December 01, 2005

01:30:38 pm Tuesday, November 29, 2005 - Cape Town, South Africa - Sunny to mid-day, cloudy in the afternoon, High 70s. Includes comment on Argentina, Japan.  

Took a walking tour of downtown Cape Town that was quite interesting. Cape Town has good colonial architecture and also Art Deco architecture from the 1930s and 1940s. Before I went to bed, I finally got all of the pictures on the web site up to date, adding over 100 pictures today. The web site is now back to normal after five weeks of being behind due to death of my old PC.

We leave South Africa tomorrow morning and I'm not sure what to conclude about it. We had a great time here, better than anticipated. I arrived expecting to be bearish on the country's future. Now I see reasons to be bullish, although I recognize that the short amount of time we spent here was entirely in one of the nicest parts of the country, so my perspective could be skewed. The reasons for my bearishness before arrival were that: 1) from afar, what little I had read on the country, indicated to me that government policy was from the two-wrongs-make-a-right school (I'll explain that) and 2) African countries have a poor record post-independence. Although South Africa's independence dates from 1910, you could consider 1994--the end of apartheid and the beginning of non-white rule--as a second independence. I wish the second fact were not the case, but you only have to look to the northern border with Zimbabwe to see a country that has been an absolute disaster since its independence in 1980. It used to be a significant food exporter, now--due to seizing of white farmland--Zimbabweans are starving. South Africa is no Zimbabwe, but with its elaborate quotas since 1994 as to what percentage of jobs and ownership each business must provide to blacks, I wonder if it has abolished one race-biased system for another. This is not to suggest that the present system has the mean-spiritedness of apartheid. It is well intentioned. But history is full of examples of good intentioned government policy with unintended consequences. I wonder about the consequences of South Africa's present policies when I hear of a 28-person business artificially divided into seven different companies--each with four employees--to avoid the quotas and rules that kick in once you have five employees.

So before my visit to South Africa, I thought this might be a chance to see the country before it deteriorates economically. Now I am not sure it will deteriorate at all. Its future could be bright. I hope it will be. But I am still not sure. Talk to a few people with knowledge of the country and you will get widely different views of its future. Opinions range from former citizens who have left the country permanently, disgusted with the new rules, vowing never to return, expecting it to sink slowly into the abyss that consumes much of Africa. Others I know who are familiar with the country, but not resident there are sadly pessimistic, against their desire to see it do well. On the opposite end of the spectrum though, we met people widely enthusiastic about South Africa's prospects. Many people are in the middle--hoping for the best, fearful of the worst, with at least a vague exit strategy in the back of their mind should their fears play out.

In assessing countries, I think it helps to have a long-term view and to consider the position contrarian to the common view. From afar, this calls for a negative view on South Africa as 1) the long-term view is that over the past several decades much of Africa has moved backwards and thus South Africa might slowly, imperceptibly, do the same even if things look good on the surface; and 2) the jubilation over the end of apartheid may be misplaced. If those with the technical abilities to run the country are no longer in power or even no longer in the country (e.g. as Zimbabwe has learned, expropriating farms and giving them to unskilled people who do not know how to farm increases hunger, not equality), the country could fall apart. However, this negative view from afar is common enough, especially in conservative circles, that it may have become the conventional wisdom. Thus, maybe the contrarian view ought to be that South Africa will actually prosper.

Visiting--again admittedly we were there only four days and only in nice parts--you can construct the case for optimism. Positive factors include cheap prices, good infrastructure, and great weather, attracting people for vacations or to live there. Also, labor is inexpensive, plentiful, and English-speaking, making the country a possible location for outsourcing (I do not understand why this has not occurred with greater frequency). The consistent friendliness of blacks to white outsiders was noticeable and commendable, and in stark contrast to the indifference displayed often throughout Caribbean countries. At first impression, everyone in this multi-racial, multi-ethnic society seems to get along remarkably well--far better than one would expect given the history.

Negative factors are high crime, concern that current infrastructure investment is inadequate (but relative to India the infrastructure is light years ahead), and fear that government policy may not protect property rights or may create onerous bureaucratic rules.

Cape Town is doing well. There is obvious investment in retail, restaurants, and housing. Tourists are plentiful. Real estate prices, according to what I read, have risen rapidly in recent years. But it still feels like a small city, known and cosmopolitan, but still undiscovered by most of the outside world. The local newspaper is running a series on traffic congestion, but the streets seem pretty empty to me. There are condos along the oceanfront, but compared to other world cities, the coast is less developed and the prices cheaper. What may seem like out-of-hand growth to locals appears to me to just as likely be the early stages of a prolonged boom. If the government does not screw it up.

Anecdotally, a person I was talking with in Botswana told me that many people who left the country after 1994 have returned because they found they could not have the same standard of living and quality of life in the UK or Australia. I was skeptical of this, but after visiting I understand it. A middle class person in South Africa could have big house on a big lot in a good location with several domestic helpers. In the UK, this person might be in a cramped apartment with a long commute and of course no domestic help and poor weather. Australia can match South Africa's weather and does have lower prices than the UK, but prices are still higher than South Africa and with low unemployment, domestic help is not common.

My conclusion is that I am less certain of which future South Africa will have--optimistic or pessimistic--than before I arrived. That is unusual. With most countries on this trip, I have a strong view of the country, good or bad, by the time I leave. Sometimes the view is the same as before I arrive, sometimes it is different, but I have a view. With South Africa, I'm not sure of my view. I am leaning toward optimism. Offhand, the other country that comes to mind where I was less certain about its future at the end of my visit than at the beginning is Argentina. Arriving in Argentina, I was down on the country because of its recent 2001/2002 debt default, the shameful way it has handled that default, and its long history of always screwing up just when things are going its way. Leaving, I thought Argentina might be--and I say might, without deep-seated conviction--continue to be a good investment for a few years (it certainly was in 2004 and so far in 2005 as it bounced off the bottom). But I still suspect the country will screw things up at some point down the road, as they did for at least the last century. Thinking more, maybe Japan is another example. My long-term bearishness on Japan remains because of their demographic crisis and their opposition to immigration, but I think they could be in an upswing in the short- to medium term that will put off their day of reckoning for a while. These short-term views on Argentina and Japan aren't put forth as unique insight; I largely am just pointing the recent positive results in their financial markets. Where I differ from the markets might be that I think those two countries are just having a positive interlude without the negative long-term picture having changed.

Finally, with most countries we visit, I don't see myself returning right away, as--even if I liked the country--our visit satiates my interest for the time being. With South Africa, our visit stimulated my interest and I would like to spend more time there. If only it was not so far away!

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November 27, 2005

12:43:20 am Southern Africa Diary II  

Friday, November 25, 2005 - Botswana and Victoria Falls, Zimbabwe - Overcast, occasional light rains, 70s.

I'll pick up things here again and later Deanna will post on our six-day safari in Botswana, which was incredible--one of the best parts of our year-long tour. After our last safari drive in the morning, we had a charter flight from our last camp to Kasane, Botswana. From there, we were driven about an hour to Victoria Falls, Zimbabwe, not including 20 minutes to cross the border. We stayed one night at the Victoria Falls Hotel, a British colonial hotel that opened in 1904. I had heard mixed reports that the hotel has declined due to all of the problems in Zimbabwe, but we wanted to stay there, as it is only a 10-minute walk to the falls. While there did not seem to be many guests, and there were some occasional lapses--mismatched silverware at the pool cafe (of course this was Deanna's observation and not mine), overall, the standards are still high and I'm glad we stayed here. The hotel is dripping with character--old framed British travel and propaganda posters line the hallways, extolling the virtues of their African colonies, while mounted wild game trophies would make Teddy Roosevelt feel right at home.

I read parts of a geopolitical book from their library on travel through Europe in 1948 (John Gunther, Behind Europe's Curtain, published by Hamish Hamilton, London, 1949. Other books by the same author include Inside USA, Inside Latin America, Inside Asia, and Inside Europe). It offered a fascinating look on geopolitics in the immediate post-World War II period where it was unclear just how things would turn out in the 40+ year Cold War that was just starting. While today we have the advantage of knowing how history unfolded, we have largely forgotten just how uncertain things were at the time, and how easily an alternative history could have occurred. For example, Italy was in deep poverty, with a high birthrate, and a communist takeover quite possible. Mayors of many Italian cities were communist, and communists controlled about 30% of the seats in parliament. Trieste, on the border of what is now Italy and Slovenia, was divided and belonged to no country. American and British troops controlled one part of the city and Yugoslavian troops controlled the other part, and it was unclear if its future would be on the east or west side of the Iron Curtain. (Churchill's Iron Curtain quote, which I paraphrase here as best I can remember it, was "From Stettin [sp?] in the Baltic to Trieste in the Adriatic, an Iron Curtain has descended across Europe.")

Europe recovered of course, in large part due to the US-led Marshall Plan. Italy did not go communist, nor did Greece, or Turkey--other countries in danger of a red future at the time. President Truman, not that highly regarded in his own time, gets high marks today as we realize in hindsight just how dangerous the post-war period was and how well his administration handled things. Italy's birth rate is now too low, ironically, and its population is projected to fall in coming decades. It is prosperous today by post-war standards and Trieste has been a fully Italian city for many decades. The future turned out better than was reasonable foreseeable at the time of the book's writing. The future is often this way--something to remember whenever things like bleak in the here and now.

Victoria Falls were the reason we traveled to Zimbabwe and they were worth seeing. I believe they are the second largest falls in the world behind Iguasu Falls on the Brazil/Argentina border, which we visited over New Year's 2002/2003. Both dwarf Niagara. Of the two, Iguasu are better, but both are spectacular.

Saturday, November 26, 2005 - Victoria Falls, Zimbabwe; Livingstone, Zambia; Johannesburg, South Africa; Cape Town, South Africa.

A traveling day. A van picked us up at 11 AM to take us across the border to Zambia to fly out of the airport at Livingstone, the first town over the border. We flew Nationwide Airlines to Joburg, then South African Airlines to Cape Town, arriving around 8:30 PM. We stay four nights at the SAS Radisson in Cape Town, overlooking the ocean.

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March 19, 2005

10:01:49 pm Final Observations on South America  

March 18, 2005

In our last week in South America, we began a post summarizing our experience there. We never finished it then, but will attempt to do so now as we are about to depart New Zealand.

South America is an unknown continent to most Americans, who never think of going there. We encountered more Europeans than Americans, the former being more adventurous in their choice of travel destinations. We do think as a generalization that South American countries do a poor job of promoting itself as a travel destination to English-speaking Americans. Europe and Asia are more front of mind to Americans desiring a foreign continent vacation. Europe is an understandable destination given the heritage of the US, but Asia is further in distance and history, although closer to us economically. We do think Asia has a slight lead over South America in prevalence of English and availability of tourist facilities that match US expectations. This lead is only slight at most, however, and may be more in our imagination than real. Anyway, this slight lead ought is counterbalanced by the closer location of South America.

Whatever the reason why Americans don't go to South America in large numbers, they should. The array of fantastic natural and archeological sites to see tops North America in our opinion. Most Americans could name the Amazon (which we have not been to) and some are familiar with Machu Picchu, but no one seems to know Iguasu Falls (the best waterfalls in the world, making a mockery of Niagara); the Calafate Glaciers (Alaska and New Zealand's glaciers do not begin to compare); or the beauty of the Lakes Region of Chile and Argentina. (As an aside, we observe that New Zealand, which we consider to be one of the most consistently beautiful and outdoorsy countries, has nothing that matches the beauty of Iguasu, Calafate, and the Lakes Region.) The landscape of Rio is as beautiful as any city in the world, but most Americans will see San Francisco and think they've seen it all. The Galapagos Islands (and to a lesser extent Easter Island) are far away places that many Americans want to go to, but never do, opting instead for more expensive, less interesting, and further away places such as Tahiti and Bora Bora that travel agents push them to (never underestimate the power of exotic sounding name, which, when combined with a personal recommendation, becomes irresistible). To top it all off, South America is cheap, cheap, cheap--one of the most affordable places you can travel to. So go.

One question that intrigued us throughout our travels in South America is why North America has prospered while South America has not, given that both were settled in the 16th Century by European powers. The early advantage was to South America over North America as it had more developed indigenous cultures and was generally settled a bit earlier by the Spanish than was North America by other Europeans, primarily the English. So what went wrong?

We have identified three contributing factors. There are likely other factors we've missed and we will not attempt fully justify the ones we've identified, but in any event, here they are:

- Simply stated, the English were better colonialists than the Spanish were. While each kept colonies for economic gain, the English did more to develop the colonies and make them a better place to live in terms of education, infrastructure, and institution building. The Spanish invested little and took much. The best comparison we can think of is actually not in the Americas or even involving the English, but we think it illustrates the point well. The Philippines were a Spanish colony for roughly 400 years and later an American colony for roughly 40 years (the only colony the US has ever had). If you consider the American colonial period in the first half of the 20th Century a surrogate for how the English would have operated, you have a fair comparison of one nation under two different colonial rulers. The Spanish were there for 400 years, but today few people in the Philippines speak Spanish and there are no significant ties between Spain and the Philippines. The one legacy the Spanish left is Catholicism. The Americans in contrast built roads, established mass education, built democratic institutions, and voluntarily handed over power. Today, English is the unifying language of this island archipelago, even though it was not commonly spoken a century ago.

- The pervasiveness of the Catholic Church in Spanish colonial society and government was so great as to be a negative. It did not have a parallel in England, which broke with Rome in 1534, and in the US, which had a clear vision of separation of church and state based upon firsthand experience of religious persecution in Europe.

- The US had figures like George Washington as a role model. He and our other founding fathers generally put the countries' interests ahead of their own and designed a brilliant system of government that properly checked the natural bad tendencies of men in power. South America had a series of those bad men, unchecked, and in power. Instead of George Washington, they had caudillos like Juan Manuel de Rojas of Argentina who lusted after power for personal gain, not for the patriotic good, and did whatever it took to achieve it, crushing all opposition. Rojas ruled Argentina as a dictator for roughly the first 30 years of its founding and set the example for future generations of leaders.

On the last point, it's worth noting that there is a South American figure, Simon Bolivar, who is called the South American George Washington. Inspired by the American Revolution, Bolivar's vision was the confederation of Gran Columbia, consisting of present day Columbia, Venezuela, Ecuador, Peru, and Bolivia. Bolivar and his right-hand man General Sucre (continuing the analogies to the American Revolution, perhaps Sucre could be called the Alexander Hamilton of South America) fought to achieve independence from the Spanish for these countries in the 1820s and then unified them. Gran Columbia collapsed in 1830, though, as leaders of the respective countries could not put aside personal differences and competing ambitions for the greater good. This failure is a stark reminder that it was never preordained that the US colonies would unite and form one great country instead of 13 minor countries that most people in the world would have trouble placing on the map. We forget that the colonies were not unified at the beginning--they were independent, competing, often squabbling, separate entities. We are so fortunate that the politicians of the 1770s and 1780s were able to reach compromise for the common good. Consider what the US and Gran Columbia each might have become had they taken the path of the other.

The Gran Columbian countries today have a population of nearly 120 million, but we suspect its size would be tens of millions higher had they remained united, as European and Central and South American immigrants would have been attracted to the most dominant Spanish-speaking country in the world. Who knows, maybe Mexican migration would have flowed south to the Gran Columbia juggernaut instead of north to the US. With a large domestic market and its language advantage over Portuguese-speaking Brazil, Gran Columbia would be the giant of South America instead of Brazil. Instead, "we are an insignificant country today," said our Ecuadorian tour guide Ruben, lamenting that the Gran Columbia Revolution did not share a common path with the American Revolution. "And you," he continued, "have become the most powerful country in the world."

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March 02, 2005

04:42:42 pm Lakes Region, Chile & Argentina; Santiago Area, Chile  

Puerto Montt, Chile
Tuesday, February 22, 2005 - Wednesday, February 23, 2005
Largest city in the Chilean Lakes Region
City population: 110,000

Bariloche, Argentina
Wednesday, February 23, 2005 - Friday, February 25, 2005
Largest city in Argentine Lakes Region
City Population: 78,000

Santiago, Chile
Friday, February 25, 2005 - Sunday, February 27, 2005
Capital and largest city in Chile
Metro area population: 6 million

Chile Country Background:
Population: 16 million
Per capita GDP: $10,000
Size: Slightly larger than Texas
Currency: Chilean peso, 585 per US dollar
Independence: 1810 from Spain
Language: Spanish

Itinerary
LAN Chile flight from Guayaquil, Ecuador to Santiago, Chile
LAN Chile flight from Santiago to Puerto Montt
One night at Presidente Hotel
Lake Crossing tour (4 buses and 3 boats) from Puerto Montt to Bariloche, Argentina
Two nights at Llao Llao Hotel
LAN Chile flight from Bariloche to Santiago, stopping in Puerto Montt (no plane change)
Two nights at Best Western Majestic Hotel

Puerto Montt Activities
Walking around town
Movie--National Treasure

Bariloche Activities
Llao Llao painting class (Deanna), spa (Deanna), gym (Nick), and pool (both)
Walking around town
Cerro Campanario (peak overlooking lakes--see image gallery)

Santiago Activities
City tour
Museo Historico Nacional
Soccer match: Colo Colo 2 Everton 1
Excursion to Valparaiso and Vina del Mar

The final leg of our South American tour began as we left Ecuador, flew south overnight to Santiago, then took a morning flight further south to Puerto Montt, the Chilean gateway city to the Lakes Region that spans Chile and Argentina. Puerto Montt itself was a disappointment. Situated on a bay of the Pacific Ocean and adjacent to several lakes, it should have been a charming town, but we found it charmless. It seemed unaware that it was a tourist destination, as there was nothing there for tourists. Add to its plainness the ever-present South American graffiti, on the magnitude that you would expect for a city of several million people, not several hundred thousand. Why a town of this manageable a size, that has large inflows of tourists, would allow all of its public areas to be so defaced is beyond us. At this point, after nearly five weeks in South America, we were mentally finished with the continent and ready to move on. Over the next few days, though, the beauty of the Lakes Region would win us back.

So, with time to kill in Puerto Montt before our next day tour, and with nothing really to do, we heading for the mall and the cinema. National Treasure was the only thing playing that we had not seen over the prior 10 days, a movie we had resisted to date for its farcical premise. If our founding fathers really had been in possession of a great treasure, we think they would have used it to finance the army! Funding problems were the other non-military battle during the Revolutionary War and nearly cost us our independence. It was a constant effort to get the colonies to pay anything for the army. We don't think Benjamin Franklin and others would maintain loyalty to the Free Masons while watching the Revolutionary Army nearly be defeated. Anyway, if you can swallow the premise, the movie was entertaining enough, a sort of Indiana Jones adventure on the eastern seaboard.

The following day, we took a series of four buses and three boats to traverse the Lakes Region from Puerto Montt, Chile to Bariloche Argentina, leaving at 8 AM and arriving just before 10 PM. The scenery was beautiful and we think we can describe it best by referring you to the image gallery rather than trying to use words here. The trip itself did not cover as much distance as you would expect, for there was a total of about four hours of downtime during the day. This is a very South American, and especially Argentine, way of organizing a tour. If dinner is typically not until 10 PM or later, why wouldn't you want to spend all day and the evening until then on the tour? Why spend 10 hours on a tour when you can spend 14?

The answer to this is that we would rather spend those four hours at the Llao Llao Hotel in Bariloche, a great hotel by anyone's standard. (We heard the hotel name pronounced many different ways. The Millers told us it's shao-shao, but we also heard jao-jao, which corresponds to how "ll" is pronounced in Argentina; and yao-yao, which corresponds to how "ll" is pronounced by most non-Argentine Spanish speakers. We're sticking to shao-shao until corrected.) As we will have well over 300 hotel nights this year, we stayed in a mixture of accommodations, ranging to date from a bed-and-breakfast room in someone's home in Buenos Aires for $35 per night to splurging at the Llao Llao, a kind of Four Seasons or Ritz-Carlton type resort. This was a nice reward for our last week in South America. Bariloche was everything Puerto Montt was not, although we confess we spent most of our time at the hotel. Alas, we arrived too late the first night for Nick to enter and win the Llao Llao ping-pong tournament. Undoubtedly, he would have crushed all of the pre-teen boys staying with their parents at the resort, with his table tennis skills, finely honed over the years on the Mason ping-pong table.

From Bariloche, we flew back to Santiago, with the plane stopping briefly in Puerto Montt. During our two days in Santiago, we attended our first South American football (soccer) match, between two local teams, Colo Colo and Everton. Apparently, Colo Colo was such a heavy favorite over hapless Everton that not many fans bothered showing up. There were maybe 5,000 - 7,000 people on hand in the heavily partisan Colo Colo crowd. Still they made as much noise as a crowed of 50,000 at a US sports event, chanting, singing, and cheering throughout the match, that Colo Colo won 2-1.

Buying a ticket was a challenge. We knew from our hotel desk clerk that there were five different ticket prices, from roughly $4 to about $17. Not knowing what to expect, and having heard the worst about boisterous South American crowds, we knew we wanted the most expensive seats to avoid the mosh pit atmosphere of the more excitable fans. The ticket booths were spread around the outside of the stadium, each selling only one type of ticket, with no prices posted, and no one speaking English. The ticket takers themselves were behind a black screen so you couldn't see anyone; you just slid your money through a hole and received a ticket in return. It had the feel of a drug deal. Finally, after we caused quite a commotion by canceling our purchase of the wrong ticket, a helpful stadium official got two teenage stadium workers who spoke some English to escort us around to the other side of the stadium, where we were able to purchase the tickets we wanted.

Santiago has about one-half the population of Buenos Aires, appropriate as Chile has about one-half the population of Argentina. Each city dominates its country as the financial, cultural, transportation, and political center, although the Chilean legislature was relocated to Valparaiso, about 90 minutes away, when it was reconvened in the 1990s after Pinochet's rule. The executive and judicial branches of government remain in Santiago.

We took an excursion to Valparaiso and Vina del Mar, twin cities that have nothing in common. Valparaiso is a faded port town that peaked in the 19th Century and then took one economic body blow after another. First in the late 1860s, the US transcontinental railroad opened. This changed the quickest trade route from the east coast to west coast in the US from shipping around Cape Horn, South America (with a stop in Valparaiso) to rail through Chicago, Omaha, Salt Lake City, and San Francisco. Then in the early 1900s, the Panama Canal opened, so remaining shipping traffic could bypass South America altogether. More recently, a major container port opened just south of Santiago, diverted most of the Chilean container ship traffic away from Valparaiso. Valparaiso is slowly rebounding now, as the relocation of the legislature has helped the city economically, but overall it remains a poor place, and a good example of how trade flows can change suddenly and create new winners and losers. The suburban fools of Chicago who resist O'Hare airport expansion would do well to take note of this lesson, for just as Chicago displaced St. Louis as mid-America's transportation hub in the mid-1800s, so too are Atlanta and Dallas vying to replace Chicago, with its NIMBY suburban mayors.

Vina del Mar is the main Chilean seaside resort. It is somewhat similar to Punta del Este in Uruguay (and probably to Mar del Plata in Argentina, which we did not visit). The differences seem to us to be that 1) Punta del Este is nicer and 2) Vina del Mar and Mar del Plata attract primarily domestic vacationers from their respective countries, while Punta del Este attracts vacationers from throughout South America. Vina del Mar was nice enough, revered in Chile as the place to be, but not outstanding to an American eye, again due in large part to graffiti. The graffiti was not as bad as in Puerto Montt, but still way too much for a supposedly upscale resort town. Societal acceptance of this continues to baffle us, especially as there is money to employ people to sweep the streets. We could tolerate a few more gum wrappers on the sidewalk if those workers were equipped with water blasters instead of brooms.

On our (least) favorite subject, we must point out places in South America where someone has taken the initiative to get rid of the graffiti menace. We previously did mention the cleanliness of the public squares in Lima, Peru, which are a virtual graffiti-free zone, but we neglected to mention that there is hardly any graffiti in Punta del Este, Uruguay, nor is there much, if any, graffiti in downtown Guayaquil, Ecuador. Guayaquil has a noticeable security presence in its central area just like in Lima. The most impressive clean public area to us though was the Santiago subway. Santiago itself is as graffiti plagued as Buenos Aires, but each city is able to keep graffiti out of their subways. Santiago though goes one step further--not only is there no graffiti in the subway, the subway is Singapore clean. We asked one of our tour guides about this, and he explained that it is understood that the subway system is a matter of national pride, not to be defaced. We accept this explanation, but we would add that the omnipresent security and litter removal workers throughout the system are also a key part of the answer. Trust but verify, so to speak.

And now a brief, summarized, and opinionated history of Chile. The history of Chile is more similar than different to the other South American countries we described. Independence from Spain came earlier than the others in 1810, but was part of the series of campaigns that saw all of South America become free in the 1810s and 1820s. Since then, like other countries, Chile has had an alternating series of elected governments and military governments. In 1970, Salvador Allende, backed by a coalition of the socialist and the communist parties, was elected with a plurality of 36% of the vote. The left was joyous that they had finally broken through at the ballot box (Allende ran unsuccessfully in 1958 and 1964), and they envisioned a Cuba-style revolution would follow, but this time the result of a peaceful election, not a military conflict. The US was not pleased with Allende, as you might imagine, and immediately began covert action to undermine him. Remember the time--the Cold War was active (and was in fact a hot war in Vietnam), many worldwide still saw Castro as an inspirational leader, and the US feared a second communist government in the Americas.

The Allende government immediately began nationalizing (a polite word for stealing) businesses, especially foreign owned businesses, with no compensation to owners. ITT and Ford for example, lost their assets. (Castro too took over foreign assets, but he did compensate the owners for what they lost). As seems to accompany socialist governments in South America, the Allende administration completely mismanaged the economy. Prices were set at below-market levels, with these government subsidies resulting in large deficits, high levels of debt, and runaway inflation. Civil unrest was high, with strikes and nationalization takeovers initially encouraged by the administration (workers would occupy foreign company offices, not leaving until the government announced their takeover), and then later with anti-Allende demonstrations rising up in opposition to the government. By 1973, internal forces opposed to Allende and external forces, primarily the US, had enough. The military overthrew Allende on September 11, 1973, with rocket attacks against the Presidential Palace, where ultimately Allende committed suicide.

Enter Augusto Pinochet, the military dictator who ruled from 1973 to 1990, but who is now under house arrest for massive human rights abuses and widespread murder of political opponents. Chile's Dirty War during this period had much in common with Argentina's Dirty War of 1976-1983.

The US association with Pinochet is but one of many examples of be careful of who you associate with. The Batista regime in Cuba and the Somoza regime in Nicaragua are two other hemispheric examples of anti-communist regimes that came back to haunt us. To take the counter point, though, we think some of the common criticism of the US goes too far. To our credit, we do tend to change our tune when the regimes we back change theirs. The US did put a lot of pressure on Pinochet to hold the elections that ultimately removed him from him from power. The US also convinced Marcos in the Philippines to give up without a fight when public sentiment turned against him. To be clear, the US was wrong in our opinion to give tacit approval to the coup that removed the fairly elected Allende from power. But we shed no tears for Allende as he was on the wrong side of history, associated with a since discredited political movement, communism, that has caused great human suffering throughout its short history. His administration provided legal sanction to morally illegal theft of billions of dollars of assets.

We think much criticism of our former alliance partners tends to forget context at the time and has a static view that how someone turns out should have been foreseeable years or decades ahead of time. By this thinking, we should not have allied with the Soviet Union in World War II, because Stalin had and would purge millions of his own people, and would initiate a Cold War against us. Or we should not have funded opposition to the Soviet invasion of Afghanistan because one of the rebels would turn out two decades later to be Osama Bin Laden, who used his skills gained fighting the Soviets against us. A present example might be General Musharraf of Pakistan. We have no doubt this guy has more than a few skeletons in his closet. Some day, by one means or another, he won't be in power, and you may well hear a lot of bad things about him. But today, he has been one of our most beneficial allies in defeating terrorism and we believe the US is a safer place than it would otherwise be if he were not cooperating with us. So whatever comes out later, we are appreciative that he is an ally right now.

Our point is not to give carte blanche to all US action, but rather to illustrate that in present-day context, actions are driven more by what's pragmatic now versus what will look good a few decades hence with present-day context is forgotten. Too frequently foreign criticism of the US and US domestic criticism, primarily from the left, can only see one side, the latter-day side, of an issue. Having said that, there are lines not to be crossed and occasionally we've crossed them, probably fewer times proportionally than other world powers, but nevertheless we've made plenty of mistakes. Working to overthrow Allende through military means rather than through the next election was one of them.

The Pinochet case took an interesting turn in 1998. Although defeated in elections in December 1989, he remained head of the army until 1998, and after that became a senator for life under the constitution. So even as the abuses of his regime were being uncovered in the 1990s, his active presence made the government was reticent to prosecute him. In October 1998, during a routine trip to London, he was arrested unexpectedly in a case that put civil libertarians in an awkward position of defending a man they hated for his human rights abuses. A Spanish magistrate requested that British officials detain him as they sought to prosecute him for murders committed against Spanish citizens. Britain complied with the arrest, but then struggled for what to do next. Clearly, Pinochet was a bad guy, deserving trial and punishment. But to extradite him to Spain would be to establish a precedent of allowing one country to violate another's national sovereignty. To take an event that happened two months before Pinochet's arrest, should the UK comply and arrest Bill Clinton on a future visit if a Sudanese court wanted him extradited for the August 1998 bombing of a Sudanese pharmaceutical factory? Clearly no, once opened, allowing one country to extradite officials from another country could be a never-ending Pandora's box of tit-for-tat politically charged retaliation, with politicians potentially unable to leave their own borders. If you think this is exaggerated, note that Donald Rumsfeld recently held off visiting Germany until the German government gave its assurance he would not be arrested upon arrival.

The ultimate decision was a wise one we think. After 16 months deliberation, Britain decided that Pinochet's declining health made him too sick to stand trail and allowed him to return to Chile in January 2000 provided that he remain under house arrest, and if ever he recovered he must be extradited to Spain.

This fear of losing national sovereignty is why the US opposes the international criminal court. One only has to look at the UN, which at times seems a parody of itself (let's put Libya in charge of the human rights committee!), to see why the US fears a global political body deciding judicial matters affecting US citizens. Again, the US gets a lot of criticism from the world for its position, with little attempt by the criticizers in our view to understand the US position or to address our legitimate concerns. Isolationism today seems to be defined as correctly pointing out flaws in a proposed system that no one else wishes to see.

Despite its terrible human rights record, Pinochet's government generally ran things well economically, and for the last 25 years most of the ink the press has written on positive South American economic policies has been written on Chile.

Most notable, at the beginning of the 1980s, Chile privatized its social security system, one of the first (the first?) of over two dozen countries worldwide with private social security systems, a fact you may not hear from US social security reform opponents. A recent press report we read on Chile's private social security system gives it a mixed review. Investment returns have exceeded projections, but somehow payouts are lagging. At first blush, that does not make sense, and the non-financial press seems content to point out the problem without trying to understand or explain it, so we are in the dark as well. The story hints at high fees, which could be a partial explanation, and one that's fixable for future generations. We would like to know more about this.

One anticipated side benefit of privatization of social security that does appear to have materialized, although we have not seen it quantified, is that the pool of funds has created greater investment capital for Chile, and the economy has advanced beyond what it would otherwise have done. As a purely anecdotal observation, Chile did seem a bit more modern and more vibrant than its closest neighbor Argentina, even if Argentina still has a slight lead in terms of per capita GDP. Chile's more stable economy has spared it from economic collapse over the past few decades and resulted in a stronger currency. Fortunately, our experience in Torres del Paine of extremely high prices was limited to that remote area. Overall, Chile is still definitely less expensive than the US (although an occasional price will approach US levels), but definitely more expensive than the rest of South America. One example, the price of a movie: $9-$10 in Chicago, $5-$6 in Chile, $3-$4 in Ecuador.

There were some limited signs of new real estate development in downtown Santiago, something we generally did not see in the central parts of other South American cities. South American cities are generally old--their 500th birthdays will be occurring in a few decades--so the central areas are crowded with narrow streets. As a result, many (not all) Spanish-founded cities have developed a new business area away from the original city center at some point after World War II, either in 1950s, 1960s, 1970s, or 1980s. The example we know best is in the Philippines (obviously not in South America, but nonetheless a Spanish colonial city), where Nick lived for one year in Makati, part of Metro Manila, but about 30 minutes away from the original city center. All of the foreign banks, the stock exchange, and many of the shopping centers are in Makati, not in downtown Manila. A difference from the US though, is that the new business districts in
Spanish colonial cities cannot quite be called suburbs as they are still dense, and the old central areas even if somewhat run down, have retained their vibrancy in terms of people traffic. Anyway, it is unusual to see much private development in the central areas and Santiago did have some of this, mainly residential.

Nick expected that Chile's pro-growth economic policies over the past few decades would have resulted in greater degree of foreign investment than what he observed. There is foreign investment to be sure, but he expected the American and English presence to be greater. For example, in all of Chile, he only found one foreign language newsstand, and the papers it sold were anywhere from two to seven days old, sold at prices many multiples of the cover prices. For example, you could buy a week-old Miami-edition of the Miami Herald for $US3 in Santiago, whereas in dollarized Quito, Ecuador, you could get the international edition of the Miami Herald on the same day of publication for $US0.75. In Buenos Aires, the daily English language Buenos Aires Herald (no relationship to the Miami Herald) covered world news thoroughly and was available for about $US0.50. Most large foreign cities have a locally edited English language paper like this once they reach a certain level of economic development. Shanghai, China for example has two. However, there appeared to be no way to get same day printed English language news in Santiago, the one exception being the Santiago airport VIP lounges (but not the airport newsstands). This was rather surprising, and indicates that while Chile has come a long way, it still has a long way to go to become integrated more fully in the world economy. Thanks to the airport lounges, though, Nick is now packing The Wall Street Journal, Financial Times, New York Times, and Los Angeles Times. One does long for news from home.

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February 09, 2005

06:30:44 pm Buenos Aires 2nd Time  

Buenos Aires, Argentina
Friday, January 28, 2005 - Sunday, January 30, 2005

Itinerary
Aerolineas Argentinas flight from Calafate, Argentina to Buenos Aires, Argentina, with a stopover (no plane change) in Trelew / Puerto Madryn (airport for Peninsula Valdes)
Two nights at Recoleta Guest House

Activities
Laundry
Updating web site
Stocking up on toiletry items
Buying English/Spanish dictionary
Goodbye dinner with Millers, Gian-Reto Cavelti

From Patagonia, we stopped in Buenos Aires for approximately 32 hours before leaving Argentina and heading north to Peru, Bolivia, and Ecuador. We spent our one final full day in BA mainly on domestic items such as laundry, shopping, and of course web site updating. On this our second visit to BA, we came to appreciate it even more. We were able to do all of the domestic activities listed above easily within walking distance of where we were staying. We discussed and agreed that if we had to choose a place to live for one or more years from among those we had visited to date in South America, BA would be the place. Its size and relatively modernity and sophistication made it the best choice for living. For a vacation, we'd prefer the beauty of Patagonia or beach lifestyle of Punta del Este, but to live our lives year-round, BA appears to be the best choice.

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