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Thursday, August 23, 2007

Argentina unilaterally cancels debt. Cuba becomes a member of Mercosur. Brazil opposes U.S. subsidies to its domestic agriculture. Venezuela invests in large scale private and semi private Latin American petrochemical projects. Cuba opens its commercial ports, airspace and to semi-capitalist nation while opposing ultra left guerilla movements in Colombia.

The Capitalist Communist binary is over in Latin America. Pan Latin American market socialism is taking its place. A supra-nationalist minded policies supported by a domestic elite, labor and reformed socialists has replaced it.

We will offer our take on the shape of things but first we offer this essay by disgruntled leftist Dr. James Petras.

Latin America - Four Competing Blocs of Power
In reality there are four competing blocs of nations in Latin America, contrary to the highly simplistic dualism portrayed by the White House and most of the Left.
. 04.17.2007


Each of these four blocs represents different degrees of accommodation or opposition to US policies and interests. Moreover much depends on how the US defines or re-defines its interests under the new realities.

The radical left includes the FARC guerrillas in Colombia, sectors of the trade unions and peasant and barrio movements in Venezuela; the labor confederation CONLUTAS and sectors of the Rural Landless Movement in Brazil; sectors of the Bolivian Labor Confederation (COB), the Andean peasant movements and barrio organizations in El Alto; sectors of the peasant-indigenous movement CONAIE in Ecuador; sectors of the teachers and peasant-indigenous movements in Oaxaca, Guerrero and Chiapas in Mexico; sectors of the nationalist-peasant-left in Peru; sectors of the trade union and unemployed workers in Argentina. In addition, there are numerous other social movements in Central and South America and a plethora of small Marxist groups in Argentina, Bolivia, Chile and elsewhere. Together these organizations form a heterodox, dispersed political bloc, which is staunchly anti-imperialist, rejects any concessions to neo-liberal socio-economic policies, opposes debt payments and generally supports a socialist or radical nationalist program.

The pragmatic left includes President Chavez in Venezuela, Morales in Bolivia and Castro in Cuba as well as a multiplicity of large electoral parties and major peasant and trade unions in Central and South America. Included here are the left electoral parties, the PRD in Mexico, the FMLN in El Salvador, the left electoral bloc and the labor confederation (CUT) in Colombia, the Chilean Communist Party, the majority in Peruvian nationalist Humala’s parliamentary party, leadership sectors of the MST, in Brazil, the MAS, the governing party in Bolivia, the CTA, the second largest labor confederation in Argentina, and a minority of the Broad Front and the labor confederation (PIT-CNT) in Uruguay. The great majority of left Latin American intellectuals are found among this political bloc.

It is worthwhile to examine why this bloc is referred to as the ‘pragmatic’ left. First of all Venezuela, Bolivia and the entire spectrum of above-mentioned social movements, trade union confederations, parties and fractions of parties do not call for or practice the expropriation of capitalism, the repudiation of the debt, the complete expropriation of US or EEC banks or multinational corporation, or any rupture in relations with the US.

For example, in Venezuela, private national and foreign banks earned over 30% rate of return in 2005-2007. Foreign-owned oil companies reaped record profits between 2004-2007. Less than 1% of the biggest landed estates were fully expropriated and titles turned over to landless peasants. Capital-labor relations still operate in a framework heavily weighted on behalf of business and labor contractors who rely on subcontractors who continue to dominate hiring and firing in more than one half of the large enterprises. The Venezuelan military and police continue to arrest suspected Colombian guerrillas and activists and turn them over to the Colombian police. Venezuela and US-client President Uribe of Colombia have signed several high-level security and economic co-operation agreements. While promoting Latin American integration (excluding the US) Chavez has looked toward greater ‘integration’ with neo-liberal Brazil and Argentina, whose oil production and distribution is controlled by European MNCs and US investors. While Chavez attacks US attempts to subvert the democratic process in Venezuela, it still provides 12% of total US petroleum imports, owns 12,000 CITGO gasoline stations in the US and several refineries.

Finally the Venezuela’s political system is wide open to influence by the private mass media, which are overwhelmingly hostile to the democratically elected President and Congress. US-funded NGO’s continue to act on behalf of US policymakers, as do a dozen pro-US political parties and a trade union confederation. The majority of pro-Chavez congressional members and officials are of very dubious nationalist credentials, having jumped on his political bandwagon more for personal advancement than from any populist loyalties. Many emigrated from defunct pro-US right wing political parties. In a word, Venezuela’s pragmatism spells out a very lucrative field for US investors, a reliable supplier of energy and alliances with the US’s major client (Colombia) in Latin America. The essence of the matter is that Chavez’s radical rhetoric and discourse on 21st century socialism does not now or in the proximate future correspond to the political realities. If it were not for Washington’s intransigent hostility and continued confrontation and destabilization tactics, even Chavez’s discourse would likely be moderated. That sectors of big business complain about increased royalty payments, profit sharing and taxes is to be expected, but hardly the basis for Washington to engage in arms boycotts, cheap rhetorical shots and undercover subversion.

US-Venezuela relations embody what is wrong and has failed in Latin America. By comparing Chavez’ policy with that of the previous Venezuelan client regimes during the 1990’s, Washington is painting Chavez as a ‘dangerous radical’. Taking into account the changed international environment of the 2000-2007 period and the limited social welfare, and tax and other reforms, and taking Chavez’ foreign policy pronouncements with a grain of salt, the US is in fact dealing with a pragmatic radical who can be accommodated. But that presumes that Washington rejects the 1990’s as a standard for measuring friends and enemies. It presumes that Washington realizes that the favorable international conjuncture of the 1990’s is gone and it must accommodate moderate reforms and foreign policy differences to avoid a social revolution.

The same is true regarding US policy toward Cuba and Bolivia. Cuba has established diplomatic ties with almost all US clients and allies in Latin America. It has explicitly extended a friendly diplomatic hand to US-backed Colombian President Uribe, rejects the revolutionary left (FARC) in Colombia, gives public support to neo-liberals like Lula of Brazil, Kirchner of Argentina and Vazquez in Uruguay and has signed a wide range of purchasing agreements with big US food exporters amounting to over $500 million dollars a year despite onerous terms. Cuba has provided free health services to a large number of US client regimes ranging from Honduras and Haiti to Pakistan. It is training thousands of doctors and educators from the poorest of US client states and has opened the door to foreign investors from four continents in all its major growth sectors.

Paradoxically as Cuba has deepened its integration into the world capitalist market leading to the emergence of a new class of market-oriented elites, Washington has increased its ideological hostility. By issuing military threats and exercising diplomatic pressure and provocations, the White House has strengthened radical tendencies in Cuban society. Washington has adopted a similar extremist posture toward the pragmatic-leftist Morales regime in Bolivia, whose ‘nationalization’ has not and will not expropriate any foreign-owned enterprise. One of Morales main purposes is to stimulate trade agreements between Bolivia’s agro-business elite and the US.

The third and most numerous political bloc in Latin America are the pragmatic neo-liberals which includes Brazil under Lula, Kirchner’s Argentina and the major trade union confederations in Brazil and Argentina, sectors of the big business and financial elites and the principal provincial political bosses handing out subsistence unemployment doles and food baskets. There are numerous imitators of these regimes among left-liberal opposition groups in Ecuador, Nicaragua (the Sandinistas and their split-offs), Paraguay and elsewhere. Both Kirchner and Lula have defended the entire gamut of legal, semi-legal and illegal privatizations, which took place in the 1990’s. Both have prepaid on their official debt obligations (though Argentina imposed a 60% discount on private debt holders).

Both have pursued agro-mineral export growth strategies. Both have vastly increased financial and business profits while restraining wages and salaries. There are also differences between the two. Kirchner’s pro-industry strategy has led to a growth rate over twice that of Lula and he has reduced unemployment by 50% (from a high base figure) compared to Lula’s failed employment policies. In other words, the investment environment for US business-people and bankers in Argentina and Brazil is as favorable to profit making (or even more so for US bankers in Brazil) as it was during the ‘Golden Years’ of the 1990’s.

The major changes in relations between the pragmatic neo-liberals and Washington are in the negotiations over a free trade agreement. The vast increase in global trade opportunities and the stronger market position of elite export producers and manufacturers within Latin America gives them a stronger negotiating position. Both Lula and Kirchner will have nothing to do with extremist-militarist US efforts to overthrow or boycott Chavez because they have growing and lucrative market investments and joint oil/gas projects in the works. They recognize the basically capitalist nature of the Chavez regime even as they reject most of his radical anti-imperialist discourse. Likewise both Presidents are diversifying trading partners and pursuing markets with US competitors in China and Asia because it is lucrative, revenue generating and part of their neo-liberal practice.

There is a clear difference between the market-oriented and free trade-driven policy of Argentina and Brazil and the militarist, ideologically driven US policy toward Venezuela, Cuba, the Middle East and elsewhere.

While Washington is not hostile to Argentina and has a friendly working relation with Brazil, it has failed to fully exploit the possibilities of extending influence because of its refusal to recognize the emergence of a kind of ‘nationalist’ free trade regime. Measuring Argentina against the 1990’s ‘Golden Age of Pillage’ under President Carlos Menem, Kirchner’s pursuit of negotiated agreements, regulated investments, tax collection and debt re-negotiations is seen as ‘nationalist’, ‘leftist’ and barely tolerable. Likewise Washington, accustomed to Cardoso’s role as a Washington client, is disturbed by the fact that Lula’s free market policies include a demand that the US end agricultural subsidies and quotas as well as Brazil. Once again Washington’s extremism sacrifices large-scale, long-term US entry into Brazil’s industrial and service sector in order to defend uncompetitive US farm enterprises. Washington’s attitude is more akin to a 19th century colonial (or mercantile) power than a 21st century market-based empire-builder, especially faced with pragmatic rulers looking to build their own regional power bases.

The fourth political bloc is the doctrinaire neo-liberal regimes, parties and elite associations, which closely follow Washington’s dictates. This includes the Calderon regime in Mexico, preparing to privatize the lucrative public petroleum and electrical firms, the Bachelet regime in Chile - the perennial agro-mineral-exporter, Central America – the tropical fruit and assembly plant exporters (El Salvador, Nicaragua, Honduras, Costa Rica and Guatemala). The latter were brought into the US orbit subsequent to the killing of over 300,000 people between the late 1970’s and early 1990’s.

Colombia, another member of the hard-line neo-liberal bloc, is recipient of $5 billion dollars in US military aid since the late 1990’s. Peru, which over the past 20 years has privatized almost all of its mineral wealth is governed by US client President Alan Garcia who continues the same policies. Paraguay has become the biggest military base for Washington. In Uruguay, a regime of ex-leftists has signed onto a new free trade agreement with the US and agreed to a military training base. In the Caribbean, the US occupies Haiti via the UN after overthrowing and abducting the elected President Bertram Aristide and has a loyal ally in the Dominican Republic (President Leonel Fernandez). In other words, Washington dominates a ‘Pacific Arc’ of loyal clients extending from Mexico, through Central America down the Southern Pacific coast, including Colombia, Peru and Chile. While the political labels, rhetoric and degree of stability vary, these regimes all embrace US-backed doctrines of free market, mostly follow the US lead in regional and international forums and in one degree or another openly or surreptitiously oppose Venezuela and Cuba. Powerful pragmatic leftist movements challenge these client regimes, especially in Mexico, El Salvador, Peru and Colombia (including the radical left in the latter). Nevertheless for the immediate future, Washington has a loyal bloc of follower regimes, even as, over the middle course this could change abruptly.


Claims by Washington and right-wing ideologues that ‘radical populism’ is sweeping the region are self-serving and gross simplifications of a complex reality. Instead there is a ‘quadrangle of competing and conflicting forces’ within Latin America. There are also new and changing international scenarios, which complicate any attempt to ‘pigeonhole’ policies with ‘either/or’ choices. Washington has emphasized the subversive influence of Venezuela and Cuba in weakening US dominance in Latin America. A far more important factor is the across the board rise in commodity prices of goods which are major export earners for Latin America. This means that the Latin American countries have less need to rely on IMF ‘conditions’ for securing loans, thus severely limiting US political leverage. Secondly the greater liquidity means that commercial loans can be secured without resorting to the World Bank, another instrument of US influence in Latin American political and economic policy making. Thirdly the rapidly expanding markets in Asia and particularly the growth of Asian investment in Latin America’s extractive industries has further eroded US ‘market leverage’ in Latin America over and above what Washington possessed in the 1990’s. Fourthly with the slowdown of the US economy in 2007, the US is expected to lessen its investments and trade with Latin America. In other words, Washington has less market leverage over pragmatic leftists and neo-liberals than it possessed during the 1990’s. To continue to act in the late-2000s as if Washington’s relative loss of influence reflects the ebb and flow of political forces (radical populism) within the region is to pursue failed policies. Mislabeling regimes and exaggerating the degree and kind of opposition leads to the exacerbation of conflicts. Furthermore for Washington to persist in believing that it can secure continent-wide free trade agreements based on non-reciprocal concessions (particularly in agriculture) is to lose out on opportunities for trade deals.

Washington’s over-politicization and ideological labeling of changes in US-Latin American relations is a result of the ultra-conservative configuration of policymakers and their principal advisers in Washington.

If Washington has grossly misrepresented Latin American political reality and misreads the current regional and international context, the Left is hardly more prescient. Leftist intellectuals exaggerate the radicalism or revolutionary reality of Cuba and Venezuela. They overlook the contradictory realities and their pragmatic accommodations with neo-liberal regimes. The Left, with little historical perspicacity, continues to categorize pragmatic neo-liberals like Lula, Kirchner and Vazquez as ‘progressives’, lumping them together with pragmatic leftists like Chavez, Castro and Morales. In many cases they characterize parties and regimes based on their past leftist political identities rather than their current free market, pro-agro-mineral elite policies. The Left confuses the pragmatic neo-liberal regimes’ efforts to negotiate symmetrical free market trade agreements with the US as some sort of ‘anti-globalization’ policy or as a ‘counter-weight’ to US power.

The Left has to face up to the fact that while US power has declined relative to the ‘Golden Age of Pillage’ during the 1990’s, it has recovered and advanced since the mass rebellions and overthrow of client regimes of 2000-2002. The hopes that the Left had that the presidential victories of former center-left electoral parties in Brazil, Uruguay and Argentina, would augur a reversion of the neo-liberal policies of their predecessors have been demonstrably dashed. The attempt to redefine the conversion of the ex-leftist-turned-pragmatic neo-liberals into something progressive or as a ‘counter-weight’ to US power is ingenuous at best and at worst compounds the initial error. The Left’s lack of political clarity regarding political changes has led it into a blind alley as damaging to its future growth as Washington’s failed efforts to recognize the new realities.

While US power over Latin America has declined since the 1990’s it has not been a linear process, a sharp fall has been followed by a partial recovery. The decline of the US has not been matched by a sustained rise in the power of the radical left. The real ‘gainers’ have been the pragmatic leftists and neo-liberals who rode to power with the demise of the doctrinaire neo-liberals and the favorable expansive conjuncture in world market conditions. There are neither inherent long-term ‘laws of imperial decline’ as some Leftist historians claim, nor ‘an end of the revolutionary left’ as their neo-liberal counterparts claim. Rather a realistic analysis demonstrates that political interventions, class conflict and international markets play a major role in shaping US-Latin American relations and more particularly the ascent and decline of US imperial power, social revolutionary forces and the other political variants in between.

March 2007

Tuesday, August 21, 2007

Tax cuts hurt South Florida home sales, real estate agents say

Potential buyers fear reduced services, increased fees, real estate agents say

By R. Benedick

The scramble is on by cities to cut property taxes, but instead of luring home buyers, real estate agents say it may be discouraging some of them.

"A big question on people's minds is what will happen in terms of public services and does this mean schools will have less money, and what about public hospitals?" said Barry Rothman, sales associate with Lang Realty in Boca Raton. "Are we going to get even less service for our tax dollars?"

That's not what state legislators had hoped would happen when they ordered cities and counties for the fiscal year beginning Oct. 1 to freeze tax collections at current levels and then make an additional cut, ranging from 3 percent to 9 percent.

"People see the tax issue as a bunch of bull, so to speak, because insurance rates haven't gone down, home prices are still high and now interest rates are rising so people who were barely able to get in when prices were down can't afford to buy now," said broker Jeff Kahn, manager consultant with Century 21 Hansen Realty in Fort Lauderdale.

To make up some of the lost property tax revenues, some municipalities are hiking fees for fire protection, garbage collection, water, building permits and parks.

"It's like they're robbing Peter to pay Paul," said Lisa Mays, president of West Park's Miami Gardens homeowners association. "It's becoming a nightmare because you've got fee hikes now and everything seems to be going up, not down."

West Park is considering a 50 percent hike in the fire fee and a 40 percent increase in the garbage fee. Other cities also are weighing drastic actions to cover shortfalls. (Pic left, will school busing cutbacks lead to this?)

Tamarac is laying off 26 employees and may reduce the community bus service for seniors. Pembroke Pines is considering pulling the plug on some preschool programs, senior bus service and the mounted patrol while doubling its fire-rescue fee.

Boynton Beach is eyeing a water tax and Delray Beach may leave five police officer positions vacant and increase business taxes to raise revenue.

Broward County is looking to increase the cost of going to parks on weekends, returning overdue library books and licensing pets. Palm Beach County plans to raise bus fares.

The property tax relief signed into law in June is projected to save the average homeowner only $174 in taxes this year. The biggest savings would come next year if voters approve part two of the tax plan: They can choose to keep their Save our Homes tax cap or a "super" exemption.

Save Our Homes lets homeowners exempt $25,000 off the home's value and caps yearly tax increases at 3 percent. The "super" exemption allows them to shave off 75 percent of the first $200,000 of their home's taxable value and an additional 15 percent off the next $300,000.

If the "super exemption" constitutional amendment passes in January, cities and counties stand to lose millions more in tax revenue, officials said, meaning more cuts in services. (Pic right, neglected roads in South Florida.)

Because of the uncertainty, "a lot of people are waiting to see what happens with the taxes and prices," said Mark Heller, a Realtor and broker-associate at Century 21 Realty in Coral Springs.

His clients, Rivka and Dan Bushel, plan to rent for a year in Coral Springs before making any decisions.

Wednesday, August 15, 2007

Sunburned Economy Must Look North (2005 article)

The US economy is based on innovation and creativity. The tie to top research universities and urban economic growth is important. Those college rankings are a lot more important than many realize since they are based largely on the criteria of research money, quality of research professors and perceived quality of students.

Charlotte has become what it is because of Duke and UNC as well as Davidson. Atlanta relies heavily upon Georgia Tech and Emory. New York City has Columbia and NYU with Yale and Princeton less than an hour away. Los Angeles has UCLA, Cal Tech and USC. Chicago’s research centers are Northwestern and University of Chicago. Boston has MIT and Harvard. Nashville may be known for music but it is Vanderbilt and its ties to Oakridge National Laboratories that has fueled its economic growth. It is no surprise that Austin and Houston have developed a tech corridor when one of the largest premier research universities, University of Texas /Texas Tech (They share endowments and research funding) are leaders in public and private research dollars and Rice is the largest recipient of federal research grants in the deep South. Washington, DC has Georgetown, Johns Hopkins and UVa. I could offer numerous other examples but there is one example that states the case definitively. The Bay Area and its research universities, Stanford and Berkeley; no two schools have surpassed them as technology incubators and birth place to tech start-ups.

Miami has something that some of these cities do not. The city and the university share weather and beaches that enable it to attract talent for less pay than other regions.

UM, thanks to a failure of leadership has proven mind bogglingly adept in recent years at frittering away this advantage. A young university, for years Miami struggled to increase its name recognition and to shed the negative implications that came with its image as “Suntan U”. Early university leaders hoped to follow in the aggressive strategy that allowed some West Coast universities to vault their East Coast counterparts.

Miami also tried to convince Fortune 500 hundred companies’ Southern operations that Miami was a viable option for regional headquarters. Miami has long been said to be Los Angeles twenty years ago. Miami mimicked that city's attempts to encourage families to relocate through a network of development and business councils (GMCC and the Beacon Council). The Orange Bowl Parade, like the Rose Bowl Parade was identified as a method to advertise glorious weather and a prosperous city to workers and potential students. It integrated Blacks into leadership (albeit grudgingly) and ended segregation rather than risk the image of racial strife. (This attracted a significant amount of black professionals from throughout the region.)

The "Non-Group" led the way. This organization of business and civic leaders fashioned after "LA’s Committee of 25" and Charlotte’s simply monikered "The Group" and Boston’s "The Vault". Not surprisingly these leadership groups from each of their respective cities often met and shared ideas, visions and advanced trade.

As a result, Miami had one of the fastest growing economies in the nation. And each decade Miami roughly doubled in population, from it’s inception until 1980. Almost half of American GI’s from World War II trained in Miami and many moved to the city with their families following the war. They were said to have had “sand in their shoes”.

When Miami’s power landscape shifted, and Miami experienced crisis after crisis the Anglo elite left, taking their businesses and networks with them. It was a sign of the times when the huge media conglomerate Knight Ridder, publisher of the Herald decided to move to San Jose.

Today, well educated, ambitious and creative people, like the GI’s from years earlier still get “sand in their shoes”. What vacationer does not envision a life in America’s only large tropical city? (Sorry, LA you are a paved desert with a cold, dirty ocean.) The problem is that Miami has developed an attitude of insularity, distancing itself from domestic trade and talent.

This has a multiplying effect. The Anglo or African American Harvard grad who applies to a City of Miami job is turned down, perhaps because of ethnicity perhaps because of being an “outsider”. She does not move here with her MIT educated husband that is active with a start up utilizing nanotechnology or the like. A chain of talented people are turned away with each act of insularity and discrimination in hiring practices.

Again, even though Western Europeans and Canadians continue to be the largest foreign investors in Florida and US residents (not a few of them Black) are the largest source of tourism, local leadership has decided that as the self appointed Capital of Latin America its priorities lie elsewhere.

Effects: Miami’s banking sector has went from the headquarters to a number of flourishing regional banks to a bilingual forward sales force for banks headquartered in other cities. Light manufacturing has all but been replaced by freight forwarding for American items made in other places.

So, the Miami-Dade government and business community, ever looking southward, gives the cold shoulder to Scripps, claiming that it cannot do anything about the lack of available real estate for a research campus, while pushing the Urban Development Boundary back to make way for urban sprawl. Palm Beach, instead of Miami, cashes in on nearly a half billion dollars of incentive funding offered by Governor Bush to jump start Florida’s lagging tech sector.

How bad can it be? The Amazons, Genentecs, Googles, Microsofts, Facebooks, Yahoos, eBays, Def Jams, Tasers, AOL, Ciscos, Dells, Suns, Oracles, etc., formed by college students and recent graduates from elite universities continue to create a new economy based on information technology, communications and entertainment. Billions of dollars in research money go to universities that attract the finest students and professors regardless of background. As research spawns new technology and products industry is created that serves their surrounding economies.

This is not just an issue of shutting out the “new” economy. The older industrial based economy already has shored up its relationships with research universities and new tech companies. Non-tech professional, marketers, advertisers and designers continue to do business where they have the access to broadest and most qualified source of human capital.

Manufacturers and retailers, formerly the less technology dependent players in the economy now are dependent upon highly technical distribution systems. Product design is also technically driven in an economy where product shelf life is shortened and manufacturing is global. America is not a manufacturing economy but a design and innovation economy. Technology has allowed large talent pools in metropolitan areas to exchange ideas. These talent pools are dependent upon the educational and research infrastructure for their training, support and regeneration.

Miami is at the bottom of large cities for the percentage of adults with high school diplomas, bachelor degrees, and has the highest percentage of those for who English is a secondary language. (Florida has the lowest graduation rate in the nation.) This is a particularly worrisome state of affairs in a world that has made post graduate degrees the necessary professional qualification and English the world’s lingua franca. Miami now leads the nation in poverty, and disparity of income and housing prices. This is no secret as the Manhattan Institute, The International Journal for Economic Development and the Brookings Institute have all made exhaustive studies focusing on the poverty, crime and drug use tied to the lack of a well educated populace. Can you imagine Fortune 500 execs lining up to move their headquarters to Miami?

Here is another illustration of the need to look beyond Latin America northward. FIU's Graduate School of Engineering created a recruiting program including full scholarships and housing, in an attempt to recruit from Latin America and the Caribbean. This was to make up for a shrinking pool of Asian and African graduate students who would rather attend colleges with more research opportunities and a welcoming local economy post graduation. FIU found it nearly impossible to find qualified graduates from any part of Latin America or the Caribbean save Jamaica and Trinidad (Most of these students had been planning to go to England or the Northeastern U.S.)

The upshot is that until Miami welcomes the most qualified people in public and private sector hiring and lures national businesses to compete for our public contracts, it will continue to be the poorest city in America. Outside talent is, however only part of the solution. We must strengthen our educational infrastucture. This will take lots of dollars. It will also take the de-politicization of educational leadership.

The other side of this coin is that we must broaden our focus in trade. Miami must not value our trade ties with desperately poor Caribbean and Central American nations where there are five of the hemispheres poorest countries (Haiti, Nicaragua, Jamaica, El Salvador and Guatemala). We must also recognize that South America is looking inward, investing in its own economies. Even if this were not the case, Sao Paolo, Buenos Aires and Caracas hardly look to Miami as the capital of Latin America.

Miami must open its eyes to the largest market in the World. The death of the FTAA should have been a clarion call to General Jeb and his Dade junta who have continued this blind march into the Caribbean.

Monday, August 13, 2007

Miami Condo Glut Pushes Florida's Economy to Brink of Recession

By Bob Ivry

Construction cranes dot the skyline of Miami

July 20 (Bloomberg) -- In the middle of the biggest glut of condominiums in more than 30 years, Miami developers keep on building.

The oversupply will force prices down as much as 30 percent, the worst decline since the 1970s, and help push Florida's economy into recession as early as October, said Mark Zandi, chief economist at West Chester, Pennsylvania-based Moody's Economy.com, who owns a home in Vero Beach, Florida.

``Florida is the epicenter for all the problems that exist in the housing industry,'' said Lewis Goodkin, president of Goodkin Consulting Corp. and a property adviser in Miami for the past 30 years, who also foresees a recession. ``The problems we have now are unprecedented and a lot of people will get burnt.''

Thirty-seven new high-rise condos and 20,000 new units are being built in Miami's 1,040-acre downtown, where sales fell almost 50 percent in May, according to the Florida Association of Realtors. The new units will join the 22,924 existing condos in Miami-Dade County that were for sale in April, according to Jack McCabe, chief executive officer of McCabe Research & Consulting LLC in Deerfield Beach, Florida. That's the most unsold units since McCabe began tracking sales in 2002.

``Have you been to Miami lately?'' Florida Governor Charlie Crist said at a homebuilders' conference last week in Orlando. ``It's like we have a new state bird: the building crane.''

Construction Jobs

While the housing industry is responsible for 10.6 percent of the nation's jobs, in Florida it accounts for 20 percent, Zandi said. Florida construction jobs fell 2.9 percent in May to 626,200 from the peak in June 2006, according to the U.S. Bureau of Labor Statistics.

The national housing industry's weakness prompted Federal Reserve policy makers this week to cut their forecasts for U.S. economic growth for the next two years.

The economy will grow by 2.25 percent to 2.5 percent in the fourth quarter of 2007 from a year before, compared with a range of 2.5 percent to 3 percent the Fed predicted in February, the board said in a report to Congress.

Florida's robust economy of 2001 to 2005 was driven by the thousands of well-paying jobs related to the real estate market and homeowners who used home-equity loans to pay for items such as boats and big-screen TVs, McCabe said.

``All those jobs are going away now, and we're seeing the trickle-down effect in declining sales in big-box retailers and home-furnishing manufacturers,'' McCabe said. ``Florida is headed to a recession.''

Influx of Retirees

A Florida recession could be averted and the state housing industry's ``serious problems'' solved by an influx of American retirees and foreign buyers, said David Denslow, a University of Florida economist in Gainesville.

``The wave of baby boomer retirees is gathering momentum, and the weaker dollar makes Florida seem like a bargain to Europeans,'' Denslow said. ``With any luck at all that will sustain us.''

Downtown Miami developers already are offering incentives for brokers who connect them to buyers. John Rosser, president of the Key Biscayne, Florida-based John Paul Rosser & Associates Inc. estate brokerage, said he is usually paid a commission of as much as 5 percent when a sale is completed. For the Capital at Brickell, a block off Miami's Brickell Avenue, he was offered what he called ``an unheard of'' deal to steer buyers to one of the 832 units proposed. A salesman said Rosser would be paid 5 percent -- payable when buyers put down a deposit. The project has just broken ground and won't open until 2011.

Puig Bankruptcy

Puig Development Group, a closely held company that converted rental apartments to condos, filed for Chapter 11 bankruptcy protection on May 29. The Hialeah, Florida-based Puig and its subsidiaries controlled 2,900 units in Florida, including 980 condos, worth about $210 million, said Ronald Glass of Atlanta-based GlassRatner Advisory & Capital Group LLC, chief restructuring officer for the Puig properties.

``Puig got a little overzealous and a little overly optimistic, and was caught when the market slowed,'' Glass said.

Florida banks have already quit making loans to Miami condo developers, said Kenneth H. Thomas, a Miami bank consultant and a lecturer at the Wharton School at the University of Pennsylvania in Philadelphia.

``South Florida lenders were the first to put money into the condo market, they were the first to see the oversupply and they were the first to get out,'' Thomas said.

Because of the lag time between making construction loans and closing sales on completed condos, loan problems showed up for Florida lenders in first-quarter bank statistics from the Federal Deposit Insurance Corp. in Washington, Thomas said.

Overdue Bills

Florida banks posted a 43 percent jump in the first quarter in loans no longer paying interest compared with the last three months of 2006, while the number for banks nationwide rose 13 percent, according to the FDIC.

Loan payments that were one to three months overdue to Florida banks increased 30 percent in the first three months of 2007 from the fourth quarter of last year. The same number for banks nationwide fell 1.8 percent, the FDIC said.

Angel Medina Jr., who runs the Southeast Florida operations of Regions Bank, a division of Birmingham, Alabama-based Regions Financial Corp., said Regions has financed projects by two of Miami's biggest condo developers: Related Group of Florida, headed by billionaire Jorge Perez, and Ugo Colombo's CMC Group.

The bank hasn't financed any Miami condos in the past 18 months because development is ``too aggressive,'' Medina said.

Chicago Lender

That leaves the business to lenders such as Corus Bank, a division of Chicago-based Corus Bankshares Inc. Corus has lent a total of $1.07 billion to eight condo developments in downtown Miami, according to the company's Web site.

Corus's net income in the first three months of 2007 was $26.4 million, a 39 percent drop from a year earlier, according to a company regulatory filing.

``It would not surprise us to see an even greater impact on earnings over the next several quarters, or even years, depending on when'' the national housing market improves, Chief Executive Officer Robert Glickman said in a statement.

Miami condo sales fell to 599 in May, a drop of 46 percent from a year earlier, according to the state realtors association. Condo sales in Orlando, home of Walt Disney World, have plummeted 80 percent, said Zandi of Moody's Economy.com.

``The statistics are scary,'' said Michael Wohl, a partner in the Pinnacle Housing Group, a Miami developer that has stayed out of the condo market. ``There's going to be a lot of blood in the water in the next 18 months.''

Hedge Funds

With prices falling, international investors, hedge funds, private equity firms and Wall Street banks are beginning to shop for deals, said Peter Zalewski of Condo Vultures Realty LLC, a consulting firm in Bal Harbour, Florida. Miami lags only New York in the number of foreign visitors to U.S. cities, attracting 5.3 million in 2006 from Europe, Canada and Latin America, according to the Greater Miami Convention & Visitors Bureau.

``Bigger and bigger funds are coming to me wanting to buy,'' Zalewski said. ``Prices have yet to hit bottom because the bulk of Miami properties won't come on the market for another six months.''

Cement dust swirls at 10 high-rise condo construction sites on Biscayne Boulevard, with its prime locations overlooking the waterfront; at six sites on Brickell Avenue, home to the glass and steel offices of Banco De La Nacion Argentina, Banco Industrial De Venezuela and Banco Santander Brazil International; and at eight locations on the Miami River, which splits the city into north and south. That's according to data collected by the Miami Downtown Development Authority.

Covering Costs

Since it can take up to four years for a condo project to travel from conception to completion, many of the towers rising from the coral rock of Miami were planned and financed during the Florida housing boom, which lasted from 2001 to 2005.

Lenders typically require enough advance sales to cover the cost of a construction loan. Customers' deposits, however, don't always mean the sales will close, said Ian Bruce Eichner, a developer whose latest Miami Beach condo tower is scheduled to open in November.

``The market is as close to a depression as Miami has seen in 30 years,'' Eichner said. ``There's a gargantuan supply of homes and the overwhelming preponderance were built for speculators, not for people who are living there.''

As much as half of those putting down deposits for Miami condos are speculators looking to flip units, or sell them quickly for a profit without living in them, said McCabe of McCabe Research.

Buyers Walking Away

With sale prices falling, McCabe said he expects up to 50 percent of them to walk away from their deposits in the next 18 months rather than complete the sales.

``What's going to happen to all those units?'' Eichner asked. ``God only knows. You couldn't give me a piece of property in Miami for nothing. I like sleeping at night.''

Condo developers encouraged short-term investors, whose deposits helped them secure funding, Goodkin said.

``The developers didn't get to start building until they had a certain number of contracts signed, so anyone putting down money was good for them,'' Goodkin said.

Many ``flippers'' closed on their units and now can't sell them, said Michael Cannon of Integra Realty Resources-Miami Inc., leaving completed condo towers with floors of dark windows and empty balconies.

The Jade Residences at Brickell is an example, Cannon said. The 338-unit, 48-story waterfront tower, a block from the Brickell Avenue financial district, opened in August 2004 with buyers willing to pay as much as $5 million snapping up all the units. Now, the new owners have listed 112 condos for sale and 17 units totaling $15 million are in foreclosure.

Trade Center

Jade Residences developer Edgardo Defortuna, president of Fortune International Realty, didn't return calls seeking comment.

The desire to strengthen Miami's position as a center of international trade is spurring the growth, said Dana Nottingham, executive director of the Miami Downtown Development Authority.

``We want to be a premiere urban center, not just nationally but globally, and downtown residential development is part of the formula for a great city,'' Nottingham said.

Mayor Manny Diaz said he's happy about what he calls ``the unprecedented flurry'' of residential development because it reduces sprawl and brings more people and money into Miami.

``We will continue to build because I see more and more interest from foreign investors coming into Miami,'' Diaz said in an interview. ``I don't think we're done.''

Island Skyscrapers

For Rosser, a former Air Force and airline pilot who's been working in the South Florida real estate industry for 19 years, a puzzling transformation is taking place on Brickell Key, a 44- acre island made of dredged bay sand connected to the rest of Miami by a 1,000-foot four-lane bridge.

On Brickell Key, 10 high-rises loom over the island's two tree-lined streets. The development is the product of a ``building frenzy,'' Rosser said.

The island's master builder is Swire Properties Inc., a Hong Kong-based developer that's a subsidiary of Swire Pacific Ltd. Swire is building a $140 million tower on Brickell Key called Asia, which is slated to open in December, according to Stephen Owens, president of Swire Properties Inc.

``Anyone who says they're not concerned about the oversupply of condos is practicing the ostrich theory,'' said Owens, who lives and works on Brickell Key.

All of Asia's 123 units are sold, with the average size of the units, 2,800 square feet, and the top sale price of $6 million discouraging speculators, Owens said.

Prices Fell

In the 1970s, when condos were a new product, Florida developers built 500,000 units and prices fell 50 percent, said Brad Hunter of MetroStudy, a research firm in West Palm Beach.

``The difference is, back then they were two-story condo buildings that had $50,000 units,'' Hunter said. ``Nowadays they are $700,000 units in 20-story buildings. Instead of building too much stuff that people could afford like we did then, this time we built too much stuff that people can't afford.''

A lot of the inventory 30 years ago was sold off and converted to rental apartments, Goodkin said. That solution won't work now because prices have soared and properties coming on the market will compete with existing condos whose prices have plummeted, he said.

Goodkin said opportunistic investors will buy construction loans from banks at a discount of 30 percent or more.

``The vultures are in the trees,'' Goodkin said. ``Reality has become the new pessimism.''

Friday, August 03, 2007

A simple (if partial/non-specific) explanation why the excesses of the Real Estate Industry will effect the economy for a long time. A local story of greed gone wrong thrown in.

Beyond that, the local cuts in spending on education, capital improvements, infrastructure, etc. will have long lasting and devastating effects on the economy. Because government employment dominates the Miami job market- MDPS, FIU, MDC, MD County, Cities, etc. Real Estate jobs (especially on the financial side) have vanished and construction jobs have become catch is as catch can. Half finished projects are dotting the downtown landscape like Baghdad. Businesses in the Gables, the Grove and throughout the city have shuttered at a remarkable rate. (A recent walk through the Grove was like touring the land of commercial death.) Even media is affected as the advertising dollar (which was often spent and mispent with abandon during the hieght of the RE boom) have now dwindled and advertising people are cutting rates to barely above the price of ink. Miami is in it for a long time. Too bad there isn't something like the upsurge in cocaine popularity as in the 80's.

The real estate crowd keeps asking for tax relief when what they really want is to stay the bleeding by screwing Floridians. If the average man wants tax relief he would do much better in asking for a reduction in sales tax.

A better idea is to continue to root out corruption, increase the quality of education and life, make the area attractive for external capital and skilled workers (God know's there are enough vacant condos to rent). By ending the Banana Republic, Miami can come out of this downturn all the better for it.