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Uruguay’s President: A Role Model for Poverty

By: Hana Fischer - @hana_fischer - Dec 10, 2013, 2:20 pm

EspañolThe president of Uruguay, José “Pepe” Mujica, appears to have the admiration of the entire world. There are places where he has been distinguished as a role model, a president whom everyone would like to have. The reason for this fascination is due to his spartan lifestyle of simplicity. He may even be considered ascetic.

In a world where corruption abounds among rulers, the existence of someone who is not concerned with material goods or a luxurious life draws attention. However, his contempt towards what he calls “consumerism” is not the view that it is a life choice, which is a valid one. On the contrary, Mujica is an activist who labors to eliminate capitalism from the face of the earth. In other words, he is against individual economic independence, which is the same as individual autonomy.

As paradoxical as this may be, his words aim to “liberate” people from materialistic slavery. At the same time, through his acts — in his past as a guerrilla fighter and now as a ruler — he seeks to subordinate all individual spheres, including the spiritual one, to the masses. In other words, his fight is against the independent and creative individual. Some of this arose during his speech at the United Nations.

The most careful observers would have seen that the essence of Mujica’s speech was praise for poverty. This may be fine for a religious leader whose mission is to take care of parishioners’ souls. But, wouldn’t this be a dangerous attitude for someone supposed to lead the destiny of a nation? If he considers poverty the ideal and “pure” state, wouldn’t it be logical for him to lead his compatriots towards that goal?

Since his ruling, he has indeed applied many anti-competitive and collectivist policies, particularly to benefit unions. He has strongly pushed cooperative groups over individual initiatives, and he has done so with public resources.

In one part of his UN speech, Mujica said that our civilization created a deceitful offer — that if we continue on this road, it’s not possible for everyone to satisfy the hunger for a glutonous life of consumerism and waste. According to him, facts show the growth of the modern culture over time, guided by wealth accumulation and the market. We promise a life of consumerism, which in the end means a countdown against nature and humanity, so his contention goes: it’s civilization versus modesty, sobriety, and all natural cycles.

Amidst all this criticism of “waste” — which, according to Mujica, originates from free markets — and the so-called international audience’s appreciation for “sobriety,” let us analyze his behavior towards public resources, taken from taxpayers.

Pluna was an airline — partly state owned — that closed its doors unexpectedly, on July 5, 2012, during Mujica’s tenure. The alleged motive was an economically and financially unsustainable situation. Consequently, Pluna entered into liquidation, and Uruguay’s executive quickly approved a law (No. 18.931, published on July 23, 2012) that shielded all the planes, the most valuable assets, from the bankruptcy proceedings. Evidently, this mainly affected their legitimate creditors.

Leadgate — Pluna’s former private partner — had bought these airplanes through a Scotiabank loan, which was still outstanding. Even though Leadgate owned 75 percent of Pluna’s stocks and was in charge of managing the company, the state was the guarantor of this loan. Then, when Pluna’s private partner didn’t pay, the Uruguayan state had to accept these payments. On July 15, 2012, the executive also signed an agreement that established the exemption of Leadgate’s civil responsibility for Pluna’s future liquidation. In other words, Mujica assured indemnity, and the burdens were to be paid by taxpayers.

Despite this disastrous and embarrassing financial outcome, the president encouraged Pluna’s union of former workers to create an airline company in the form of a cooperative, under the name “Alas Uruguay.” The president then promised to give the workers all the possible support of the state. Among these benefits, there was a US$15 million loan from the State Development Fund for this new company.

These union workers intended to use this loan as their first working capital to start flying, but we still don’t know the day when that will happen. In addition, according to the agreement between the government and the group of workers, the state was going to give three planes to “Alas U,” which were “saved” from the bankruptcy assets and valued at $46 million. And if that were not enough, he gave them three years to pay it back.

However, this presidential-union project faced one “obstacle”: A few days ago, the Supreme Court of Justice declared the unconstitutional nature of the law No. 18,931, which approved Pluna’s liquidation.

In the face of this setback, neither the trade unions nor Mujica got scared. Former workers and current owners of “Alas U” asked the president for the state guarantee them, again, with Pluna’s airplanes. Their aim was to buy the airplanes from the liquidator after the ruling. Even though this is legally unfeasible, the president promised these workers to find a legal mechanism that could allow it.

If this agreement materializes, it will mean that the state will be double guarantor of these planes. In exchange, a union representative told the press that they will offer three cars and a truck — valued at $45,000 — as a security for “Alas U.” That, supposedly, will allow them to acquire three planes valued at $46 million.

This kind of “generosity” towards “friends” isn’t harmless. On the contrary, it’s impoverishing and makes the lives of ordinary people — those with no political “godfather” — more difficult. This can be proven by the following facts:

Since Pluna closed, the government has paid — with funds from general tax revenue — three installments of $8.7 million each. The next installment comes due on February 15, 2014, and it’s $8.6 million. Fiscal records show the government also owes Scotiabank $126 million. According to the opposition’s calculations, so far the whole Pluna process has cost the Uruguayans more than $250 million. For Uruguayan taxpayers this “adventure” is costing their pockets $600 per hour.

Given this kind of management of public resources and governmental actions, it’s no surprise that Uruguay has declined in global economic indicators and rankings.

According to the Global Dynamism Index of Grant Thornton — recently published by The Economist Intelligence Unit — Uruguay fell from 15th to 24th, out of 60 countries. The annual report of global competitiveness 2013-2014, by the World Economic Forum (WEF) and published in September, showed a decay in Uruguay’s indicator of 1.9 percent and its lowest value since its 2008-2009 report. That means the nation has dropped 11 places since last year’s world ranking — from 74th to 85th and the largest fall of all the countries in the region. Similarly, according to the Doing Business 2014 report by the World Bank, which measures the ease of doing business in 189 countries, Uruguay fell three places from last year’s position, from 85 to 88.

How can a person be called austere with his own capital when as a ruler he “wastes” money produced through someone else’s work? Need I say, double standard?

For all these reasons . . . Watch out with those rulers who praise so much poverty!

Translated by Marcela Estrada

Hana Fischer Hana Fischer

Hana Fischer was born in and resides in Uruguay. She serves as a writer, researcher, and international affairs columnist in different media outlets. A specialist in philosophy, politics, and economics, she has written several books and received honorable mentions. Follow her @hana_fischer.