Diane Francis on American Politics

Thursday, June 22, 2006

Gringos Beware?

Diane Francis column for Wednesday Post June 21:

Six years ago, I drank champagne into the wee hours in the election headquarters of President Vincente Fox of Mexico to celebrate his victory in the country's first-ever free elections.

I was there to cover the election but also as an official international observer to monitor the vote which ended 70 years of corrupt, socialist dictatorship perpetrated by the Institutional Revolutionary Party (PRI).

It was a heady victory. President Fox appeared an attractive figure with new ideas. But, as the electorate would learn, appearances were misleading.

Even so, his election marked a turning point. Mexico then, and now, has clean elections, thanks to a bullet-proof voting card system that would put Canada's scrutineers to shame. All voters must present their national identification card which has their photo, fingerprint, signature and digital information.

It also has a vibrant press. In the late 1980s, government-owned newspapers and the monopoly network were privatized and newspapers were allowed to buy newsprint from sources other than the federal government.

Now Mexico is truly a mature democracy which is why this election is such a horse race. _But press reports, out of the U.S., have got it mostly wrong. Some are speculating that the next President of Mexico may be another anti-American, anti-capitalist populist like Hugo Chavez. But this is baseless speculation, no matter who wins.

The most recent poll, by Zogby yesterday, shows a tight race between President Fox's chosen successor, Felipe Calderon with the pro-business, conservative National Action Party (PAN) and the left-wing Democratic Revolution Party (PRD) leader Andres Manuel Lopez Obrador.

PAN's Calderon has 34.5% of respondents' support; PRD's Obrador, 31.3%; PRI's leader Roberto Madrazo Pinitado (also left-wing), 27.1% and roughly 9% undecided.

Significantly, the poll fails to include the all-important absentee ballot from the massive Mexican diaspora living in the United States, an estimated 30 million legally and 10 million illegally. And that group represents a sort of middle class in exile with natural policy ties toward the pro-business PAN party of Fox and Calderon. In fact, it's notable that President Fox campaigned vigorously for this absentee vote in his election bid.

Pollster John Zogby notes another important factor in the outcome: "Voters in Mexico will go to the polls feeling better about themselves and about Mexico They want change, but the Constitution will provide that anyway because of term limits. This is still a close one, but Felipe Calderon benefits by a split between leftist candidates."

Even if Obrador wins the day, he is no Hugo Chavez, the Venezuelan who's flirted with Cuba's Castro, threatened to kick out foreign resource companies and to divert oil exports away from the U.S.

Mr. Obrador has talked about renegotiating the North American free trade deal. But so did Canadian Liberal candidate Jean Chretien back in the 1993 election and yet he did absolutely nothing to make good on that "promise".

Such gringo-bashing is favored by self-styled populists in Mexico and Canada alike, but fail to resonate with a majority of the populace in either neighboring country. This is not only because it's dismissed as rhetoric, but it's also increasingly appreciated that the NAFTA deal makes inordinate good sense for all three countries.

As for Mexico's resource industry, there's nothing to nationalize. Mexico's federal government owns the monopoly oil company, PEMEX.

And no candidate is talking about privatization either. _Conservative candidate Calderone, and Madrazo, have both proposed to let private sector oil companies participate in the oil industry in order to exploit the offshore. Some estimates are that Mexican oil production may fall from 3.35 million barrels per day to as little as 2.8 million barrels per day in two or three years, if nothing is done. About 1.7 million is consumed domestically.

Meanwhile, leftist Obrador has no interest in developing the offshore, but wants to lower gasoline prices and build new refineries and petrochemical plants to upgrade the resource. Unfortunately, PEMEX is a bloated bureaucracy with little expertise which is why it has no offshore expertise itself.

Whatever the future holds for Mexico, it will be according to the democratic wishes of a population that is newly confident and slowly prospering. Unfortunately, it's also a gradualist place and the Fox Presidency was "lost opportunities", according to a friend, Mexican editor Rosanna Fuentes-Berain.

"He accomplished a smooth transition from the PRI into democracy which not a small deed, but little else," she wrote in an e-mail yesterday. "He continued with Zedillo's and Salinas' macro-economic policy so we are fine but he had no political creativity and is an undisciplined man who is just waiting to go back to private life."

Monday, April 24, 2006

The Hispanic Card

Diane Francis column Financial Post Friday April 21:

NEW YORK CITY - It doesn't take long to realize that this city is bilingual, as are most other large cities in the U.S.

America's gigantic Hispanic population is an estimated 46 million, according to recent studies, which makes it considerably larger than Canada's population as a whole.

More than 13% of the U.S. population is officially Hispanic, or 34 million. But this week, the Pew Hispanic Centre, a think tank, said another 12 million are here illegally.

Spanish is heard on the streets here, as in Miami, Chicago or Los Angeles, as much as is English. Everything from computer manuals to cell phone contracts or water bills and voting ballots are bilingual. Everywhere are waiters, nannies, dog walkers, bus boys, chefs, cabbies and carpenters who are Hispanic, not to mention baseball players.

The result is that Hispanics have become an essential component of the country's economy and have become a critical voting bloc to politicians.

And recent protests demanding amnesty for illegals and more immigration access are creating both a backlash and underscoring the huge power of this group, both economically and politically.

In fact, the Republicans are in power due to this underclass, ironic considering that the Democrats have billed themselves as the party of the common man.

This is because the Republicans in general, and the Bush family in particular, have played the "Hispanic card" brilliantly.
President George Bush, his wife and daughters are bilingual, due to the influence in Texas of Mexican immigration. His brother, Florida governor Jeb Bush, is married to a Mexican national and is bilingual in a state with a huge Cuban population.

The result is the Bush regimes have supported porous borders and now propose a form of amnesty plus improved work visas in future.

These policies overwhelmingly benefit both business interests and Hispanics. Open immigration drives down wages and the huge productivity gains in the U.S. may be attributed in part to cheap labor from these immigrants as well as to technological advances.

Democratic efforts to attract Hispanics has failed due to the fact that their two biggest voting blocs are unionized workers who are most threatened by the flood of newcomers as well as African Americans, who feel the same.

Even so, Hillary Clinton stepped up to the immigration debate during her Senate re-election campaign in this state by declaring that rules are so onerous that even "Jesus Christ" would have been denied entry or citizenship.
This annoyed many unionists and Democrats.

But her shift is an attempt to match the "soft" immigration stance of her rival front-runner, Senator John McCain from the border state of Arizona with its own enormous Mexican population. He's also playing the "Hispanic card" astutely.

The minority's importance was also underscored last month in a Brookings Institute study. The Brookings, a conservative think-tank in Washington, added the fact that in addition to Hispanics' representing 13% of the population officially, the group represents half of the country's overall population growth.

This means that their numbers will continue to soar disproporitionately and their priorities will become the nation's priorities. This has already become evident in the heated immigration debate but also in debates concerning recognition of Cuba, foreign policy toward Haiti and hemispheric free trade.

Hispanics are also gaining socio-economically. Recent studies have pointed out more interesting facts:
-- One in 20 workers in the U.S. are Hispanic illegals.
-- Employers depend on illegals to fill 400,000 low wage jobs each year.
-- U.S. officials have been loathe to enforce immigration laws and there have been only three employers prosecuted in the past few years.
-- Hispanics, legal or otherwise, hold down mostly low-level service jobs in the hospitality, agricultural and construction sectors that Americans spurn.
-- Hispanics represent 29% of all agriculture workers.
-- Hispanics represent 29% of the nation's roofers.
-- They represent 27% of its butchers and meat processors.
-- 25% of its gardeners.
-- 22% of maids and cleaners.
-- 20% of cooks.
-- and 15% of all laundry workers.

Another study shows how Hispanics have begun to move upward through entrepreneurship.

In March, the latest U.S. Census Bureau report showed that Hispanics owned nearly 1.6 million businesses in 2002 - an increase equivalent to 31% compared with five years before.

(Their enterprises now represent 7% of all privately-owned American businesses. In 1997, they owned 6% of all businesses.)
These and other facts are propelling Hispanic issues to the top of federal, state and municipal issues.

And Hispanic issues will continue to dominate backroom politics, benefit American businesses and hoist the Republican party.

Thursday, February 02, 2006

America's Number One Economic Problem

National Post Thursday Post Feb. 2:

NEW YORK CITY - The President's State of the Union address finally admitted that America's biggest substance abuse problem is its excessive consumption of gasoline.

Once the world's biggest oil producer, the U.S. is now - as some New York tabloids proclaimed yesterday - “an oil addict”.

So is Canada where per capita consumption levels are actually higher than south of the border.
Fortunately, Canada has lots of oil and is a sizeable exporter. By 2020, Canada will be one of the world's five biggest oil exporters, thanks to the oil sands.

Even so, Canada must dramatically adapt its energy policies in ways that are similar to what the gasoline-guzzling Americans have to do. This makes good economic, as well as environmental sense: A barrel of oil backed out at home means another barrel can be sold to the Americans or Asians.

The President's speech was truly significant because it will mark an overdue change in policy direction which will affect North America and the rest of the world too.

It means that even Republicans will begin to realize that oil imports are their single biggest economic problem. In fact, the need for a remedy is far more urgent than the President's speech portrayed.

Today, roughly 40% of the Americans' gigantic trade deficit is oil imports alone. Only 20% of its oil comes from Saudi Arabia and the other wobbly regimes. Most comes from Canada, Mexico and the North Sea.

What the President did not say is that the world is only a handful of terrorist attacks away from oil jumping to US$100 a barrel or greater. His regime last summer saw the same frightening oil crisis simulation that was enacted at the recent World Energy Forum in Davos which was attended by three dozen of us.

Created by non-profit Securing America's Future Energy in Washington DC, the scenario was that terrorists had shut off indefinitely about 3.5 million barrels per day (only 4% of world total) by attacking “chokepoints” - entry to the Bosphorus Sea in Turkey and Valdez in Alaska.

The economic scenario showed that this supply disruption could cause prices to hit US$125 a barrel or more, and cause an immediate recession by shaving 3.5% off the world's Gross Domestic Product.

The only good news was that oil supplies would be forthcoming immediately, according to the officials who participated in the mock emergency cabinet meeting staged as part of the simulation.

“About 1.5 million barrels a day could be provided out of the International Energy Agency (IEA) strategic reserves around the world of four billion barrels plus another 2.5 million a day could come from Saudi Arabia,” said a participant in the simulation who asked to remain anonymous.

But increased security costs, loss of consumer confidence and the destruction of growth would take its toll. So would more attacks at other facilities.

Such vulnerability has been kept out of the public's eye or has been unrecognized.
That's why the speech was needed and will hopefully spark an appropriate debate and focus attention in Congress.
Ironically, Congressional protectionists have targeted China rather than oil even though its exports to the U.S. are a fraction of the oil bill. Besides that, China's imports end up mostly on Walmart store shelves, giving consumers huge savings and Walmart shareholders huge profits unlike oil imports which increasingly benefit dangerous regimes.

My guess is that Canada and Mexico will continue to be valued oil exporters because both they are economic partners who are huge customers for American goods and services. Besides in Canada, many American oil companies are big players and will profit from future oil sands, arctic and offshore production.

However, Canada and Mexico both depend greatly on American prosperity which is why the President's pronouncement was welcome, if inadequate. He talked about subsidies to develop alternative fuels such as ethanol plus clean coal technology.

But even cutting 10% out of usage, which would be drastic, won't be enough. Prices are going to increase because there will be increasing demand from North America, Europe, China and India. On the supply side, production will decrease everywhere except Russia and Canada. And well-planned terrorist attacks could aggravate this situation.

Clearly, the U.S. should undertake a couple of important policy shifts sooner rather than later.
Washington should mandate, and subsidize, its domestic automakers to produce only smaller hybrids from now on. That would cut the oil bill while also bailing out the auto sector.

Washington should also immediately increase ethanol subsidies and requirements, already around 10% of the total fuel usage. This would enhance subsidies to its farmers who suffer from Europe's protectionism.

And Canada should also encourage conservation, although it cannot mandate hybrids without the U.S. taking the lead. Ontario's move to enhance the use of ethanol should be increased and copied throughout the country.

But most importantly, Canada must realize that as the country reaches the big leagues of oil production, it must also undertake greatly enhanced security to protect pipelines and production facilities.

Oil may be Canada's number one economic trump card going forward, but it also places a bull's-eye firmly on this nation's forehead.


Wednesday, February 01, 2006

Oil Imports a Problem. Duh!

Oil imports represent roughly 40% of the U.S. trade deficit which is too high at 6% of GDP. The State of the Union speech represents a long-overdue and, frankly, inadequate shift in policy.

Next problem is the health care bill which, at 16% of GDP, is not only vastly understated but 50% higher than the bills of Canada, Switzerland, Japan and most European nations.

The health care tab is vastly understated because it doesn't include: the toll in productivity due to sick, uninsured workers; the cost to the economy as a result of the carving out of workers who have grave illnesses and cannot be insured or employed as well as the cost to the economy of litigation by insurers and plaintiffs over medical expenses.

Stay tuned on both issues.