Noah Mamet Sworn-in as U.S. Ambassador to Argentina, Twice For Good Measure

Dec. 16, 2014

1 min read


– Domani Spero

Ambassador Noah B. Mamet was confirmed by the US Senate on December 2nd. He was sworn into office, in a private ceremony at the State Department with Western Hemisphere Affairs Assistant Secretary Roberta Jacobson administering the oath.

via U.S. Embassy Argentina

Ambassador-Designate Noah Mamet, with mother Millie Mamet, is sworn in by Bureau of Western Hemisphere Affairs Assistant Secretary Roberta Jacobson, December 3, 2014, at the U.S. Department of State. (Photo: Dept. of State)

On December 10, Ambassador Mamet was sworn-in again by Vice President Joe Biden at an official ceremony held at the White House. Argentine Ambassador to the United States Cecilia Nahon attended the ceremony.

Ambassador Mamet, with mother Millie Mamet, is sworn in by vice president Joseph Biden. (Photo: Vice President’s Office)

Ambassador Mamet, with mother Millie Mamet, is sworn in by vice president Joseph Biden. (Photo: Vice President’s Office)

Senator John McCain was once asked by Tim Russert about running as George W. Bush’s VP. His response was, “No. No way. The vice president has two duties. One is to inquire daily as to the health of the president, and the other is to attend the funerals of third world dictators.” He forgot to mention VPOTUS’ duty in the ceremonial swearing-in of political ambassadors, which sounds like fun, too.

Ambassador-designate Mamet is yet to present his credentials in Buenos Aires but he is already on Twitter. Don’t get too excited there! It looks like he actually joined Twitter in January 2010 but has only the following three tweets as of this writing.

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6. ARGENTINA ECONOMY: QUICK VIEW – BOND SALE A FAILURE (Economist Intelligence Unit – ViewsWire)




By Camila Russo

Dec 16, 2014

With emerging market currencies tumbling from Russia to Brazil, Argentina sees no reason to devalue the peso, Central Bank President Alejandro Vanoli said.

“We feel comfortable with the competitiveness of our currency, and we will continue to pursue the policy of a controlled floating peg based on the global and local situation,” Vanoli told reporters in Buenos Aires.

The Argentine peso has slid 0.2 percent in December to 8.5509 per dollar, the seventh best performer among 25 developing market currencies tracked by Bloomberg. The peso was unchanged today. The calm in Buenos Aires stands in contrast to a rout in the Russian ruble, which has lost 14.2 percent in the past two days as crude oil prices tumble. The currency in Brazil, Argentina’s largest trade partner, has weakened 2.9 percent.

Argentina’s central bank has maintained a crawling peg for more than a decade by intervening in the currency market by buying and selling dollars almost daily. The government also prohibits most foreign currency purchases as part of capital controls introduced in 2011.

The peso tumbled the most in the world in January when former central bank chief Juan Carlos Fabrega devalued the currency 13 percent over a two-day span. Vanoli has curbed the slide in the currency since taking over on Oct. 1 by taking measures to boost reserves and tightening import and currency controls.

Year-to-date, the peso has weakened 23.8 percent, the most in the world after Russia, Ukraine and Ghana, according to data compiled by Bloomberg.


By Pablo Gonzalez and Rodrigo Orihuela

Dec 16, 2014

Petroleo Brasileiro SA is delaying its exit from Argentina’s petrochemical business as it focuses on a graft case in Brazil, two people familiar with the process said.

Petrobras, as the Rio de Janeiro-based producer is known, received a joint offer for its 34 percent stake in Cia. Mega SA from partners YPF SA (YPF) and Dow Chemical Co., said the people, who asked not to be named because the talks are private. Buenos Aires-based YPF owns 38 percent of Mega and Dow has 28 percent.

An expanding investigation into Brazilian contractors that allegedly bribed Petrobras officials is cutting off its access to debt markets, slowing signing of new contracts and has helped push down the stock by 63 percent since September. Mega had 1.9 billion pesos ($222 million) in sales last year.

Alejandro Di Lazzaro, a YPF spokesman, declined to comment when contacted by phone. Petrobras’ press office declined to comment in an e-mail.

Dow “does not comment on rumor or speculation in the marketplace,” spokeswoman Rachelle Schikorra said in an e-mailed statement.

The Brazilian oil producer, which operates Mega, began marketing assets in Argentina — including a refinery, petrochemical plants and oil and gas fields — in March as part of a global divestment plan intended to focus on its Brazilian oil fields.

Petrobras rose 3.3 percent to 9.48 reais at 4:03 p.m. in Sao Paulo.


By Rodrigo Orihuela and Rebecca Penty

Dec 16, 2014

Repsol SA (REP), Spain’s largest energy company, agreed to buy Talisman Energy Inc. (TLM) for $8.3 billion, ending a months-long search for acquisitions to help boost crude reserves and production.

Talisman shareholders will receive $8, or C$9.33, in cash for each share they own, according to statements from both companies. That’s a 60 percent premium to Talisman’s 30-day weighted average price, the Calgary-based company said.

Repsol has been seeking to spend about $10 billion on takeovers since receiving compensation in May from Argentina for the 2012 nationalization of YPF SA. The total deal value is about $13 billion, including Talisman debt, making it the biggest foreign takeover by a Spanish company since 2007, according to data compiled by Bloomberg. Repsol’s offer comes as a slump in crude drove the Canadian explorer’s stock below C$5 for the first time in 14 years.

“They’re paying a full and fair price that Talisman shareholders should be satisfied with,” Brendan Warn, an analyst at BMO Capital Markets in London, said by phone. “If oil had stayed above $100, the deal may not have happened as Talisman would have ploughed on.”

Repsol fell for a seventh day, dropping 0.4 percent to 15.64 euros at the close in Madrid. Talisman rose 48 percent to C$8.84 at the close in Toronto, the biggest gain in 30 years. The stock is down 16 percent since news of Repsol’s interest in the company first surfaced, as oil prices plunged to the lowest in more than five years.

Boosting Reserves

In losing the Argentine producer YPF, Repsol gave up almost half of its oil and gas reserves and has been looking for ways to replace them. The Talisman deal will boost Repsol’s crude reserves by 55 percent and production by 76 percent, the Madrid-based company said in a regulatory filing. Talisman, which has operations spanning six continents, is focused on the Americas and Southeast Asia.

“The transaction with Talisman is the result of a thorough analysis of more than 100 companies and assets around the world,” Repsol Chief Executive Officer Josu Jon Imaz said in a statement. “Talisman has always been the best option due to the excellent quality of its assets.”

Similar-sized targets in oil exploration have commanded an average premium of about 38 percent in the last three years, according to data compiled by Bloomberg.

Repsol may sell as much as 5 billion euros ($6.26 billion) of hybrid bonds to help finance the transaction.

Carl Icahn

The deal requires the approval of two-thirds of Talisman shareholders, who include billionaire Carl Icahn. Icahn’s representatives on Talisman’s board support the offer, Repsol Chairman Antonio Brufau told reporters in Madrid today. Talks between the companies had broken off in August.

Shareholders will probably support the deal, said David Neuhauser, whose holdings include Talisman in funds under management at Livermore Partners in Northbrook, Illinois. Talisman couldn’t afford to expand its business in the current oil price environment and didn’t have a replacement for Hal Kvisle, its outgoing CEO, Neuhauser said.

“They had to come out with a knock-out bid and they did that,” Neuhauser said. “For Talisman shareholders, it’s not the type of ending we all would liked to have seen but given the environment, it’s a better ending than the alternative.”

Talisman’s board considers the Repsol offer superior to other options for the company, Kvisle said on a conference call today. Low oil prices, limited options to reduce spending, a difficult environment to sell assets and risks associated with its debt all pose challenges for the company, Kvisle said.

Pension Board

Repsol will soon seek approval from the Canadian government for the Talisman takeover, which will result in a company operating in more than 50 countries with output the equivalent of more than 680,000 barrels of oil a day and refining capacity of more than 1 million barrels a day, Kvisle said. A government spokesman said it’s expecting the application under the Investment Canada Act.

Industry Canada will probably approve the deal after a straightforward review because Talisman doesn’t operate in the oil sands, a particular area of focus for the government, the CEO said. Also, Repsol is not controlled by a foreign government and Talisman has 80 percent of its assets outside the country, Kvisle told reporters in Calgary today.

Canada Pension Plan Investment Board was weighing a bid for Talisman, people with knowledge of the matter said yesterday, after initially considering buying parts of the company. Linda Sims, a spokeswoman for the pension board, declined to comment today on whether the fund was still considering bidding on Talisman.

Goldman Sachs Group Inc. and Nomura Holdings Inc. advised Talisman, while JPMorgan Chase & Co. and Deutsche Bank AG advised Repsol.


December 16, 2014

Argentine state-owned oil company YPF wants to form a partnership with Brazilian state-controlled oil giant Petrobras to produce gas in the Vaca Muerta shale play in Patagonia, media reports said Tuesday.

“I would love to do more things with Petrobras,” YPF CEO Miguel Galuccio told ValorPro, a Web site operated by the Sao Paulo business daily Valor Economico.

Petrobras’s presence in an area near Vaca Muerta will bolster gas production in the shale formation, Galuccio said.

“Petrobras is already in a gas exploration area in Neuquen,” the province where most of Vaca Muerta is located, and its participation in exploiting the giant shale formation would help Argentina stop “the drop in gas production” and “reduce the volume of imports,” which have soared since 2007, Galuccio said.

YPF signed an agreement with U.S.-based supermajor Chevron last year to develop the massive Loma Campana play within Vaca Muerta, which is in southwestern Argentina.

The agreement between YPF and Chevron calls for $1.24 billion in investment in the first phase of project development and $1.6 billion in the second phase of the development of Loma Campana.

YPF also signed a memorandum of understanding with Malaysia’s Petronas to work on developing the shale play.

YPF announced the discovery of non-conventional oil and natural gas reserves in Vaca Muerta in 2011 after successful results in the exploration phase.

Environmentalists oppose the development of the non-conventional oil play.

Millions of liters of water, thousands of tons of sand and chemicals will be used to extract oil and gas from the field using hydraulic fracturing, or “fracking,” a controversial method that involves pumping a pressurized fluid – usually composed of water, sand and chemicals – into a shale formation to create a fracture in the rock layer and release trapped petroleum or natural gas.


December 16, 2014

Spain’s Abengoa said Tuesday it won the rights to develop a new electricity transmission project in central Argentina that will supply power to a new steel mill.

The $34 million project will be built in areas near Perez, a city in Santa Fe province, and is to be completed in 12 months, Seville-based Abengoa said.

Abengoa, which will not own the assets once the project is completed, will oversee the construction and testing of the six kilometers (3.7 miles) of 220 kV power lines, the expansion of the Rosario Oeste transformer station and the construction of a new 220 kV transformer station.

This is the third power transmission project that Abengoa will carry out in Argentina in the fourth quarter of 2014.

The company has now built more than 5,000 kilometers (3,106 miles) of power lines and 40 substations in the South American country.

Abengoa has operations in the energy, telecommunications, transportation and environmental sectors.

6. ARGENTINA ECONOMY: QUICK VIEW – BOND SALE A FAILURE (Economist Intelligence Unit – ViewsWire)

16 December 2014


Argentina has issued new local-law bonds to try to bolster its foreign-currency reserves, but take-up was minimal. In a move designed to cut its repayment obligations for 2015, it also offered holders of bonds that mature in October 2015 the opportunity to cash in immediately or swap them for bonds that mature in 2024, but this was also unsuccessful.


The issuance in early December of local-law dollar bonds that mature in 2024, called Bonar 24s, was widely considered a failure. The government issued just US$286m of the US$3bn it had offered. The government had hoped the new issuance would help to further bolster its foreign-currency reserves, which have risen in the past week to over US$30bn for the first time since January, thanks to a fresh currency swap with China.

The economy minister, Axel Kicillof, said that selling any debt at all was a success in a “black week” for financial markets that included a continued drop in crude oil. However, the government has been criticised for a clumsy issuance. It offered the bonds for sale at 96.2 US cents on the dollar, 1.8 cents more than the Bonar 24s were fetching in the secondary market when the sale closed.

The government also saw little interest in its offer to either buy back or exchange (for Bonar 24s) US$6.3bn of local-law dollar bonds that mature in October, called Boden 15s. It bought back only US$185m of the securities and swapped just US$377m. The government offered 97 cents on the dollar for the Boden 15s, which was below market price.

A healthy response to the offer might have helped Argentina in its negotiations with holdout creditors, easing pressure on the government to agree a deal at the start of 2015. The government had also been hoping to cut its repayment obligations next year, which, according to the latest data from the Ministry of Economy and Public Finance, total slightly over US$13bn. The failure of the offer will heighten concerns over the government’s capacity to pay. Although another offer on better terms could well be successful in coming months, the risk is that market conditions could deteriorate in the interim, leaving Argentina unable to issue or to service its debts.


By Lourdes Garcia-Navarro

16 December 2014

RENEE MONTAGNE: In Argentina, even though the national currency is the peso, the American dollar is actually king. With the country’s economy tanking, everyone who can is trying to put money into the greenback. NPR’s Lourdes Garcia-Navarro recently traveled to Buenos Aires and brings us the story on how the sharing economy has become one way to do that.


EVE: Hola.

BRENNER: Hi. Here for dinner?

EVE: Yes.


BRENNER: Come on in.

EVE: I’m Eve.

BRENNER: Nice to meet you. I’m Kelly.

LOURDES GARCIA-NAVARRO: Kelly Brenner ushers in some of her guests at the Adentro Dinner Club. This is a puertas cerradas restaurant, meaning behind closed doors. It’s a culinary movement where people cook for paying guests inside their homes. Adentro is the most well-reviewed in Buenos Aires. And Kelly, who’s originally from Boulder, Colorado, acts as the host, and her Argentine fiance, Gabriel Aguallo, does the cooking, focusing on grilled meat.

BRENNER: And this is where we’re going to be eating eventually.

EVE: Oh, great. This is beautiful.

BRENNER: Thank you.

GARCIA-NAVARRO: Despite the success of the venture, the pair, she tells me, have been struggling.

BRENNER: Tourists come and they’re planning their vacation. They want a reservation for two months from now, and we couldn’t take that reservation because we couldn’t tell them how much it was going to cost in two months.

GARCIA-NAVARRO: Inflation is ravaging Argentina’s economy. According to some estimates, it’s running at 40 percent a year. Compare that to the U.S., where inflation is only 1.7 percent a year. Prices rise at a dizzying rate, she says. She just couldn’t run her business relying on the local currency. So finally, she did this…

BRENNER: We’ve actually just switched at the beginning of this month to charging in dollars as opposed to pesos after charging in the local currency because it was too chaotic.

GARCIA-NAVARRO: Here is a brief economics lesson.

ALAN CIBILS: People basically go to the dollar as a way to preserve the value of their purchasing power to hedge against inflation.

GARCIA-NAVARRO: That’s Alan Cibils, the chair of the political economy department of the National University of General Sarmiento. In Argentina, because a peso will buy you less and less each day, people put their money in dollars, which is a stable currency. Getting dollars, though, has become increasingly difficult. Argentina defaulted on its debt in 2001 and again this past summer. So it’s been locked out of the international markets where it can pay on credit. So it needs dollars to pay for things. The way it’s been getting them is preventing dollars from leaving the country, Draconian currency controls, which leads to scenes like this.

UNIDENTIFIED MAN #1: (Speaking Spanish).

GARCIA-NAVARRO: (Speaking Spanish).

I’m buying a ferry ticket, and I’m being told I have to pay in dollars or with my U.S. credit card. I’m told the government issued a decree that all foreigners have to pay for their travel in hard currency. Argentina now has a dual currency system. You have the official rate at which you can exchange dollars – $1 is about 8 and a half pesos – and then you have what is called the blue dollar rate, or the black market rate, which is about 13 pesos to the dollar.

It’s a beautiful spring afternoon in Buenos Aires, and I am walking down La Avenida Florida, which is a pedestrian street. But instead of the strains of tango, what I’m hearing is this…

UNIDENTIFIED MAN #2: (Speaking Spanish).

GARCIA-NAVARRO: People are asking me if I want to change my dollars. The hunt for the dollars is big business here in Argentina these days.

UNIDENTIFIED LANDLORD: Well, it’s rented most of the time, 80 percent of the days.

GARCIA-NAVARRO: Which brings us back to the sharing economy. That’s an Airbnb landlord. He doesn’t want his name used because of the government restrictions on dollar transactions.

LANDLORD: This apartment has a very – I think it’s the attraction, it’s the view of the neighborhood.

GARCIA-NAVARRO: Airbnb, where you rent your home for cash, has become a huge, global success. In Argentina, though, it has an added benefit. You charge and get paid in dollars.

LANDLORD: Very, very useful this extra money and the way I get it.

GARCIA-NAVARRO: According to Airbnb there are now 8,500 active Argentine properties on the site. That’s a 70 percent jump from last year. It’s one of their fastest-growing markets in Latin America according to the company.


GARCIA-NAVARRO: Back at the Adentro Dinner Club, Kelly Brenner says it’s really a tiny fraction of the population who has regular access to foreign currency like her. Though some estimates say that Argentineans love to hoard dollars so much that they hold one of every 15 dollars in the world. Brenner jokes the three national pastimes are…

BRENNER: Soccer and Malbec and looking for dollars.

GARCIA-NAVARRO: Still the majority of Argentineans are paid in pesos, and they have to deal with the devastating inflation. She says she’s lucky, and she wishes there was a strong national currency, but…

BRENNER: We don’t want to raise the prices. We don’t. We want to try and keep it somewhat stable.

GARCIA-NAVARRO: And that means charging dollars. Lourdes Garcia-Navarro, NPR News.


By Eduardo Porter

17 December 2014

SANTIAGO, Chile — Few people are as intensely worried about the slowing Chinese economy as Latin Americans.

Not only does China buy nearly 40 percent of Chile’s copper, but its once-insatiable demand helped push copper prices from $1 to $4 a pound.

Meanwhile, Beijing plowed billions into Peruvian mines and fisheries and spent billions more buying soybeans from Argentina and Brazil. And it propped up the Venezuelan government to the tune of $50 billion in loans, to be paid in shipments of oil.

China’s voracious hunger for Latin America’s raw materials fueled the region’s most prosperous decade since the 1970s. It filled government coffers and helped halve the region’s poverty rate.

That era is over. For policy makers gathered here last week for the International Monetary Fund’s conference on challenges to Latin America’s prosperity, there seemed to be no more clear and present danger than China’s slowdown.

”The commodity boom allowed governments and companies to avoid hard choices,” Andrés Velasco, Chile’s finance minister from 2006 to 2010, told me. ”For goodness’ sake even Argentina grew by 5 to 6 percent per year for almost a decade.”

Copper is back under $3. As commodity prices continue to swoon, driven in large part by China’s weaker demand, the going will get much tougher.

That’s especially true of the major oil exporters, clobbered by a collapse in oil prices driven by faltering global demand and increased supplies from the United States and elsewhere.

Venezuela, notably, is in free fall. The I.M.F. expects the Venezuelan economy to contract both this year and next. And it has been forced to limit its promised oil shipments to China, in effect defaulting on its Chinese debt.

But the commodity decline isn’t sparing many. ”Growth in Latin America should move back to pre-commodity boom rates,” said Alejandro Werner, who leads the Western hemisphere division at the I.M.F. Indeed, the fund expects the region to grow barely 1.3 percent in 2014, a third of its pace just three years ago.

The bust underlines how Latin American economies have failed to overcome the existential weakness that has plagued them throughout history: a dependence on raw materials that has shackled the region’s development to an incessant sequence of booms and busts.

From Brazil and Argentina in the southern tip of the region to Mexico in the north, officials across Latin America fretted for years that China undermined their decades-long efforts to build the manufacturing industries that, they hoped, would provide a ticket into the developed world.

Not only did China’s cheap labor outcompete Latin American industry and draw the lion’s share of global manufacturing investment, but its appetite for Latin America’s minerals, oil and agricultural products also raised the value of currencies around the region, making their manufactured goods even less competitive.

Manufacturing’s share in Latin America’s economic output has declined steadily for more than a decade, ever since China inserted itself aggressively into the global economy by entering the World Trade Organization.

At the same time, the share of raw materials in Latin America’s exports, which had fallen to a low of 27 percent in the late 1990s, from about 52 percent in the early 1980s, surged back to more than 50 percent on the eve of the global financial crisis.

China’s footprint on Latin America is contributing to what the Harvard development expert Dani Rodrik would call its ”premature de-industrialization,” shutting off the standard path of economic development followed by pretty much everybody since the industrial revolution.

Mr. Velasco, 54, recalled when a 23-year-old student in Antofagasta asked him what the Chilean government would do with the nation’s copper riches. By the time the student was his age, Mr. Velasco responded, Chile would have no more copper.

”The question,” he said, ”isn’t what should we do with copper but what will we do without it.”

China’s diplomats emphasize that it is a developing country, not an advanced, ”imperialist” power like the United States or the European colonial powers who ruled for centuries and served as the first foreign exploiters of Latin America’s mineral wealth. To many in Latin America, the difference hardly seems relevant.

Take San Juan de Marcona, a remote village on the edge of the Pacific Ocean in the Nazca region of Peru. Built in the 1950s to house workers at the vast open-top American-owned iron mine, the town no longer houses managers from the United States. In the 1970s, General Juan Velasco Alvarado, then Peru’s military dictator, pushed them out.

Today, Marcona’s managers come from Shougang, of China, which bought it from the Peruvian government in the 1990s.

”A growing China was very important to bring Peru along in the last 10 years,” said Cynthia Sanborn, who leads the Research Center at the Universidad del Pacífico in Lima.

North of Marcona, Chinalco built a town to relocate 5,000 inhabitants of Morococha, where it will blast open a copper mine. This year, China’s MMG, Guoxin International Investment and Citic Metal bought the Las Bambas copper mine from the Anglo-Swiss conglomerate Glencore.

Chinese companies are interested not only in raw materials but also in vast public works to transport the raw materials, including rail links across Brazil and a proposed $50 billion, 171-mile canal across Nicaragua.

In 2010, Chinese lending to Latin America roughly equaled that of the World Bank, the Inter-American Development Bank and the United States Ex-Im Bank combined. (It has since slowed.) Carmen Reinhardt of Harvard forecasts that China could become Latin America’s main source of financing.

Perhaps Latin America should just count its blessings. ”The concerns of dependency are there, but if China weren’t there, Peru would be seeking other markets for its minerals,” he told me.

Mr. Werner of the I.M.F. argues that the case for deindustrialization is overblown. ”From a medium-term perspective, China is a plus, plus, plus for Latin America,” he said.

In agriculture, for instance, exports to China are leading to lots of innovation and efficiency improvements. Demand for Brazil and Argentina’s soy — a principal source of animal feed — is unlikely to wane as the Chinese become richer and eat more meat.

”Don’t bet against nature,” Mr. Werner urged policy makers in the region. ”Play to your comparative advantage.”

In some of the region, however, China has inspired a nostalgic reinterpretation of its economic history and a re-examination of the policy choices of its past.

Remember Dependency Theory?

The doctrine, which spread across Latin America from the 1950s through the 1970s, proposed that the region, or any developing country, could never advance simply by selling natural resources to the rich North, using the money to import the North’s industrial goods. Import substitution, behind a wall of trade barriers, was the path to prosperity.

The theory fell into disrepute during Latin America’s ”lost decade” of the 1980s — blamed by a new crop of market-oriented, United States-trained leaders in the 1990s for turning the region into an uncompetitive backwater.

Courtesy of China, it’s back, fine-tuned to adapt to a more integrated global economy.

”We’re not calling for more protectionism, but to substitute imports within competitive open economies,” said Alicia Bárcena, who leads the United Nations’ Economic Commission for Latin America and the Caribbean. ”We must think of creating regional production chains to serve regional markets.”

She suggests that China should still be invited to participate in Latin America’s development, but on different terms: ”You want our commodities? O.K. But also invest in solar panels here,” she proposed.

Yet for all the hopes in Latin America that a new kind of deal can be had, the symbiotic relationship between the largest importer of commodities and one of the biggest commodity-exporting regions of the world is unlikely to change in any substantial way.

”Without this complementarity, the Chinese don’t have much to go on,” said Matt Ferchen, who runs the China and the Developing World program at the Carnegie-Tsinghua Center for Global Policy in Beijing. ”It’s working out quite well for China.”

And the symbiosis could survive for a long time. As Huang Haizhou, the managing director of China’s International Capital Corporation, told the nervous Latin Americans at the I.M.F.’s conference here, despite any slowdown in growth, China’s long-term demand for commodities remained voracious.

China’s income per person is still only about one-third that of Chile. Every year for the next 30 years, it plans to move 1.3 percent of its population from the countryside to cities. That will require a lot of construction.

”China’s demand for commodities is more important for Latin American growth than exports to the United States,” Mr. Huang said, ”and it will be more important for many years to come.”

This may come as a relief to the worried finance ministers here, struggling to recrunch their budgets to fit lower growth and scarcer tax revenue. But it also poses a challenge to the region’s leaders: maybe the traditional development strategy based on manufacturing needs to be recast in Latin America for a new era.



The Implications of the Torture Report

13 min read


The reaction to the Senate Intelligence Committee’s “Study of the CIA’s Detention and Interrogation Program” is as significant as what the study uncovered about the psychology and methods of those who run the Deep State that rules us.

After years of the Obama administration’s foot-dragging, obfuscation and threats, the senate Intelligence Committee’s “Study of the CIA’s Detention and Interrogation Program” has finally flopped onto the senate presiding officer’s desk like a landed carp.

The present writer will take as a given the veracity of its three main findings: that the United States engaged in practices both legally and commonly definable as torture; that the actionable intelligence these practices produced was negligible; and that the practices tainted the moral prestige of the United States government in a manner that damaged its foreign policy. These assertions may be taken as true both because of the abundant evidence presented in the report itself and because of the flailing and hysterical reaction by our country’s national security elites.

Whether from obstruction or lack of control, the implications of the CIA’s spying on Congress merited Senator Feinstein’s description of it as a constitutional crisis.

“Hysteria” does not arise from groundless causes, but from a guilty and conflicted id seeking to displace blame from itself onto others. The reaction to the senate study is as significant as the facts that the study uncovered in providing a window on the psychology and methods of those who run the Deep State – the hybrid association of key elements of government and parts of top-level finance and industry that is effectively able to govern the United States with limited reference only to the consent of the governed as it is normally expressed through the formal political process. This essay will discuss some of the implications of that reaction.

President Obama is an operative of the Deep State, but it is unclear whether he is its master or its prisoner. The president’s role in this affair has been extremely puzzling. On March 11, 2014, when the torture issue blew up in the senate because of Intelligence Committee chair Diane Feinstein’s allegations of CIA spying on her committee’s staff members, she said that the White House had been supportive of her committee’s probe of CIA activities. That may have been true, but that is still only what she said she believed. It is hardly beyond the realm of plausibility that the president or one of his aides told her that the White House was supportive of her committee’s investigation while at the same time tolerating, or even encouraging, CIA obstruction. But suppose the president did support the committee’s probe? That would imply that the White House does not really control the CIA. In either case, whether from obstruction or lack of control, the implications of the CIA’s spying on Congress merited Senator Feinstein’s description of it as a constitutional crisis.

Obama showed a similar split personality nine months later when the report was finally released. The president, and his White House press secretary, insisted that he was in favor of the public seeing the study (or at least the redacted summary of it). Yet on the Friday before its release, John Kerry, the most senior cabinet official in the government, called Senator Feinstein and urged her not to disclose it.

Shorter Kerry: “Lots of things going on in the world; not a good time for disclosure.” But when is there ever not a lot of things going on in the world? Kerry seems to have travelled a great distance since he was the young Winter Soldier who proclaimed that you can’t ask someone to be the last man to die for a mistake. Did Obama authorize Kerry to make that call? If not, did he care that Kerry was contravening stated White House policy? Or does Obama have any say in the matter?

The CIA’s strategy . . . was less about keeping faith with its dutiful foot soldiers than about priming its former big-shots with an advance look at the report so that they could go on an immediate public relations counteroffensive.

These questions, however, may be addressing a distinction without a difference. Whether willing or unwilling, whether in charge or not, Obama is fulfilling his role. Obama’s personality has been more impenetrable than that of any other president in recent history; yet he may, like Napoleon III, be a sphinx without a riddle: merely an ambitious person who tested well with focus groups and who arrived at the right moment, promising hope and change as a pretext to reign over, but not rule (in the manner of a constitutional monarch) a corrupt and entrenched system without conviction or feeling any personal stake in the great issues.

For the Deep State, attack is the preferred form of defense. National security elites have been preparing a vigorous counterattack for months. Because of the seriousness of the crimes in which CIA officers may have been implicated, chairwoman Feinstein reluctantly agreed to the CIA’s request that some of the current and former CIA officers mentioned in the senate report should have the opportunity to read it prior to its release. This was an unusual concession, since subjects of congressional investigations are not normally made privy to the contents of a report before the public finds out, but it is not a completely unreasonable request given the gravity of the allegations against these individuals.

Nevertheless, just prior to the time scheduled for the officers to read the document in a secure facility, the CIA told them there had been a mix-up, and that only senior, current and former CIA leadership (people like former directors George Tenet, Porter Goss or General Michael Hayden) could read the report. These were men with lucrative post-government careers and plenty of public relations knowhow in dealing with the Hill and who likely would have continued to have a range of press contacts. The CIA’s strategy was crystal clear: Its request to the senate was less about keeping faith with its dutiful foot soldiers than about priming its former big-shots with an advance look at the report so that they could go on an immediate public relations counteroffensive against the document on the day it was publicly released.

The rebutters’ gaps in logic and evidence have almost never been challenged by the bulldogs of our gloriously free and adversarial press.

In fact, the opening barrage occurred even before it was made a part of the senate record. On the Sunday talk shows, people like General Hayden and House Intelligence Committee chairman Mike Rogers were at their most hyperbolic. Congressman Rogers seemed to revel in the prospect of being vindicated in his prediction of dire terrorist attacks as a result of the study’s public disclosure. General Hayden waxed positively lyrical about the blessings of torture, as he has been doing virtually nonstop since he stepped down as CIA director in 2009. (1)

It was all hogwash and misdirection. The rebutters produced no concrete evidence that torture brought worthwhile results. Blaming the revelation of the crime, rather than its commission, on anything bad that might happen in the future is to stand ordinary ethics, not to mention common sense, on its head.

It requires only a moment’s thought to realize that mistreated detainees who were subsequently released knew exactly what was happening to them, and they would tell their family, friends and anyone else in their home countries, including local media, what went on in those prisons. The only people who would not know, absent official disclosure, would be the American people. That, however, is how the Deep State operates: It forces through its agenda by appealing to the elemental fear of terrorism so that it short-circuits the logic of the listener.

The news media are complicit. The rebutters’ gaps in logic and evidence have almost never been challenged by the bulldogs of our gloriously free and adversarial press. During the two or three days prior to the senate report’s release, the media were awash with unbalanced stories trumpeting the (hypothetical) damage disclosure would cause, all based on interviews with former government officials with an obvious interest in keeping the report under wraps.

This is in part because the media maintain an incestuous relationship with their current and former government sources. One of the most egregious examples was CBS News; one of its national security consultants is Michael J. Morell, a former acting CIA director. The network actually permitted Morell to inveigh against the report’s release under color of being a news consultant, despite the fact that he was one of the former CIA big-shots who had prior access to the document and had worked on a rebuttal to it! The mortal remains of Edward R. Murrow are presumably spinning like a rotisserie. (2)

“We’re the real victims here.” When they are caught in the act, it is a frequent psychological ploy among bullies and con men to accuse other of the crime and to play the victim. The senate study has been accompanied by a torrent of such behavior on the part of the Deep State’s current and former operatives. Several former CIA directors and other former intelligence players have even launched, with suspiciously miraculous speed, a website devoted to attacking the senate report and portraying themselves as victims. (3)

Their demand for secrecy is really a penchant for self-dealing without public scrutiny.

The themes were predictable: senate Democrats were just picking on dedicated public servants doing their patriotic duty to keep Americans safe. The program they administered was lawful. CIA officers now have to worry about shifting political winds. We got bin Laden, didn’t we? Those sloppy senate staffers didn’t even interview us.

And so on. Let us examine those assertions.

False appeals to patriotism have become so common after 9/11 that they are almost an involuntary reflex. But, as Samuel Johnson said, patriotism is the last refuge of the scoundrel. In reality, however much of the rebuttal brigade see themselves as patriots, they were actually senior operatives of the Deep State, deeply imbued with an ideology that is neither specifically Republican nor Democrat, and certainly not the beliefs necessary for the maintenance of a constitutional republic under law and the informed consent of the governed.

The ideology of the Deep State is about maintaining and enhancing power – and cashing in afterwards. It is worth noting that almost all senior national security operatives never retire after leaving government; they cash in with consultancies and board memberships with security-related corporations. It’s not that no one ever truly retires, but like snakes in Ireland, they are a vanishingly rare phenomenon. It is profoundly in the material interest of these operatives to defend the Deep State so as to keep the cash flowing.

When they complain about the CIA being subject to shifting political winds, they are expressing distaste for the very processes of elective politics that constitute the democracy they once swore to defend. Their demand for secrecy is really a penchant for self-dealing without public scrutiny. It is exactly what James Madison warned about: “A popular government without popular information, or the means of acquiring it, is but a prologue to a farce or a tragedy, or perhaps both. Knowledge will forever govern ignorance, and a people who mean to be their own governors must arm themselves with the power which knowledge gives.”

The mountain of documents uncovered by the senate staffers gave a far more accurate picture of the contemporary situation than the self-serving memories of a George Tenet or a Porter Goss would have.

Assertions that the interrogation program was lawful rest on claims that a presidential finding and the Justice Department’s office of legal counsel authorized it. But a presidential finding says nothing at all dispositive about a law, treaty or constitutional provision. Opinions of executive branch legal counsels are not the same as a plain reading of the applicable statute; it has been my experience in Congress that executive branch legal counsels are far too often in the habit of giving a green light to whatever farfetched interpretation of a law the executive branch wants to give it. To say that the president signed off on something, so consequently it was legal, sounds uncomfortably like the Nuremburg defense, or President Nixon’s memorable statement to David Frost: “If the president does it, it’s not illegal.” What is legally binding are the Geneva Convention and the relevant federal statutes prohibiting torture.

The CIA supposedly ended the enhanced interrogation program in 2006. If in fact the torture produced actionable intelligence, why did it take five more years to dispose of Osama bin Laden, the supposed object of all our efforts after 9/11? That’s longer than the period the United States was in World War II, from Pearl Harbor to Tokyo Bay. Ticking time bomb, indeed.

Chillingly, “enhanced interrogation” is a literal translation of the German verschärfte Vernehmung, a term introduced by a Gestapo directive of June 12, 1942, to describe permissible methods of interrogating prisoners.

Finally, the big-shots’ website engages in mock sorrow over the fact that the senate Intelligence Committee’s investigators did not bother to investigate them. There is good reason for that. Legendary investigative journalist I.F. Stone rarely interviewed high officials in government, but based his stories to the extent possible on documents. Why? As a subject becomes controversial, or as people risk getting into legal jeopardy, actors in a situation tend to shade their stories to make themselves look better or to exculpate themselves. Or they may simply misremember an incident several years old. But documents give an exact picture of thinking and intention at the time they were written.

The mountain of documents uncovered by the senate staffers gave a far more accurate picture of the contemporary situation than the self-serving memories of a George Tenet or a Porter Goss would have, particularly as they had reason to believe they might be in legal jeopardy, whatever the disinclination of the Obama administration to prosecute torture might be. It certainly would make foreign vacations a riskier proposition for such people, if they traveled to countries claiming universal jurisdiction.

As always, contractors are the real creeps. In every possible situation, from mess halls to logistics to the guarding of military bases, the government contracts out services so as to keep the money flowing into the hands of potential political contributors. And so it was even with torture. The CIA outsourced the program to two psychologists, James Mitchell and Bruce Jessen. The report says that the two had never witnessed a real interrogation before (as opposed to the mock interrogations conducted by the military’s survival, evasion, resistance and escape schools), and had no relevant other experience, such as cultural knowledge of the Middle East. Yet, as with Halliburton, incompetence was no obstacle, and the two were hired to run the program of “enhanced interrogation.”

Chillingly, “enhanced interrogation” is a literal translation of the German verschärfte Vernehmung, a term introduced by a Gestapo directive of June 12, 1942, to describe permissible methods of interrogating prisoners. Post-World War II war crimes tribunals judged the techniques described in the directive – techniques strikingly similar to those employed six decades later by the CIA – to be war crimes. It should also be noted that a Japanese sergeant at Changi Prison in Singapore was sentenced to 20 years at hard labor after World War II for waterboarding prisoners.

People routinely condemn politicians and bigwigs of all stripes without noticing an uncomfortable resemblance.

The senate document says that of 139 CIA detainees, 39 were selected for the psychologists’ treatment. Since the agency had showered the pair with $81 million to conduct the program, that comes to over $2 million per detainee! The cost makes the Air Force’s $600 hammer look like a bargain. And why is it that so many people in the CIA were convinced that the intelligence these methods produced was so good? Perhaps because the psychologists themselves were in charge of evaluating whether the interrogations they had designed produced good results, and whether they should be continued. I have often speculated on how many of the S-class Mercedes one sees on the Washington Beltway, or yachts in the Washington marina, were the fruits of the so-called war on terror that conveniently never seems to end. There is even a pot of gold, apparently, in forcing people to stand on broken legs.

If you want to see the Deep State, look in the mirror. The torture report makes one wonder: Did all this happen against the will of the American people? To some extent that may be the case, because public opinion is virtually irrelevant.

The political game is so rigged that something like this was to a degree foreordained. It also explains why no one will ever be tried, at least in a US court. But why is it that our political system is the way it is? It is true that at the polls, Americans face a rigid, binary choice of pre-selected candidates in thrall to corporate money. That is the stock progressive critique of the American political system.

Still, it does not quite explain why the people just last month elected possibly the most reactionary and plutocratic Congress since the Coolidge era. There are other psychological factors involved than mere mystification and manipulation of a poor, deluded public. Just as Americans console themselves with the belief that Washington is not the real America when it is in reality only concentrated distillation of all the good and bad characteristics of any American town, so do people routinely condemn politicians and big-wigs of all stripes without noticing an uncomfortable resemblance. It is one thing for the Jon Stewarts of the world to denounce Dick Cheney and his henchmen for authorizing torture as if they were somehow disembodied from society at large.


t is more painful to reflect upon the results of a 2014 Amnesty International poll, finding that 45 percent of Americans believe that torture can be justified on public safety grounds, a significantly higher percentage than in any other country in what is now called the developed world. By contrast, respondents in countries like Chile, Argentina, and Greece, where the public knowledge of torture has been much more up-close and personal, gave sharply lower affirmative responses to the question than Americans did. Gazing at the snarling face of Dick Cheney, some Americans would be shocked to find it is a grotesque reflection of their own countenance, distorted as in a funhouse mirror.


1. It has been little remarked in the context of US mistreatment of prisoners, but the historical record shows that torture is often intertwined with sexual perversion of the type described by Richard von Krafft-Ebing, as the incidents at Abu Ghraib prison demonstrated to the world. One cringes to think how people like General Hayden may be getting their jollies.

2. To be fair, in 2007, CBS News’ Scott Pelley baited former CIA director George Tenet into making a touchy, defensive denial that the CIA engaged in torture which only succeeded in suggesting that precisely the opposite was the case.

3. The fact that the current CIA director, John Brennan, allowed former government employees to see a highly

sensitive document that was being withheld even from senators not on the intelligence committee so that these former employees could more effectively engage in partisan axe-grinding ought to be investigated as both an ethics and a security violation.


America Didn’t Just Prosecute Torturers, We Executed Them


Posted on Dec 16, 2014

By William Pfaff

The wartime Western allies, their judges sitting in judgment on war crimes in the city of Nuremberg, ordered hanged until dead eleven major World War II criminals at Spandau Prison in Germany on October 6, 1946. Those judged were not hanged because their crime was that they were themselves torturers; they were too highly placed for that. They were people who had ordered that the gloves be taken off. It was the people under their orders who took the gloves off and tortured and murdered.

For many years preceding the Second World War torture of a human being was widely accepted as being a heinous crime. It was not formalized in international law as such, because it was taken as part of the General Law of Humanity, which is to say law that was taken to be obvious to humans in Western Civilization.

Since World War II and the Nuremberg Trials, and other war crimes trials held in the months and years that followed, torture has been formally identified as an international crime in a number of conventions and treaties, and by such bodies as the International Red Cross, and of course the United Nations.

It has widely become adopted into national as well as international legal codes. It is part of the Laws of War as recognized by the United States Armed Forces.

The United States has also incorporated it into the Code which binds all men and women serving in the forces. It has added the rule that no soldier may obey an illegal order, such as an order to torture a prisoner.

This obviously places such a soldier in a paradoxical situation since the superior giving the order is assumed to issue only legal orders. The soldier would rarely be in a position to appeal over his head to a higher officer. In general it must be assumed that the soldier is in a position in which his own conscience must decide his act. It is exactly this which, with rare exceptions, is absent from the story we have read in the Senate CIA Report.

In the CIA case there is little record of employees of the agency refusing an order to torture. There is a record of people in this position denouncing the order to the press or to some civilian political authority, Congress, or the public. This typically has resulted in the legal prosecution and conviction of the truth-tellers, or—especially under the Obama administration (to the dismay of Mr. Obama’s admirers) to strenuous efforts to capture and prosecute these people for revealing the truth about what may be crime or malfeasance, as in the cases of Julian Assange and Edward Snowden, and of course that of the self-confessed conscientious objector, Bradley (Chelsea) Manning—as well as a few others.

It has for years been known in police and intelligence circles that torture rarely produces useful and timely information from a captive. It typically produces lies meant to stop the torture, untrue information supplied to please the torturer’s apparent wishes, or murder of the victim by the torturer or the torturing institution, as at Guantanamo, and apparently at one or more of the Black Sites.

The most disturbing and basic question is why Americans officials seemed to want so badly to torture when to do so was known – even to the Agency – to be so unprofitable. Dick Cheney in an interview (on “Meet the Press”) stubbornly insisted that the torture had produced rich results, was not properly torture anyway, and that the CIA report published by the Senate was a deliberately concocted and politically motivated compendium of falsehoods by Democratic politicians and the liberal press—even though no doubt can exist that it was prepared from information inside the CIA by members of the Senate staff.

Within the Agency a pathology clearly has existed and prevailed, but it was initiated and promoted by Agency leaders and prominent members of the Bush administration. It was sustained inside the Obama administration by other such persons in official positions and in the Congress despite Mr. Obama’s forbidding of torture and his unfulfilled promise to close Guantanamo prison, where torture apparently continues even now in the form of forced feeding, which serves no defensible military or intelligence purpose at all, other than to debase prisoners (and obviously their jailers, as well as those officials who ordered it). These people have simply wanted, and still want, to torture people.

Apparently nothing is going to be done to change anything as a result of this episode, just as nothing effective was done about torture and assassination in Vietnam. In Vietnam we had the Phoenix program of assassinations of suspected enemy collaborators among the peasantry. I emphasize ‘suspected,’ having gone along, in a semi-official analytic capacity, on one such interview of a terrified family whose father was not at home.

The American civilian I accompanied was followed by a montagnard tribal executioner so that the job, if necessary, could be done on the spot. The American seemed to like his work. I mention this—which for me followed several years of work with a CIA-owned international political warfare organization—so as to disabuse the reader who might think that what I am about to say is the fancy of an unsophisticated journalist.

In my view those in the American government who ordered and conducted this program of torture by the CIA since the autumn of 2001 should be arrested, tried for self-evident common crimes, and if convicted, hanged.

That would convince government officials for years to come that international legal prohibitions of torture and other readily recognized crimes against humanity, which have been ratified by the United States Executive Branch and Congress, shall be obeyed, and illegal orders to the contrary be disobeyed and denounced to the international public if necessary.

Regrettably, in this case in the United States, criminals are no longer hanged, nor is the death penalty widely applied to other than the poor. Thus I would assure that the sentence be served in a common prison in the company of ordinary criminals, sharing the ordeal which is the common experience of that vast number of Americans condemned to penal servitude. In no case should it be served in the comfortable federal prisons reserved by our government for white-collar criminals. They should be made to think of Nuremberg.

Visit William Pfaff’s website for more on his latest book, “The Irony of Manifest Destiny: The Tragedy of America’s Foreign Policy” (Walker & Co., $25), at http://www.williampfaff.com.


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