Solar Power for Africa?

David Wheeler, from the Center for Global Development has been excoriating his old employer, the World Bank, for living in the past and continuing to help fund coal fired energy projects. Here is a graph of the most favorable spots on Earth for solar power generation:

The NRA loses a couple members

(click directly on story to enlarge for ez reading).

So THATS why they're fudging the numbers!

In today's WSJ, Ken Rogoff and Carmen Reinhardt join Angus's "Argentina's in trouble" club.

In doing so, they give a very good reason for why the Kirchner governments have so stubbornly refused to concede that inflation is a problem in Argentina:

Already, a good share of Argentina's debt is in default. What else do you call it when a government that owes over $30 billion in inflation-indexed debt manipulates its consumer-price statistics? Through a variety of crude measures (such as firing its top statisticians), the government is publishing an understated inflation rate that is used for calculating indexation payments.

The official inflation rate in Argentina for the past 12 months is under 10%. But the true inflation rate appears to be at least 30%, according to virtually every neutral source.

I think that maybe the best thing to be in Argentina right now is a pot and pan seller!!

And Tarija makes 4

Now four Bolivian provinces have passed an "autonomy referendum", and the latest to do so, Tarija, holds the great majority of Bolivia's natural gas deposits (which is the country's major export). It is not totally clear exactly what these referenda mean, though the first one in Santa Cruz and this fourth one passed overwhelmingly, but to me the message is that the relatively wealthy and non-indigenous lowland part of the country is not going to go along with Evo Morales and his Andean supporters attempt to re-write the constitution and govern the country in a different way. The implicit threat is that these rich provinces will withhold tax revenues from the central government.

Morales has also agreed to stand for recall in an election this August. Despite his troubles in the Eastern provinces, he is likely to avoid recall. However, as this LA Times article points out, simply holding the election significantly delays any possible vote on Morales' new constitution, which if approved would allow him to run for re-election and likely mandate land re-distribution in the Eastern provinces.

All this political infighting may well simply be the old guard's attempt to ride out Morales' term without losing their current standing/status/wealth while hoping for better treatment from the next president. Here is a previous KPC post on delaying tactics for Evo's new constitution.

Argentina creeps closer to trouble

Last month, I casually tossed out the notion that Argentina may be on the verge of another serious economic crisis. Besides the issues I raised then (inflation, farmer's strike, reserve losses), which are ongoing, it now turns out that the Argentine public debt is 56% of GDP which surpasses the level it reached (54%) at the beginning of the 2001 crisis. And, if you include the amount owed to investors who refused their crisis related haircuts and are suing to recover, the figure is actually 67% of GDP!

Wow.

Plus, Argentina is off the IMF gravy train and is in default to the Paris Club countries for a few billion, so their main source of external funding is good old Hugo Chavez, who has been charging a fairly healthy (13%) interest rate on his dough.

Of course, given that independent estimates put Argentine inflation at over 20%, maybe Hugo needs to think about doubling his rates!!

Sr. de la Torre, I beg to differ!

Guano-mania rages again in Peru!

ISLA DE ASIA Peru— The worldwide boom in commodities has come to this: Even guano, the bird dung that was the focus of an imperialist scramble on the high seas in the 19th century, is in strong demand once again. Surging prices for synthetic fertilizers and organic foods are shifting attention to guano, an organic fertilizer once found in abundance on this island and more than 20 others off the coast of Peru, where an exceptionally dry climate preserves the droppings of seabirds like the guanay cormorant and the Peruvian booby.

But all is not well in the guano kingdom:

While the bird population has climbed to 4 million from 3.2 million in the past two years, that figure still pales in comparison with the 60 million birds at the height of the first guano rush. Faced with a dwindling anchoveta population, officials at Proabonos are considering halting exports of guano to ensure its supply to the domestic market.

Uriel de la Torre, a biologist who specializes in conserving the guanay cormorant and other seabirds, said that unless some measure emerged to prevent overfishing, both the anchovetas and the seabirds here could die off by 2030.

“It would be an inglorious conclusion to something that has survived wars and man’s other follies,” Mr. de la Torre said. “But that is the scenario we are facing: the end of guano.”

Oh Sr. de la Torre, you just couldn't be more wrong. I invite you to come to Washington DC, where I assure you there is no end to the guano!

Is Argentina going to implode again?

Even without the help of the IMF? Jack Chang, in his blog "Inside South America" says maybe so:

Local media report that people are buying up dollars for fear that the peso could slide again and that the government will respond by freezing bank accounts, like it did in the bad old days. Government officials have denied any such measures are in the works, but people don't seem to be listening. The country's central bank recently had to inject $1 billion in dollars into the banking system to counter the bank rush.

Other evidence: In the capital of Buenos Aires, a poll by the Public Opinion Center of the University of Belgrano found that 69 percent of respondents believed another crash was "very probable," with 41 percent believing it could be triggered by inflation.

Which leads to the factors. First there's the protracted battle between President Cristina Fernández de Kirchner and the country's farming sector, the main economic engine here, over higher export taxes imposed on soybeans and sunflowers in March. Farmers have blocked roads and withheld production to protest the higher taxes, and as the conflict drags on, the risk to the economy grows.

Then, there's inflation, which the government says hovers around 8 percent annually but which economists estimate is as much as three times that number. And a more recent factor, the Argentine peso is weakening against the dollar, a decline that bucks the worldwide trend. This morning, the peso was trading at 3.18 to the dollar.

Bloomberg has further coverage of the Argentine farmers' protests and notes that President Fernandez's popularity is falling to de la Rua levels (i.e. getting run out of office levels).

Wow, it seems that the only things worse than the results of orthodox policies in Latin America are the results of heterodox policies in Latin America.

McCain gets one thing right and HRC goes mental!

John McCain had the guts to say he would veto the current farm bill thus making an almost infinite increase in the number of sensible things he's said lately, but Hill's having none of it:


"I believe saying no to the farm bill is saying no to rural America."

"When Bear Stearns needed assistance, we stepped in with a $30 billion package. But when our farmers need help, all they get from Senator McCain and President Bush is a veto threat," Clinton said.

Holy Crap! Do high food prices hurt farmers? I thought low food prices hurt them? Is there anything on this planet that could possibly happen that wouldn't hurt the American farmer?

With moves like this, how could John Edwards not have endorsed her?

Markets in everything: Dromedary Edition

Some things just go together, like roads and serfdom, like Mungowitz and Cheetos, and as KPC readers know, like India and camels!

And now, thanks to soaring oil prices, the bond between Indian and Dromedary is tighter than ever!

Camel demand soars in India

By Jo Johnson in New Delhi

Farmers in the Indian state of Rajasthan are rediscovering the humble camel.

As the cost of running gas-guzzling tractors soars, even-toed ungulates are making a comeback, raising hopes that a fall in the population of the desert state’s signature animal can be reversed.

“It’s excellent for the camel population if the price of oil continues to go up because demand for camels will also go up,” says Ilse Köhler-Rollefson of the League for Pastoral Peoples and Endogenous Livestock Development. “Two years ago, a camel cost little more than a goat, which is nothing. The price has since trebled.”

Market prices for these “ships of the desert”, which crashed with the growing affordability of motorised transport, are rising again as oil prices soar.

A sturdy male with a life expectancy of 60-80 years now fetches up to Rs40,000 ($973), compared to Rs5,000-Rs10,000 three years ago, according to Hanuwant Singh of the Lokhit Pashu-Palak Sansthan, a non-profit welfare organisation for livestock keepers. Entry-level tractors cost around $4,000.

“It’s very good news,” says Mr Singh, whose organisation aims to dispel the image of backwardness associated with camel ownership and tries to promote higher economic returns for breeders. “We had started to see camels, even female ones, being slaughtered for their meat. Now they are replacing the tractor again.”

Ah yes, Mr. Singh, that is very good news indeed.

"the league for pastoral peoples"? "even-toed ungulates"? "little more than a goat, which is nothing"?


People, India and Camels is comedy gold.

What really scares the Iranian Mullahs?

Is it McCain gettin' elected and us stayin' for a hundred years?

Is it the Israelis bombing out their nuclear facilities just before they can make a bomb?

Is it seeing a Sunni Government come back to power in Iraq and starting up another war with them?

Nice tries, but No, No and No.

It's Barbie!!!!!!!!!!!!!!!



I am not making this up!

In the latest salvo in a more than decade-old government campaign against Barbie, Prosecutor General Ghorban Ali Dori Najafabadi said in an official letter to Vice President Parviz Davoudi that the doll and other Western toys are a "danger" that need to be stopped.

"The irregular importation of such toys, which unfortunately arrive through unofficial sources and smuggling, is destructive culturally and a social danger...The displays of personalities such as Barbie, Batman, Spiderman and Harry Potter ... as well as the irregular importation of unsanctioned computer games and movies are all warning bells to the officials in the cultural arena,"

Najafabadi said Iran is the world's third biggest importer of toys and warned that smuggled imports pose a threat to the "identity" of the new generation. "Undoubtedly, the personality and identity of the new generation and our children, as a result of unrestricted importation of toys, has been put at risk and caused irreparable damages."

I would like to make three observations in closing:

(1) what the heck is that guy gonna do with that doll?

(2) I'm pretty sure Iran is NOT the world's third largest toy importer

(3) These are the guys screwing us up in Iraq? Shame on us.

A swing and a miss?

As you know, I love an internet beatdown as much or more than the next guy. However, Rodrik's attempt to put the Turkish hammer on Tyler Cowen's NYT piece is kind of a semi-whiff. Here's Dani:

The "free trade reduces prices" fallacy, yet again. This time the culprit is Tyler Cowen. In his column for the New York Times today, Cowen argues that freer trade in food commodities such as rice would boost global supplies and help reduce prices. He is probably right about the first, but not about the second. The effect of freer trade on domestic food prices depends on whether a country is a food importer or exporter. Freer trade would reduce prices of food (relative to other prices) only in countries that are food importers. Food exporters would experience a rise in the relative price of food, and there is simply no way of escaping that reality.

The economics of what Rodrik is saying are indisputable: if we go from no trade to free trade, the exported good's relative price will rise in the exporting country and fall in the importing country.

However, it's not at all clear to me that Tyler ever says free trade lowers prices for everyone. The closest he comes is in the first paragraph:

Rising food prices mean hunger for millions and also political unrest, as has already been seen in Haiti, Egypt and Ivory Coast. Yes, more expensive energy and bad weather are partly at fault, but the real question is why adjustment hasn’t been easier. A big problem is that the world doesn’t have enough trade in foodstuffs.

So, maybe you could interpret that as being wrong. However, it surely does not say "trade lowers the price of the traded good for everyone", which is the error Rodrik claims he is making.

For me, it's too vague to make any claim about what economic theory or fallacy is underlying the paragraph. As it is the opening of an op ed, I suspect its main intent is to get our attention.

The article is actually about how the lack of free markets, market friendly government policies, and supporting infrastructure in a lot of developing countries can be extremely counterproductive in an ever more interconnected world, using rice as an example.

An increasing percentage of the world’s production, including that for agriculture, comes from poor countries. Over all, that’s good for rich countries, which can focus on creating other goods and services, and for the poor countries, which are producing more wealth. But it can slow the speed of adjustment to changing global conditions.

For example, if demand for rice rises, Vietnamese farmers — who remain shackled by many longstanding regulations of communism — aren’t always able to respond quickly. They don’t even have complete freedom to ship and trade rice within their own country.

Poorer countries also tend to be the most protectionist. To make matters worse, about half of the global rice trade is run by politicized state trading boards.

The reality is that many of today’s commodity shortages, including that for oil, occur because ever more production and trade take place in relatively inefficient and inflexible countries. We’re accustomed to the response times of Silicon Valley, but when it comes to commodities production, many of the relevant institutions abroad have only one foot in the modern age. In other words, the world’s commodities table is very far from flat.

Many poor countries, including some in Africa, could be growing much more rice than they do now. The major culprits include corruption in the rice supply chain, poorly conceived irrigation systems, terrible or even nonexistent roads, insecure property rights, ill-considered land reforms, and price controls on rice.

The ability of a country to grow rice depends not just on its weather, but also on its institutions. Burma, now Myanmar, was once the world’s leading rice exporter, but it is now an economic basket case and many of its people go hungry.

My own criticism of Tyler's piece would rely less on Heckscher-Ohlin and more on Pritchett: In terms of helping the world's poor, freer trade is a drop in the bucket compared to allowing increased labor mobility.

If you live in a country with "corruption, non-existent roads, insecure property rights and price controls" free trade is not going to help you. Leaving will help you. The best thing the rich countries could do for a Haitian or Egyptian would be to let them come and work in the rich world.

How long can this go on?

We are closing in on 4 weeks since the Zimbabwean presidential elections, with no results yet announced. The parliamentary elections didn't go Mugabe's way and they are currently being "recounted". The MDC candidate who in all likelihood won the presidential election is in Ghana, afraid to stay in Zim. And now there's this:

Armed riot police raided the headquarters of Zimbabwe's main opposition party on Friday and detained scores of people in the biggest crackdown on the MDC since disputed elections last month, officials said. Dozens of riot police detained around 100 MDC supporters who were taken away in a crowded police bus, a Reuters witness said. The MDC said 200 to 250 police took part in the raid and they also took away computers used by the election command centre.

At this point, it looks like Mugabe staying in power seems like the most likely outcome of this mess. Father time (Bobby M is 84), seems like the only savior of the Zimbabwean people.

Good Stuff

1. Hey Brazil! Wanna be our personal gas station? Brazil's discoveries of what may be two of the world's three biggest oil finds in the past 30 years could help end the Western Hemisphere's reliance on Middle East crude.


2. Our trade pact with Colombia, Nic Kristof gets it! Some Democrats point out that Colombia’s government has been tied to paramilitary units that kill union members. It was important for Democrats to raise these concerns — forcing the Colombian government to crack down on paramilitaries and prosecute those who murder unionists. But Colombia’s progress has been immense. Assassinations of union members, while still a problem, have fallen 80 percent since 2002. Last year, the murder rate for union members was 4 per 100,000, reaching levels far below the homicide rate for the general public. As she clips flowers in a vast greenhouse, Ms. Reynosa knows that her future depends on access to the American market. She agrees that Colombia has human-rights problems, but she argues passionately that the free-trade agreement is the way to register continued improvements. More trade will mean more jobs and more security and human rights, she argues.

3. Roger Simon lays out Hillary's path to the nomination. A random excerpt: And then, of course, bribe the superdelegates.

Culturing Violence

New NBER working paper by Miguel, Saiegh, & Satyanath entitled "National Cultures and Soccer Violence" (ungated version available here).

Abstract:

Can some acts of violence be explained by a society’s “culture”? Scholars have found it hard to empirically disentangle the effects of culture, legal institutions, and poverty in driving violence. We address this problem by exploiting a natural experiment offered by the presence of thousands of international soccer (football) players in the European professional leagues. We find a strong relationship between the history of civil conflict in a player’s home country and his propensity to behave violently on the soccer field, as measured by yellow and red cards. This link is robust to region fixed effects, country characteristics (e.g., rule of law, per capita income), player characteristics (e.g., age, field position, quality), outliers, and team fixed effects. Reinforcing our claim that we isolate cultures of violence rather than simple rule-breaking or something else entirely, there is no meaningful correlation between a player’s home country civil war history and soccer performance measures not closely related to violent conduct.

Kudos to Mozambique, Angola and yes, South Africa (but not really)

I've been critical of South Africa, especially its president Mbeki, about their tacit support for Bobby Mugabe. Yet they reversed course and turned away the Chinese arms shipment and other southern african countries followed suite. The ship is headed back to China fully loaded.

While this is good, it's far from sufficient to stem the fraud and violence still being perpetrated in Zimbabwe by Mugabe and his people.

Incredibly, South Africa is now pushing a "unity government" where Mugabe and the M.D.C would somehow "share" power. This in an election where the votes have never even been reported? Where the incumbent presided over epic inflation, unemployment and out-migration?

Here's Jacob Zuma, head of South Africa's ruling ANC party:

Asked about a national unity government in Zimbabwe, Mr. Zuma said, “I don’t think it is premature because you are dealing with a situation where we are almost three weeks after the election and there has been no announcement of the results.”

Regional diplomacy had not resolved the crisis, he said, “so we have to say ‘what do we do?’ ”

“The natural thing is that there should be discussions,” he said. The call for a unity government “is not premature, it is actually appropriate at this time,” he said.

Can Correa control Ecuador's Military?

Not yet, says an article in the NY Times by Simon Romero.

PhD Economist turned firebrand President Rafael Correa began his term by trying to buy the military's support with:

"salary raises for soldiers; a 25 percent increase in the 2008 military budget, to $920 million; and lucrative highway construction contracts for companies controlled by military officials."

Yes you read that right. As it turns out the Ecuadorian military is old school:

Unlike the armed forces of most other countries in Latin America, Ecuador’s military has retained substantial economic might since a military junta transferred power to a civilian government in the 1970s. Through holding companies, the armed forces still control TAME, one of Ecuador’s largest airlines, and enterprises in the munitions, shrimp fishing, construction, clothing, flower farming and hydroelectric industries, making the military one of the country’s most powerful economic group.

Despite his efforts, the military is still too close to the US and Colombia for Correa's comfort:

Still, tensions persist over his clash with top generals, which emerged after Colombian forces raided a Colombian rebel camp in Ecuador last month. The raid against the rebel group, the Marxist-inspired Revolutionary Armed Forces of Colombia, put Ecuador and its ally Venezuela on edge with Colombia. Twenty-five people were killed, including Franklin Aisalla, an Ecuadorean operative for the group, known as the FARC.

The face-off between Ecuador and Colombia ended at a summit meeting in the Dominican Republic, but it has begun again over revelations that Ecuadorean intelligence officials had been tracking Mr. Aisalla, information that was shared not with the president, but apparently with Colombian forces and their American military advisers.

The leak became evident when video and photo images surfaced in Colombia and Ecuador showing Mr. Aisalla meeting with FARC commanders.

“I, the president of the republic, found out about these operations by reading the newspaper,” a visibly indignant Mr. Correa said last week during an interview in the capital, Quito, with foreign correspondents. “This is not something we can tolerate. He added that he planned to restructure the intelligence agencies to give him greater direct control over them.

In a rebuke of senior military officials, Mr. Correa named as defense minister his personal secretary, Javier Ponce, who was an outspoken critic of the armed forces in his previous careers as a poet and an editorial writer at some of Ecuador’s largest newspapers.

While I am not Correa's biggest fan, I am with him on this one. Civilian control of the military is a must, (as is, I might add, *not* having the military run large civilian companies). I'd rather see the craziest policies coming out of a democracy than excellent ones coming after a coup from a military junta.

No hay monos en la costa?

Maybe not for long in Costa Rica according to the Christian Science Monitor:

In the past decade, construction of hotels, second homes, and condominiums has surged in coastal regions, taking advantage of a vacuum in planning and enforcement. The total land area that has been developed grew 600 percent in that time, according to a government report.

As a result, the biodiversity that has long lured visitors is disappearing, say scientists. Monkey and turtle populations are plummeting, and infrastructure is strained to a near breaking point.

Costa Rica's highly regarded, nonpartisan State of the Nation report aired the country's dirty laundry last November, alarming both the press and the public.

Statistics revealed that 97 percent of Costa Rica's sewage flows untreated into rivers, streams, or the ocean, and that more than 300,000 tons of garbage was left uncollected on streets in 2006. And a flurry of illegal well-drilling is running aquifers dry, ironic in a country where as much as 20 feet of rain falls annually.

Despite the chaos, less than a quarter of coastal towns have zoning plans to balance tourism development with natural resources and government services such as sewage treatment and public water supply.

Monkey populations, symbols of the rain forest and a charismatic tourist attraction, declined an estimated 50 percent in little more than a decade, according to a recent report by a team of wildlife scientists.

Even given these developments, Costa Rica is still a very cool place:

Costa Rica remains decades ahead of its neighbors. More than 26 percent of its national territory is under protected status, 80 percent of its energy is produced from renewable resources such as wind and hydropower, and the country is growing more trees than it cuts down – an anomaly in widely poor Central America.

Costa Rica's natural resources are equally impressive, with its 11,450 species of plants, 67,000 species of insects, 850 species of birds, and the highest density of plants, animals, and ecosystems of any country in the Americas.

Ms. Angus and I have visited the Osa peninsula twice and had a great time on each occasion.

Been down so long it looks like up to me

I just read through an interesting new NBER working paper (ungated version here), "Training Disadvantaged Youth in Latin America: Evidence from a Randomized Trial". Here is the abstract:

Youth unemployment in Latin America is exceptionally high, as much as 50% among the poor. Vocational training may be the best chance to help unemployed young people at the bottom of the income distribution. This paper evaluates the impact of a randomized training program for disadvantaged youth introduced in Colombia in 2005 on the employment and earnings of trainees. This is one of a couple of randomized training trials conducted in developing countries and, thus, offers a unique opportunity to examine the causal impact of training in a developing country context. We use originally collected data on individuals randomly offered and not offered training. We find that the program raises earnings and employment for both men and women, with larger effects on women. Women offered training earn about 18% more than those not offered training, while men offered training earn about 8% more than men not offered training. Much of the earnings increases for both men and women are related to increased employment in formal sector jobs following training. The benefits of training are greater when individuals spend more time doing on-the-job training, while hours of training in the classroom have no impact on the returns to training. Cost-benefit analysis of these results suggests that the program generates a large net gain, especially for women.


The training was 3 months in a classroom and then 3 months "on the job". While these effects seemed small and discouraging to me, they are much larger and stronger than the effects found in randomized trials done in rich countries;

These results stand in strong contrast to most of the results obtained in developed countries and, in particular, in the U.S. (see, e.g., Heckman and Krueger, 2003; Burghardt and Schochet, 2001; Heckman, LaLonde and Smith, 1999). In these countries the effects are often small, if at all positive, and it is often unclear whether from they are worth implementing from a cost-benefit perspective.

Also interesting is that the larger effect for women has also been found in evaluating non-randomized programs in developing countries.

By George, I think he's got it.

There is an interesting blog called Oil Wars that I have criticized in the past for getting things wrong about development. But now I gotta give credit, because they are getting it right on Venezuela's nationalization program (all the interesting formatting is in the original post):

"But what is important to note is what Venezuela will NOT get through any of these nationalizations; new steel mills or cement factories or new telephone systems – those already existed and simply changed hands. There won’t be any new jobs as all the jobs working for those firms already existed. There won’t be any new economic output as the goods and services produced after nationalization were already being produced before it.

In sum, the only benefit that Venezuela gets from nationalizing these companies is it now controls their profits and it only even gets that if it ensures the companies are well run and remain profitable.

Now let’s turn to an alternative use of that money. Instead of buying existing steel mills or cement factories suppose the government built new ones.

By contrast if the government built a new steel mill with the same $2 billion it would create thousands of NEW jobs, it would generate NEW economic activity, it would generate NEW tax revenue and, if the company is run well, it would even get NEW profits.

In summary, if the Venezuelan government uses its oil revenues to purchase an existing company its Venezuela’s only gain is whatever the profits of that company are. But if it instead uses those resources to build NEW industries it gets far more as much new wealth is created, economic output increases, and the standard of living of Venezuelan’s increases. This is not to even count other tangential benefits that may accrue such as increasing the skill level of your work force, obtaining new technologies, reducing the economies dependence on oil, etc.

It is more than clear that from an economic point of view it would be better not to nationalize Sidor and the other companies and instead invest the money in building up new industries. These nationalizations are therefore a misguided and a wrong policy for Venezuela to be pursuing.

The fact that the Venezuelan government is pursuing this type of policy is evidence that it is fighting the wrong battles. Yes, Venezuelan’s are generally underpaid and have a low standard of living.

The reason for that, however, is not that they are exploited by foreign companies who take vast sums of wealth out of the country. The principle reason is that the country is underdeveloped and simply doesn’t generate enough wealth for Venezuelans to live well, even if all of that wealth remains in the country. Hence, the central issue facing Venezuela isn’t how to distribute the countries economic output more equitably (though that too can be worked on in various ways) but how to INCREASE its economic output.

Putting this in terms that would be familiar to Marxists, Venezuela’s problem isn’t who OWNS the means of production; it is that it doesn’t have ENOUGH means of production."

Awesome!! If this guy gets it right, how can anyone NOT?? Phone call for Hugo Chavez on line 7!!

Will Boliva split apart?

Here at KPC we have been following the dual saga of Evo Morales' attempts to pass a new consititution in Bolivia that re-distributes political power and several of the richer individual states making plans to hold autonomy referenda (see here for a story and other links).

The Miami Herald ran a story yesterday about how this situation is still unresolved and a cause for concern.

A major diplomatic effort is underway to ease tensions in Bolivia, where planned autonomy referendums by rich, renegade provinces have stoked fears of political strife. Dante Caputo, the head of the political unit of the Organization of American States, is to meet on Monday with the governors of five provinces that have challenged Bolivia's left-wing President Evo Morales' push to pass a draft constitution. The text gives indigenous peoples more power and the state greater control of the economy, deepening regional and ethnic rifts in the Andean country. This has produced an unprecedented international reaction, with the foreign ministers of Brazil and Argentina visiting the country in recent days and on Friday the European Union and 16 more countries offering to mediate, underscoring international concerns over the direction of the poor, landlocked nation, which sits on some of South America's largest natural-gas reserves and is a major producer of cocaine.

The state of Santa Cruz has an autonomy referendum scheduled for May 4th, two others on June 1, and a fourth on June 22.

The article ends on a cautionary note:

Economic woes are adding to the tensions. Inflation has been creeping up in Bolivia and natural-gas output has been slipping since Morales nationalized the industry in 2006. Bolivia is a major natural-gas supplier to Argentina and Brazil.