which Lan is a member. I tend to think that LATAM would gain greater competitive advantage by choosing to be part of Star Alliance because its U.S. member carriers (Continental, United, and U.S. Airways) currently have little presence in South America. Star Alliance could give LATAM a strong marketing image and, in turn, LATAM could give Star Alliance access to a virgin market. By contrast, the only U.S. carrier affiliated with One World is American Airlines, which already has a huge presence in Latin America but also has an increasingly bad image there—due not only to its low levels of customer service, but also to its complacency in a market that it takes for granted. Moreover, American is always looking for new ways to charge its customers more, the latest being an extra fee for “front row seats.” No wonder no other U.S. carrier wants to be associated with One World/American Airlines.

With that said, the Southern cone of South America could become a major international hub, making LATAM a world-renowned carrier on its own merits as well as a serious competitor of American Airlines in the region. I don’t know whether you are aware of it, but there are no direct flights from any country in South America to Japan, China, or other parts of Asia or to Africa. Currently, Qantas, an Australian airline (One World) flies directly from Australia to Chile and Argentina and serves as a connection to those regions above. But why shouldn’t Brazil, Argentina, Chile, or Peru—which has a new state-of-the-art airport—allow Air New Zealand, which is a Star Alliance member, to provide connecting flights as well? Or, even better, why not allow Air China, South African Airlines, or All Nippon Airlines to provide direct flights? After all, it’s all about politics and economic competitiveness. (Camarão que dorme a onda leva.)

There is also talk that Avianca, a Colombian carrier with an increasingly strong presence in the northern parts of South America and, through its partnership with TACA airlines, Central America, is in talks to become part of the Star Alliance. This would not damage or undermine the presence of LATAM; on the contrary, it would likely increase its profitability and its market capacity. The major airline hubs to countries in the South Pacific, Asia, Africa, Oceania, and even the Middle East are all now in the United States. But since Brazil and Chile are emerging markets with more economic trade to those regions, it is time to have a major airline hub in South America. The merger between TAM and LAN could make this possible.

Indígena Amazónico a la Presidencia

Leí en la página Web de la BBC Mundo, que los indígenas del Amazonas decidieron formar su propio partido político, lo cuál espero que de ser electos para el congreso peruano, o inclusive, para la presidencia; se pueda ver cambios tangibles para la mejora y la protección de la amazonia peruana y sus habitantes. El derecho a mantener sus costumbres, a existir sin imposiciones sociales modernas, prevenir la continua creciente deforestación de la selva, y evitar la explotación desmesurada del Amazonas, deben ser factores importantes en la agenda política de cualquier candidato a la presidencia del Perú, en las próximas elecciones de 2011.

Pero, lo que más me llamo la atención del articulo leído fue el comentario del ex ministro del interior, Fernando Rospigliosi. Comentarios racistas e inconsiderados, no propio de un profesional que estuvo a cargo de un ministerio público. A que se refiere Rospigliosi cuando dice con tanta seguridad que Pizango, el líder indígena del nuevo partido político, “no tiene ninguna opción de llegar a la presidencia”. ¿Cuál es realmente la razón que descalifica a Pizango en su posibilidad a ser presidente?, será porque Pizango es indígena, de una zona rural de la selva del Perú (los moradores de la selva del Perú siempre han sido discriminados y tomados como burla); o porque lleva un atuendo autóctono, y como cualquier líder comunitario ha tenido que hacer protestas callejeras.
Sigo en duda, ¿Cuál será la razón?.

Y eso de comparar un país con el otro. ¿Qué es lo que Rospigliosi quiso exactamente decir cuando se refiere que el “Perú no es Bolivia”. Que su país es mejor que Bolivia, que los peruanos son una cultura más civilizada, o que en su país los indígenas, cholos o como Rospigliosi quiera diferenciarlos; no tienen oportunidad a ser presidente. (¿). Comparaciones como esas , se escucha feo. Peor aún, si compara una cultura con la otra. No hay culturas mejores que otras, cada cultura o grupo social es distinto, con caracteres únicos o similares a otra cultura, pero que no los hace ni más, ni menos. A Rospigliosi se le olvido que fue ministro en la presidencia de Alejandro Toledo, también un líder de descendencia indígena.

Imagino que a Rospigliosi no se le ocurrió tener un poco más de consideración antes de hacer tales comentarios. Fueron comentarios instigadores y mal intencionados, que no ayudan a romper esas divisiones sociales que son tan profundas en el Perú, tampoco ayuda a mejorar las relaciones políticas entre Perú y Bolivia. Permítame decirle que no sólo en Bolivia un líder comunitario llegó a la presidencia, también eso ocurrió en Brasil, Polonia, y muchos otros países.

What's in It for Me?

Andres Oppenheimer’s column on the 2010 “World Wealth Report” in yesterday’s Miami Herald confirms once again that the rich in Latin America are selfish and uninterested in building a better future for their societies. While the rich in the developed world live in essentially the same way as everyone else in, say, Bern, New York, Monaco, or London, the Latin American rich live apart in almost unimaginable opulence, flaunting their wealth without any remorse or guilt. They take the world as it is, not as it could be.

When I was living in George Town, the capital of the Cayman Islands, and working for an offshore bank, I once saw so much money coming out of a single country that it was inconceivable to me that that country could have such high levels of poverty. I routinely saw rich Latin Americans open bank accounts with suitcases full of cash (literally). But, of course, I was not allowed to ask where the money came from or what kind of “business” had yielded such unbelievably large profits. Bank regulations; sorry!

It seems not to be in the nature of Latin Americans to behave selflessly or to contribute even part of their wealth to charitable foundations, people in need, programs to alleviate poverty, and the like. Moreover, they seem wholly disinterested in volunteering for any kind of cause. The attitude has always been, “If I do this, what’s in it for me?” Of course, the rich are under no formal obligation to give money to the poor or to support efforts to improve the lot of their fellow citizens. But unlike the less than 1 percent of the world population that benefits from “old money,” the Latin American rich have been able to amass their fortunes thanks to the societies within which they live. Thus, there is a moral obligation to give something back.

I am not talking about giving away all or even half of your fortune. I am merely talking about making a difference, making a contribution—even if, in exchange, a project, building, or school has to be named after you. Don’t worry about leaving your children without your wealth. If they have received a good education, they will make their own wealth too. And that is the best legacy that the rich can leave to their families, right? Also, why not at least try volunteering at a hospital, a community kitchen, or a public school? For a rich Latin American to do so would be like a miracle in Mes Morado in Peru or Festa de Todos os Santos in Brazil. Sadly, I don’t think many rich people in Latin America would even consider these idealistic suggestions.

By contrast, the United States seems to offer a good example of self-giving and compassionate behavior. Please, don’t get me wrong. I am not saying the United States is better than any other country. I am just pointing out that Americans themselves seem to be especially generous. This is not about the economics of wealth concentration or political influence; rather, it just seems to be part of the natural way of being for many Americans.