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GARCIA STRIKES AT CHAVEZ

Here’s something exciting: In the days since his spectacular comeback election as president in Peru, Alan Garcia has made some softie statements about wanting to get along with Hugo Chavez and having no intention of leading a regional antichavez movement.

However, Garcia’s first actions upon his election this weekend are telling quite a different story. He’s going after Chavez right at the source of his power: energy resources.

Garcia says he wants to triple Peru’s natural gas investment, something that’s already on the upswing, based on ongoing capital flight from Bolivia.

He pointedly says he wants to sell natgas to Mexico, which is experiencing shortages and must buy from Venezuela. If it now gets gas from Peru, and it has a surplus of it, Mexico will happily export the extra onward to over to California. Natgas doesn’t store well, so if you can’t use it, you often have to burn it, or ship it to someone else who can use it.

All of this is a striking double blow at Hugo Chavez and his obedient viceroy, Evo Morales.

The background tells us why:

Chavez has very bad relations with both Peru and Mexico, each of which have recalled their ambassadors from Caracas in the past year.

But aside from those battles of the leaderships, there are trade deals in the works. One of them is for Mexico to buy Venezuela’s abundant natural gas supplies.

The other is for Evo Morales to sell his gas at high markups to squeeze control and profit on all his neighbors. (Natgas is a strange commodity in that it can only be sold to neighbors by pipelines, or else through specialized facilities from port to port. Bolivia can’t just sell gas to Tibet if it likes, it has to sell to a neighbor, making it a highly regional market.)

For Peru to develop its natgas resources automatically increases the gas supply out there and makes it a competitor against Bolivia. Undoubtedly, Peru will probably be able to produce far more efficiently than Bolivia.

It accompanies Mexico’s efforts to develop its oil industry and further undercut Hugo Chavez, as was announced here.

But for Peru to sell gas to Mexico automatically makes it a competitor to Venezuela, too.

Both countries could be undercut by this masterstroke. Peru is stealing Chavez’s and Morales’ markets. I am frankly stunned by the brilliance of this chess move by Alan Garcia against the hemisphere’s two worst menaces.

What’s good about this? Peru benefits. If Peru can develop its natural gas, sell it at a fair price, make deals with Mexico, and win new markets, it will make lots of money for itself. If it can make tons of money, it can build roads, schools, retirement programs, microlending facilities and other things that will make life as Peruvian much better. Fewer poor Peruvians mean fewer future Chavista voters.

Net result: Peru wins, Mexico wins … Chavez loses, Morales loses. Absolutely amazing!

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