by Michael Meurer
What
the hell is happening in tiny Uruguay? South America's second smallest
country, with a population of just 3.4 million, has generated
international headlines out of proportion to its size over the past year
by becoming the first nation to
legalize marijuana in December 2013, by
welcoming Syrian refugees into the country in October 2014 and by accepting the first six
US prisoners resettled to South America from the Guantánamo Bay prison on December 6, 2014.
Outgoing President Jose Mujica, a colorful former
Tupamaros rebel who was imprisoned and brutally tortured by the military during the era of the disappeared in the 1970s under US-supported
Operation Condor in Uruguay, Chile, Argentina and other nations of the Southern Cone, is a
favorite media subject and has been at the center of these actions.
Yet an even larger story with deeper historical roots and global
implications is unfolding simultaneously in Uruguay with minimal media
attention. Uruguay has spent the last decade quietly defying the new
transnational order of global banks, multinational corporations and
supranational trade tribunals and is now in a fight for its survival as
an independent nation. It is a rich and important story that needs to be
told.
The 2014 Presidential Election
For the past 10 years, Uruguayans have been conducting a left-leaning
experiment in economic and social democracy, turning themselves into a
Latin American version of Switzerland in the process. Under the
leadership of the left-leaning Broad Front party, the International
Monetary Fund (IMF) reports that Uruguay has enjoyed
annual economic growth of 5.6 percent since 2004, compared to
1.2 percent annual growth
over the last five years in Switzerland. The Swiss have decriminalized
marijuana and gay marriage. Uruguay has legalized both. Prostitution is
legal in both countries, and each provides universal health care.
According to the
Happy Planet Index, Uruguay has the same low per capita environmental footprint as
Switzerland, with a similarly widespread sense of well-being among its people in spite of significantly lower per capita GDP.
Yet unlike Switzerland, with its highly developed
financial services sector and, until recently,
safe haven tax policies
for global capital, Uruguay has become a prime target for the wrath of
multinational corporations and the London bankers who fund them.
From the bankers' perspective, Uruguay is setting a bad example by
taking care of their people instead of catering to global financial
speculators.
In November 2014, Uruguayan voters voiced approval for their government's policies of social tolerance and public spending on
early childhood education, affordable
universal health care and
social safety net
programs by re-electing former president Tabaré Vasquez from the ruling
Broad Front party. With support from allied green and radical left
parties, Vasquez won a landslide victory against a neoliberal opponent
who ran on a platform of
slashing public sector spending
and opening the nation's economy to foreign investors. Instead,
Vasquez's return to the presidency in 2015 will extend the Uruguayan
social democratic experiment another five years to 2020. London's
neoliberal, supply-side bankers are not amused.
Less than a week after Uruguayan election results were certified,
Capital Economics,
a London-based financial think tank aligned with British Prime Minister
David Cameron's brand of aggressive neoliberalism, issued an economic
report sternly warning that Uruguay is going to face tough economic
times after electing another leftist president unless they change their
ways. The language of the
Capital Economics report is telling:
Capital Economics concludes that given Vazquez' promises of
continuity and more social spending, and the Uruguayan economy running
at full capacity, any attempt to bolster domestic demand most likely
will generate more inflation and more strains in the balance of
payments.
"Our view is that policymakers need to tighten fiscal policy and pass
supply side reforms to boost medium-term growth," says the report.
Likewise wage indexation is widespread in Uruguay and according to
the IMF, as many as 90 percent of labor contracts are indexed, which
contributes to high and persistent inflation. "More generally, reducing
the power of trade unions will help to ease labor market rigidities."
This report reprimanding Uruguay was published against the backdrop of the
most aggressive assault on the public sector
in British history. The Cameron government is proposing cuts of 22.2
percent to the national budget by 2020, with cuts of 41 percent to
"unprotected" programs, which translates as discretionary social welfare
spending.
The leftist economic experiment taking place at the opposite end of
the globe in tiny Uruguay is more than the bankers in London can
tolerate, never mind that Uruguay, with
minimal military expenses, has annual deficits nearly
600 percent lower than the UK
as a percent of GDP. From the bankers' perspective, Uruguay is setting a
bad example by taking care of their people instead of catering to
global financial speculators.
If the Capital Economics report is decoded, it functions as a virtual
thesaurus for the language of financial tyranny, bullying and terror
used by the new regime of
global capital headquartered in London and New York.
Decoding the Language of Neoliberal Bankers
Capital Economics wants to ensure that Uruguay adopts polices that
ease "labor market rigidities." While the preciosity of this formulation
is not without entertainment value, in plain language, it means union
busting in order to lower wages.
Capital Economics also insists that "supply-side reforms" are essential for Uruguay's survival. Here is a
typical list of such reforms.
- Cutting government spending, taxes and policies to cut government borrowing
- Passing laws to control trade union powers
- Reducing red tape to cut the costs of doing business
- Implementing measures to improve the flexibility of the labor market, or reforming employment laws
- Enforcing policies to boost competition such as deregulation
- Privatization of state assets
- Opening up an economy to overseas trade and investment
- Opening up an economy to inward labor migration
In sum, the London financial establishment is telling pesky leftist
Uruguay that it needs to crush its unions by encouraging an influx of
low-wage, immigrant workers to reduce labor costs, slash social spending
and privatize as much of the public sector as possible.
It is important to note that
55 percent of Uruguay's government bond debt
is held by foreign investors, many of them British. The anti-labor
austerity program being recommended by Capital Economics would be
disastrous for Uruguay's domestic programs and quality of life, but it
would provide a profiteering opportunity for speculative bankers in
London by temporarily increasing the value of Uruguayan bonds. This is
what is really meant by "a boost in medium-term growth."
The TTIP and TPP
The neoliberal assault on export-dependent Uruguay is likely to
intensify in the next few years, and not solely because of their deficit
spending on popular social welfare programs that fly in the face of
economic austerity recommended by London bankers and
the IMF.
Uruguay has also become a lightning rod for the global financial elite
because they are challenging the legitimacy of international trade
tribunals that lie at the heart of the proposed
TTIP (Transatlantic Trade and Investment Partnership) and
TPP (Trans-Pacific Partnership) trade agreements.
Uruguay's encounter with the emerging regime of transnational
corporate governance started when the National Ministry of Public Health
mandated that vivid written and pictorial warnings about health risks
from smoking needed to cover 50 percent of cigarette package surface
area.
Contrary to advance PR by cheerleaders such as Cameron and US
President Barack Obama, the TTIP and TPP are not designed to promote
trade. The cumulative effect of TTIP and TPP would be the
establishment of a transnational governing structure
that supersedes the current order of sovereign nation-states that are,
at least in theory and sometimes in practice, democratically accountable
to their own people.
Proposed signatories to the TTIP and TPP all fall within the sphere
of US-UK-EU economic influence, which explains why Russia, Africa, the
Islamic nations and the leftist regimes of Latin America are excluded.
This is the fabled capitalist
"new world order" dreamed of by the shrub's daddy more than 20 years ago.
Uruguay looms disproportionately large on the global stage at the
moment because they have unwittingly vaulted into the vanguard of a
global backlash against the TPP and TTIP due to a seemingly unrelated dispute with the international tobacco industry.
Enter Marlboro's Mad Men
Uruguay's encounter with the emerging regime of transnational
corporate governance started in 2005, under the first administration of
incoming president Tabaré Vasquez, when the National Ministry of Public
Health mandated that vivid written and pictorial warnings about health
risks from smoking needed to cover 50 percent of cigarette package
surface area. In 2009, this was increased to 80 percent of surface area.
Uruguay was tackling an epidemic of smoking-related health problems,
especially among young people and pregnant women.
Smoking has since dropped from 40 percent of the adult population to 23 percent in 2014, and from 33 percent to 12 percent among teenagers.
"The costs of defending these cases are enormous, so tobacco
companies are trying to pick off lower-income countries that can't spend
the money and political capital to defend themselves against industry."
In the ultimate irony, Phillip Morris, which
moved its global headquarters to Switzerland in 2002 for
tax and liability avoidance,
sued Uruguay in 2010 over the new labeling requirements under the terms
of a bilateral trade agreement between the two countries. The Phillip
Morris suit, which
seeks $25 million in damages
and weakening of the Uruguayan labeling requirement, is being
prosecuted through the International Centre for the Settlement of
Investment Disputes (ICSID) in Washington, DC. The ICSID is
chaired by the president of the World Bank
and funded from the Bank's budget. It is a supranational trade tribunal
that specializes in international state dispute settlements (ISDS).
ISDS are
at the core of both the TPP and TTIP,
but on a truly global scale. If Uruguay were to prevail against Phillip
Morris, the ramifications for TPP and TTIP enforcement, and the new
global order the treaties represent would be far reaching.
Phillip Morris, which makes Marlboro, the world's
best-selling and most valuable cigarette brand, has annual revenues greater than Uruguay's entire GDP - $80 billion vs. $59 billion. According to
Ellen R. Shaffer,
co-director of the Center for Policy Analysis, "The costs of defending
these cases are enormous, so tobacco companies are trying to pick off
lower-income countries that can't spend the money and political capital
to defend themselves against industry." Uruguay is so fiscally
constrained, it has been receiving financial assistance to cover its
legal fees from Bloomberg Philanthropies, headed by
Michael Bloomberg, the billionaire former mayor of New York City and an avid anti-smoking crusader.
Phillip Morris argues in its suit that both its profits and its
"brand" are being severely damaged by Uruguay's anti-smoking campaign,
noting that the company's brand represents
"a long-term significant investment."
In a further punitive action, the company closed its cigarette factory
in Uruguay after filing the suit, throwing 40 people out of work. The
Uruguayan government responded by rehiring eight of the workers as
anti-smoking health advisers, and in October 2014, they filed a
500-page defense and rebuttal to the Phillip Morris suit with the ICSID.
In the defense document, which has not yet been publicly released, Uruguay
reportedly cites its obligations
to protect the health of its citizens under the World Health
Organization's 2005 Framework Convention on Tobacco Control, an
international agreement that has been signed by nearly 200 nations and
includes recommendations for health warnings on cigarette packages.
Silvina Echarte Acevedo is the legal adviser heading the Uruguayan Ministry of Public Health's defense.
She recently told The Independent:
"They [Phillip Morris] are bullying us because we are small. This is
like David and Goliath. But we will fight because it is our right and
duty as a government to protect our citizens' health."
The fact that a sovereign nation trying to protect the health of its
people is being forced to defend itself in expensive litigation against
the profiteering of a multinational corporation in front of a
supranational World Bank tribunal is already far down the wrong path.
While Uruguay's brave and principled stand against Phillip Morris is
heartening, it is also a preview of what could become the prevailing
reality if the TTIP and TPP are allowed to go forward. The tobacco
behemoth is also using international trade tribunals to sue the
governments of Australia and Thailand over their attempts to place more
prominent health warnings on cigarette packaging. The
lawsuit against Thailand
was successful and is being appealed by the Thai government. The
litigation in various trade tribunals against the governments of
Uruguay, Australia and Thailand has
already intimidated both New Zealand and Britain into delaying proposed cigarette label changes similar to Australia's.
Organizations aligned with Uruguay against Phillip Morris include the
World Health Organization and the
Pan American Health Organization, as well as a loose coalition of anti-smoking NGOs.
In this moment, we are all Uruguayans. Their little heralded stand
against the emerging model of transnational governance by multinational
corporations and global banks is everyone's battle. A Uruguayan victory
at the ICSID tribunal has the potential to set a welcome precedent in
favor of local governance versus the kind of transnational order
envisioned in agreements such as the TTIP and TPP, yet it is a battle
that is being fought on enemy territory. The fact that a sovereign
nation trying to protect the health of its people is being forced to
defend itself in expensive litigation against the profiteering of a
multinational corporation in front of a supranational World Bank
tribunal is already far down the wrong path.
In a touching
display of bipartisanship,
passage of the TPP is a top priority for President Obama, Mitch
McConnell (r-Kentucky) and John Boehner (r-Ohio) when the new
Republican-controlled Congress convenes in January 2015. However, there
is
opposition in both the Democratic and Republican congressional caucuses that may be responsive to public opinion.
More troubling for proponents of TPP and TTIP is the resistance of
several proposed member states who are balking at the erosion of their
national sovereignty. These states include Japan, Thailand and most
recently, the European Union, which is concerned about being forced to
import US meat, poultry and produce, which they deride as
"Frankenfoods," due to lax US regulation of additives, hormones and GMOs.
For anyone interested in voicing support for Uruguay's position, contact information for ICSID can
be found online. To register support for Uruguay and opposition to the TTIP and TPP within the United States, contact information for the
White House and individual
senators is available online, while Public Citizen has a portal for registering opposition with
House members.
In the interim, viva Uruguay!
