The Falkland situation

February 16, 2012

Quién posee las Islas Malvinas?

Argentina has voiced increasingly potent claims of ownership concerning the Falkland Islands, or Islas Malvinas as they are known in Argentina.

I recently read that American actor Sean Penn has slammed the UK inferring that the their position wafts of  “archaic and colonialist ideology..” But what is this increasingly heated toing and froing about? I am British, yet I know nearly nothing about the context of the argument (thanks State education), so I’ve decided to do a little research myself.

The Falklands has an interesting, complex, and long history.

1592 – Most people believe that the Islands were first sighted, other than by American Indians, by English explorer John Davis.

John Davis

Source: communigate.co.uk

1600 – Sebald de Weert, a Dutch captain and vice-admiral of the Dutch East India Company was recognised for accurately plotting the Falkland Islands.

1690 – The Islands were named The Falklands by John Strong, an English captain on route to Chile. The Islands were named after Viscount Falkland (Strong’s boss), who was the Treasurer of the Navy.

1713 – Treaty of Utrecht ratified Spain’s control over its (colonised) territories in the Americas, including the Falklands.

1764 – The earliest territorial claim to the Islands actually came from the French, by Antoine Louis de Bougainville. This was also the period of the first recorded settlement on the Islands, which the French named les Malouines.

1765 – Commodore “Foul-weather Jack” lands on the islands and plants the Union Jack, in a possible attempt to reaffirm possession for the Crown likely to be based on grounds of Davis’s prior discovery. British settlements established on Saunders, which is one of the outlying islands. The next year the British colonials discover the French colony.

1767 – The Spanish were angered at France’s and England’s claim of the Islands. The French were allies of Spain, and as such, ceded ownership to the Spanish after a ‘small’ reimbursement. British forced from the Islands three years later.

1771 – Conventions made within the Treaty of Madrid conceded the Spanish claim to Britain. Officially, the Islands did not become a British colony until 1833.

1816 – Prior to the British colony being established, the islands had reverted to administration de facto by the vice-royalty of the River Plate, an administrative entity consisting of representatives from the Spanish empire from present day Argentina, Paraguay, Uruguay and Bolivia. This entity claimed independence from the Spanish Crown during the time when Spanish colonies were in revolt against Spain.

Falkland Islands

Source: pennymead.com

1825 – Britain and the Argentine Government signed the Treaty of Amity, Trade and Navigation. No mention of the Falkland Islands.

1829 – A Buenos Aires resident (originally French and German connections), Louis Vernet, an interesting character, undertook a private venture and established a colony at Puerto de la Soledad. Vernet was then named unpaid Commander of his concession by the Buenos Aires Government.

1831 – 5 years after establishing his colony on the Islands, Vernet seized three American sealing ships, in an attempt to control fishing of the surrounding waters. As a response, America sent the USS Lexington to the region and the vessel destroyed Vernet’s colony at Puerto de la Soledad, and the remaining inhabitants were said to have left on the Lexington. America then proclaimed the Islands ‘free of any government’.

1833 – Since this time, British administration has remained unbroken.

The history continues from here, and if you’d like to read on please see this detailed historic timeline. It is important to note that the five years between 1829-1831, includes the only significant Argentine settlement, and appears to be, as Michael Kuczynski put it in his FT Comment article, “the fons et origo of Buenos Aires’ claim to the islands.” However, it is abruptly apparent the history makes the situation far more complex.

Escalating tensions.

Cristina Kirchner has recently claimed that the UK is “militarising the South Atlantic, one more time” in reference to the War in 1982. It was actually the military junta of Argentina, led by General Leopoldo Galtieri that instigated the War in 1982, in an effort to improve their waning public popularity, mainly attributed to the dire economic situation of high inflation and low growth. Even the Peruvian Government attempted to dissuade the General from launching a military attack based on the foreseeable reaction from the UK.

General Leopoldo Galtieri

Mario Menéndez (right) with Leopoldo Galtieri, the President of Argentina, in April 1982 on the Falkland Islands. Source: enotes.com

Is this about oil?

Some commentators believe that the issue of oil exploration is a key driver of the current Argentinian position. According to sources, there are significant oil reserves in the surrounding waters of the Falkland Islands, and even if the four British oil interests aren’t officially promoting this fact, the Argentinian’s firmly believe that this is the case. Ownership, or even partial-ownership of these exploration rights would, without any doubt, significantly bolster Argentina’s economic growth.

What about the inhabitants?

The Falkland Islands population of over 3,000 is predominantly of British descent, and these inhabitants have stated that they wish to remain British. In fact, there are even more Chilean’s than Argentinians living in the Falklands, and we are likely to hear Chile’s official position on the situation soon as David Cameron, the British PM is planning a lengthy phone conversation with his Chilean counterpart to discuss this issue.

Argentina and their spokesperson, Sean Penn, are criticising the UK for exercising colonial behaviour, but the act of forcing control by one nation over another’s inhabitants is the definition of Colonialism. This is exactly what the Argentina’s objective appears to be, and this seems somewhat hypocritical. One article, which I found rather amusing but also drew strong parallels from, likens Argentina’s current rhetoric to that of forcing Alaska to become part of Canada.

Sean Penn and Cristina Kirchner

Source: thesun.co.uk

I found the following excerpt from PiCA, a Global Research Organisation, which sums up the situation neatly from an International Law perspective.

“The dispute over the Falkland/ Malvinas Islands is interesting and complex, with no obvious answer within the realms of international law, hence the fact that is it still an unsolved dispute after so many years. Even if the British are indeed colonising the territory there were no peoples being subjugated as there were never any indigenous people- hence it is not really colonization which traditionally means usurping the culture and rights of indigenous people, as was done for instance by the Australians to the aboriginals. This suggests that the legal formulas do not deal with a case where in effect there are no indigenous peoples and thus it cannot be compared to British, Spanish or Portuguese, to name but a few examples of Colonialism in other parts of the world…  Furthermore, the culture, language and loyalty of all the people on the islands are clearly British and despite the arguments which have been provided against their self- determination, it is a factor that simply cannot be ignored.  Thus, it appears as though there is no clear legal framework to solve this case which is why we still see the issue of these islands in today’s news, so many years later in 2009.”

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Greece 2011 vs Argentina 2001

November 21, 2011

Unless you have been living in a cave for the last year, you would know that there is quite a significant debt crisis festering in Europe. It is not just worrying for European nations, but other markets know that contagion is likely to reach their shores if action is not swiftly taken. The inter-connected nature of European finance is a contributing factor to the obvious challenge of dealing with this situation; no action can be made independently because of the inevitable repercussions on other countries.

European debt

European debt

So what to do? The present European captains (France and Germany) have done little to assuage concern, and are at loggerheads on the best way forward, much to the annoyance of key institutions and other countries. This post should hopefully give you some food for thought on what could potentially happen by using the Argentinian economic crisis as a case study.

In 1999, Argentina was feeling the brunt on several fronts: GDP was falling; the US-Peso currency peg had made exports uncompetitive; and the Country was haemorrhaging capital as a consequence of the Asian financial crisis in 1998.

In financial strife, Argentina arranged a contingency loan from the IMF worth US$7.4million, but not even this could save the country from its huge budget deficit and public debt. All these factors just fuelled market uncertainty, and things began spiralling out of control.

The government enacted Corralito, which froze a substantial number of bank accounts held by the Argentinean people. This resulted in bloody riots, and some Argentinians are still chasing the money they saved over 10 years ago. In 2002, the artificial currency peg was scrapped and Argentina floated the Peso. This resulted in a swift devaluation, and a loss of 70% in total value of local funds, as well as a steep increase in consumer prices.

How is this relevant to the situation now? Well you may be able to see some similarities in this story with our current predicament, but another comparison can be seen in government bond rates. Bond rates are a good indication of the level of confidence in the entity issuing the bond, and clearly represented the angst being felt in Argentina during the crisis. Could our current bond rates predict the same fate?

Bonds are basically IOU’s. The yield of a bond (the % ‘coupon’ rate the buyer is quoted) is the interest you are paid for holding the bond, and this rate is also inversely related to the bond’s current price. This means that higher the % quoted, i.e. the coupon rate, the riskier the investment. Bonds are like most investments, at the outset there is a price quoted, but markets fluctuate and so can your investment.

Greek and Argentinian bonds

Greek and Argentinian bonds (via Hiddenlever.com)

The graphs above show some worrying similarities. Furthermore, Italian and Spanish government bonds are also experiencing turbulence, and it is likely this will continue until the Euro zone begins calm market fears.

So what happened in Argentina? Well the country partly defaulted on its external debt in 2002 (about US$93million). Since then, the government has made significant attempts to bring itself back to health. According to figures supplied by the Argentine government, the country has seen strong economic growth over the last several years, but there are some criticisms of the figures provided. So can we foresee what will happen in Europe based on this previous experience?

Like Mark Twain once said: history does not repeat itself but it does rhyme.


US-Colombia Free Trade Agreement to make waves in 2012

October 16, 2011

It is an exciting time for Colombia, the third largest economy in Latin America. After several years of procrastination, the US finally ratified the US-Colombian Free Trade Agreement (FTA) on Wednesday 12th October. The agreement is intended to come into force in the first half of 2012. (See this and this for an overview of the agreement)

This agreement came as a bit of a surprise to Colombia and holds exciting prospects for the country’s economy; the country has one of the lowest exporting rates out of all the Latin American economies. With Colombia’s unemployment rate around 10%, and optimistic forecasts for the country’s continued growth, this agreement will be very important for Colombia’s future.

The ratification of this trade agreement is a strategic move by the Obama administration. Unemployment in the US is currently at 9.1%, and the country is forecasted sluggish growth over the coming years. This depressing state of affairs appears to have galvanised the administration to push this trade agreement through, as well as others, including ones with South Korea and Panama.

The FTA is forecasted to create jobs and numerous benefits for both the US and Colombia. The Office of the United States Trade Representative goes into some detail on a number of key benefits here, thorough analysis of benefits here. I have highlighted some below:

  • US exports to Colombia forecasted to increase $1.1 billion
  • Access to robust services market – US service providers will be granted new access to Colombia’s $166 billion services market
  • New opportunities for agriculture – Agricultural tariffs for US farmers will be reduced, and eventually removed, opening up new business opportunities to both American and Colombian farmers
  • Galvanise the industrial export market – Industrial tariffs for US exports range from 7.4 to 14.6. 80% of all industrial exports will become duty free with immediate effect, and the rest will be phased out over the following decade
  • Greater protection for Intellectual Property rights – Colombia will improve level of standards for IP protection, closer in line with US and international standards
  • The Colombian FTA will result in a $2.5 billion increase in the US GDP
US-Colombia FTA

For the number of supporters the agreement has, it also has an equal number of critics. Indeed, there are a number of potential drawbacks to the US-Colombia FTA as well. In addition, previous FTAs have also drawn criticism. The North American Free Trade Agreement (NAFTA), for example, has been criticised for increasing the US deficit, which has led to job losses within the States. If you’re keen on the subject read Joseph Stiglitz’s, Globalization and Its Discontents, which gives a fascinating insight into the challenges, failures, and often huge bias’s of US-led free trade initiatives. In this respect, Colombia must be cautious when moving forward with the agreement, and ensure that it works collaboratively with the US, and maintains an open and frank dialogue on related issues.

US Trade Deficit

A nice visual of the US trade deficit

There is a myriad of considerations to take into account for the successful implementation of the US-Colombia FTA. Take security and human rights abuses for example, which have been high on the agenda for both the previous Colombian president, Álvaro Uribe, and the incumbent, Juan Manuel Santos. Colombia’s record for human rights abuses and attacks on trade unionists is worrying. The exceptionally high number of trade unionist murders has grown over recent years, and is showing no sign of abating. Despite mixed views on the progress made by Colombia’s Democratic Security Policy, which is supported by the US, this specific issue is being tackled as one conditional facet of the FTA’s implementation by Washington. (Progress and summaries can be seen here)

Opening up the Colombian economy to increased levels of competition from the US does also have the potential to do a great deal of harm to vulnerable sectors within the country. Agriculture is a significant area of concern for Colombia in this context. Colombia’s agriculture minister has warned that many small businesses are not ready for the impacts the FTA will have, and are not in a strong enough position to effectively compete with similar businesses based in the US.

Under the Uribe presidency, a programme to subsidise these small enterprises was initiated for the sole purpose of counteracting concerns about competition from American farmers. Unfortunately for Colombia, the agriculture minister at the time, Andrés Felipe Arias, was found to have diverted much of this financing to his own party supporters, and was consequently jailed for this behaviour, which he adamantly denies.

Andrés Felipe Arias

In addition to jail time, Andrés Felipe Arias has been banned from public office for 16 years

The issue of corruption is not just a problem Colombia faces alone, but is prevalent across the majority of South and Central America. Transparency International’s Corruption Perception Index shows annual figures for the levels of corruption by country. The index shows Colombia comes 78th out of 178 – the higher the position, the more corrupt. Considering the UK and the US come in 20th and 22nd, respectively, there is still much room for improvement.

On paper, the US-Colombia FTA appears to be a win-win for both parties. With the possibility of the Obama administration being replaced in the near future, the agreements sustainability remains in the hands of the controlling party, and primarily, in the support of the US people the agreement will benefit.

The FTA’s long-term survival is not a certainty; its sustainability depends on its success. This I am hopeful for. The benefits for Colombia will not just be confined to US-Colombian relations either, some say this trade agreement will be a stepping stone for Colombia to open up its markets to other global economies and regions. With this in mind, let’s hope both sides take it slow and iron out all the creases as they go.


German Peruvian

September 23, 2011

I watched a short documentary last night with Ben Fogle and Hugh Dennis (the latter is from that awesome show Outnumbered). The two travelled a historic route through the Andes in search of the lost city of Constitución, which was once destined to replace Lima as the capital of Peru.

Ben and Hugh drove a 4×4 over treacherous terrain in search of the Ciudad de Constitución,  which was President Fernando Belaunde Terry’s vision of a new Peruvian capital. The town was to be located at the geographical centre of the Country, deep in the rainforest. Fortunately, the plans never came to fruition, and all that now remains is an extremely long and muddy road through the jungle, and several buildings. Most satisfyingly, the remnants of the artificial capital are now populated by the indiginous tribes whom Belaunde Terry evicted to make way for his grand vision.

Although Constitucion’s history is interesting, I was more surprised by a stop the duo made along the way at the town of Pozuzo. The history of this town is incredibly fascinating. To keep in short, in the mid-1800’s a group of Austrian and German migrants left Antwerp, in Belgium, for a new life in Peru. Quite a while later the group arrived at the coastal city of Amberes. 300 of these migrants left the Peruvian coast spending the next two years fighting their way through dense and deadly rainforest, until they reached Pozuzo on July 25th in 1859. Sadly around half of those whom attempted this feat died, but those who did remain, firmly established themselves as an Austrian-German-Peruvian colony, which remained completely isolated from the outside world for the next 120 years.

The town has kept its strong Germo-Austrian character (see the Church in the picture), and has now developed into a cultural hybrid of a town which actively celebrates its diverse heritage. Pozuzo is now firmly established on my list of places to visit.


Colombia and its culture

February 24, 2011

As part of a culture class I took for my Master of Management degree I put together a Colombian cross-cultural business guide. The guide provides insights into Colombian and Latin American culture and delves into how these cultural nuances can and do impact business practices. The guide was written with Australian businesses in mind, but the guide is still extremely relevant for other western cultures. The guide was developed through my own research, one part of which involved speaking to a previous Honorary Consul to Colombia, Angus Bartlett-Bragg, and discussing his extensive experience in LATAM.

I have a personal interest in all things Latin American and wanted to use this assignment to explore some of the issues that Colombia has been faced with in the past and face still, and how the business environment over there has developed in paralell with these challenges. Colombia has made leaps and bounds in the last few decades and I found much evidence of this. The business environment is now reaping increases in foreign investment and continues to grow, the Country’s crime rate has been challenged by security reforms and a proactive security force, and Colombia is slowly but surely shaking off the stigma which it was once stuck with.

I hope you find my guide of use.


Social Business

November 30, 2010

Earlier this year I attended a presentation by Anne Bartlett-Bragg from Headshift. She had been invited to present to my class by my programme director, Nick Wailes (i’m currently studying for a Masters at Sydney Uni). AnneBB decided to present to us on the subject of managing our personal brand. I found the ideas she was suggesting completely eye opening. The underlying theme was that we (graduates, well anyone really) can leverage social media, such as Facebook and LinkedIn, to enhance our recruitment prospects for the future. I’m not going to lie. The prospects took me by suprise.

We all had Facebook. Some of us had LinkedIn. We were told about how recruiters now look into our online profiles to find out more about us as a potential employee. We’ve all heard those horror stories from Facebook about the employer who discovers the staff member who was ‘ill’ was actually out partying! (see this blog for some more examples). But, to have someone explain to us the benefits of actually realising that these online spaces form your own personal brand really brought the importance of social to the forefront of my mind. Not to say that there wern’t those more critical to the social phenomenon. But by the end of the presentation there were definitely more advocates than critics.

After the presentation I managed to grab AnneBB and I told her about how interesting I found what she had to say. Luckily for me, around a month or so later, after a trip to the Philippines, being hospitalised with dengue fever, an infection and enlarged liver (probably worth a separate post), I was interning at Headshift.

I spent the winter being immersed in the workings of a social business consultancy, and what striked me then, and still strikes me now, is how invaluable the social trends are to business. Similarly to the presentation AnneBB gave to my class, in the business world there are critics and there are advocates. The main problem is the preconception a number of managers have on social tools being for the personal use of individuals at home and completely inappropriate for work. From my experience so far, in some cases the only exposure some clients have had to these tools are seeing their children chatting with their mates on Facebook, or reading a news article about Twitter in the Sydney Morning Herald.

This preconception of what benefit social tools can have for business is wrong but to some extent understandable. Websites such as Twitter, Facebook, LinkedIn, GoogleReader and so on, are the sole collection of social tools that a large number of people are exposed to. What businesses are beginning to realise is that what is more important is the concept, the flow of information within these sites, the proximity people have with one-another without geography.

I’m still learning about a great deal but what impresses me is the benefit these collaborative ideas and systems can have on organisations. Efficiencies, cost-savings, cross-departmental collaboration and so on.

There are a number of challenges we face now, and new ones we will face in the future, but for the time being I’m happy to say I’m an advocate of social business.


Corporate Pirates?

August 20, 2010

When I asked Google for a definition of innovation, the top result provided a short explanation informing me that innovation is “an invention; a creation (a new device or process) resulting from study and experimentation.” Now I don’t mind this definition, it’s a lot simpler than many definitions I have been exposed to during my time at University. However, more recently I have come across some more interesting terms.

Yesterday, during a discussion with a colleague of mine, I was handed a book by Henry Chesbrough titled Open Innovation. Open Innovation proposes the sensible idea that a firm cannot rely on ideas developed entirely within its own walls. In short, Organisations should reach out from their confining boundaries to obtain innovative resources. This instantly brought to mind an image from War of the Worlds, where the aliens came to earth, wiggled their long tentacles around in manic attack pose, and plundered the Earth of its resources by sucking it dry.

I’m quite aware that this image the book commanded was a little over the top. On a plus note, it did bring back nostalgic memories of watching a War of the Worlds Theatre production in Manchester a couple of years ago, but I digress. I completely agree with Chesbrough’s notion that innovation cannot be defined to the internal environment of the firm. In such a world where knowledge is so widely distributed, ideas aren’t just going to come along, you have to go out looking for them. As such, Chesbrough’s theory is completely relevant to business.

But what tactics can an organisation employ to source out new ideas from the external environment? Can we rely on firms to be ethical about seeking out this knowledge? Could these approaches lead to some degree of conflict? These are all questions I have been churning over in my head over the last day or two. I haven’t yet come to a conclusive plane of thought, but I have had a few thoughts I think worth mentioning.

The main issue I have is with the implementation of open innovation strategies; without a well considered approach, fully fledged open innovation could be considered stealing… swashbuckling pirate comes to mind! What I am referring to is intellectual property (IP). Chesbrough suggested that through open innovation an organisation could legally utilise licenses, joint ventures and IP from other firms. But what restricts them from utilising the knowledge from other groups, rather than simply its competitors and unrelated industries?

Students, for example, are an interesting bunch to consider. What are the ethical and moral considerations an organisation should take if it focuses its energies on obtaining innovative ideas from those studying within the education system? A firm could organises a group of students together and provide an environment where these individuals can bounce ideas off each other. The end product of such a process would be a well developed idea which would ideally be internalised within the organisation, or sold on to the highest bidder. Top prize would be a completely disruptive innovation which the firm could leverage for future rewards.

But where would this leave the students who developed and mind-sparred the idea, and who in essence came up with this innovative spark? Going back to my earlier points, are there moral and ethical considerations a firm should take if it were to perform similar activities to this? Both groups must bring something to the table for such an approach to be successful, but the balance of reward for such an arrangement must be appropriate for the circumstance at hand. Would the firm be perceived as honest facilitators of innovation, or will they be looked upon as corporate pirates?