Grupo La Colina

LAS PREDICCIONES DE NEWSWEEK PARA EL AÑO ENTRANTE, INCLUIDA UNA PARA VENEZUELA (EN INGLÉS)

Fidel Castro has been ailing for years, and 2010 looks to be his last year on earth. Control of Cuba will formally pass to brother Raul, who has been running the country during Fidel’s dotage. The transition will be peaceful, as most citizens, though they are dissatisfied with components of Fidel’s totalitarian system, don’t reject socialism outright. Cuba won’t change overnight, but Fidel’s demise will mean that all the doctrinal rigidities tied to his name (lack of press freedom, immigration restrictions, a cult of personality, persecution of gays) will get a second look. Foremost, Raul, recognizing the economic potential of improving ties with the U.S., will curtail the government’s anti-American rhetoric. The Obama administration, always on the lookout for rapprochement with rogues, will send a delegation of assistant secretaries from the State, Defense, Homeland Security, and Commerce Departments to visit. Within short order, and perhaps by year’s end, Secretary of State Hillary Clinton will announce a plan to normalize relations with Cuba by the year 2013.
After 2008’s banking crisis and 2009’s recession, in 2010 we’ll likely see the next phase of global economic turmoil: a crisis in public finance. The troubles are most acute in Europe. Government deficits have ballooned to more than 12 percent of GDP in Spain, Ireland, and the U.K., while government debt will hit over 100 percent across the European Union by 2014. Greek markets crashed in December 2009 due to worries about the government’s ability to finance its enormous deficit. Because most EU countries now use the euro as a common currency, they can no longer finance their debt by printing money, or by devaluing their currency to make their exports more competitive and thus grow themselves out of the slump. At best, the crisis will delay recovery—as in Spain, which is raising taxes even as unemployment soared past 20 percent, or in Ireland, which cut civil servants’ wages by anywhere from 5 to 20 percent despite the hit to consumer spending. At worst, faltering countries could face sharply higher interest rates, problems refinancing their debt, and, ultimately, default—something that has not happened in a developed European economy since The Tories’ lead over Labour is already narrowing, and in next year’s parliamentary elections they may well fail to win an absolute majority. Instead, the party will be forced into an uneasy coalition with the Liberal Democrats, and it will be too weak to push through the painful measures needed to redress Britain’s ballooning debts. International confidence in the British economy, already weakened by Labour’s modest efforts at tackling the deficit announced in December 2009, slides dramatically. Investors take fright as the country loses its treasured “Triple AAA” status, and sterling collapses. The economy, already lagging far behind its major European competitors, plunges back into deep recession.

Certainly, Brazil has already received its fair share of hype from international investors, development economists, and the International Olympic Committee, which selected Rio de Janeiro for the 2016 Games. But as 2010 unfolds, the distance between Brazil and the rest of the BRICs will only grow. Russia long ago dropped out of the running, as Putin’s chilling, authoritarian tendencies became more apparent, scaring away foreign money. India is still growing strongly, but it’s locked in an unstable region with threats on all sides. China, of course, is still the delight of the international moneymen, but a number of risks—a real-estate or equity bubble, ethnic unrest, an environmental catastrophe—hover on the horizon.
For Brazil, it’s all upside. The economy will grow at 8 percent in 2010. Exploiting the new offshore oil find—the largest in the Western hemisphere in three decades—will create jobs for Brazilians and riches for the government. (It will also solidify Brazil’s enviable energy independence.) New infrastructure projects are in the pipeline as the country gears up for the 2016 Games. Next year’s presidential election will likely be a snoozer, but that’s only because it’s hard to outshine Brazil itself these days.
Protesters still occasionally hit the streets to condemn Ahmadinejad’s presidency, but the criticism only seems to have hardened the Iranian leader’s resolve. The Revolutionary Guards are expanding their economic and political power, imprisoning dissidents and snapping up state-owned companies at bargain-basement prices. The atmosphere is hardly suited to diplomacy and dealmaking. When another secret nuclear site is inevitably found, the United Nations will have no choice but to consider imposing sanctions, and today’s holdouts, including China and India, will have run out of excuses. The sanctions could be devastating for a country that imports two fifths of its gasoline, and much of its food and manufactured products. The economic hardship will fall mostly on the poor and middle class, but it won’t do much to hurt the intended targets. As a recent Brookings report notes, sanctions mean that more people will turn to smugglers for their daily supplies and occasional luxuries. And since the Guards control the black markets, their power will only grow.
Political discourse in Europe took an ugly, even racist turn, in 2009, with the Swiss voting to ban minarets on mosques, the French investigating a burqa ban, and other well-publicized instances of prejudice. Expect a backlash in 2010, especially if the economic recovery proves a mirage. Pay particular attention to France. With key nationwide regional elections in March 2010, its chronically troubled banlieues—the low-income, minority-rich housing projects that saw fiery youth riots in 2005—will again become hot political terrain. The trouble is, many of France’s politicians would actually benefit should the already-tense districts flare up again. In a new bid to steal voters away from the far-right, anti-immigrant National Front, President Nicolas Sarkozy is talking tough on security, immigration, and “national identity.” After the Swiss vote to ban minarets, Sarkozy sympathized with the “profound suffering” caused by “the feeling of losing one’s identity,” and called for “humble discretion” in worship. To many, that looks like cynical electioneering. Meanwhile, banlieue residents, many of them Muslim, might wonder what happened to Sarkozy’s promises to alleviate their suffering. Even before the recession, one third lived under the poverty line and the jobless rate for young men was 42 percent. Opposition parties like the Socialists are already pointing out that Sarkozy’s so-called “Marshall Plan” for the districts is flagging, and new strife would give them campaign-ready evidence.
Ultimately, fomenting new problems to obscure unsolved old ones is lazy politics—with the potential for incendiary consequences.
The bullish global economy and skyrocketing demand for crude oil until late this decade played into the hands of Venezuelan strongman Hugo Chávez. But the recession took the wind out of Hurricane Hugo, and now Chávez’s quest to convert Latin America to “21st-century socialism” is falling apart. A carnival of government spending and a disastrous price freeze promise to stoke inflation. Prices, up 30 percent in 2009, will head even higher in 2010; inflation falls hardest on wage earners and the poor, Chávez’s choice constituency, and decimates public investment in roads and electricity. As rolling blackouts, mounting government debt, and the Cold War with Colombia—Venezuela’s biggest trade partner after the U.S.—grow worse, the problems will paralyze the economy, hobbling factories and emptying supermarkets. Fresh milk, beef, and floor fans become luxury items. Chávez declares war on the daily bath, “a bourgeois indulgence.” Even with oil prices rebounding, Venezuelan GDP tumbles for the second year running, shrinking 2 percent in 2010 as the rest of the world pulls out of recession. Privation stokes despair and crime; the murder rate in Caracas, already the hemisphere’s most violent city, goes off the charts. The Bolivarian leader’s vaunted popularity tumbles. The mood among the humblest Venezuelans, who put Comandante Hugo in power in the first place, and the disgruntled middle class, accustomed to Western-style consumerism, turns mean. The military steps in to depose Chávez and restore order, as 21st-century socialism spins toward the familiar 20th-century tableau of scarcity, poverty, and chaos.
Western pundits heap scorn on Afghanistan’s Hamid Karzai, who is widely considered a weak, and possibly illegitimate, president. It’s astonishing, then, how little attention is paid to the crumbling reign of Asif Ali Zardari, who leads nuclear-armed Pakistan. Karzai, at the very least, has held office since 2001; Zardari has been in power only since 2008, and only because he’s the widower of the popular opposition candidate Benazir Bhutto, who was assassinated in late 2007. It’s becoming more and more difficult to imagine a scenario in which Zardari is still president at the end of 2010. He has almost no popular support: as of October 2009, barely one in five Pakistanis approved of the job he’s doing. The deeper problem, however, is his inability to exert control of the government. Experts say that the foreign office, the prime minister’s office, and the powerful military oppose his leadership. “Zardari is extremely unpopular right now,” says former CIA officer Bruce Riedel. While a coup is by no means certain, Riedel says, “it’s conceivable. It’s certainly the history of Pakistan.” Seeing as the military would bend even less to Washington’s will, a coup would offer a second troublesome partner in the Afghan war, a sober development indeed.
It’s become conventional wisdom that China is the key winner of the global financial crisis. After all, it’s growing 8 percent a year, politically stable, and flush with cash—the Chinese didn’t even feel the credit crunch thanks to a trillion dollars in new bank lending over the last year. But all that easy money has inflated stock and housing markets, leading many high-level investors to worry about a bubble. Indeed, a number of hedge funds have grown bearish on China, and even Chinese officials warn that a fair bit of the country’s new lending and investment has ended up as hot money in the market. Still, Beijing continues to ramp up production of the steel, cement, and chemicals needed to build huge, government-funded public works and manufacturing projects, even as there is plenty of spare capacity in the system. Green technology has become the latest fad (one third of the $600 billion stimulus program is dedicated to it), but a recent report from the European Union Chamber of Commerce in China cautioned that the Middle Kingdom is making far more wind power than anyone will be willing to buy. The result is that the China stock and real-estate bubble will collapse, leading to a destabilizing bout of global deflation. If this occurs in tandem with a banking crisis, a trade war, or a slowdown in Chinese growth, it could be a pop heard round the world.
As the “surge” began in Iraq in 2007, there was little reason for optimism: 40 to 50 bodies a day were turning up in Baghdad alone, and the country was in a state of civil war. But slowly, surprisingly, the number of civilian casualties began to drop. In fact, by the fall of 2007, the number of violent attacks countrywide were at their lowest point in three years. There were several factors that led to the success of the surge, but the most important was this: American troops shifted their focus to protecting the population.As the Afghan surge gets underway in 2009, the pundits are as pessimistic as they were about Iraq in 2007. But the surge will work, because Gen. Stanley McChrystal, the top commander in Afghanistan, has shown every indication that he’s learned the lessons of the Iraqi experience. He’s already pushed for a serious investigation into a NATO bomb attack in September that killed several civilians. McChrystal, in other words, is serious about protecting the population. That will help the U.S. military receive more and better intelligence as they spread out into communities and signal their commitment to ensuring safety. The secrets of the Taliban’s logistical networks and hideouts will be revealed, paving the way for a crushing offense. There’s a lot that’s different about Afghanistan in 2010 than Iraq in 2007. But the U.S. military’s “Hail Mary” pass worked in Iraq, and it will in Afghanistan, too.