Category: Brian McNicoll

US Interests Intertwined with Guatemalan Mining Operation


Guatemala faces many challenges — a 59 percent poverty rate, deadly drug trafficking, the lowest literacy rate in Central America, and topographic realities where only five percent of the soil can support permanent crops, yet agriculture accounts for half the jobs. 

On top of that, its low-growth economy and violent, largely unchecked drug trade have convinced a generation of Guatemalans to look elsewhere for peace and prosperity. Today, nearly eight people leave the country for each one that comes in. By comparison, nearly 16 people move to the U.S. for every person who moves out. 

Considering this epic drain of talent and resources, it is puzzling that Guatemala’s government, with the acquiescence if not approval of some elements of the U.S. government, has shut down the third-largest silver mine in the world in San Rafael in southern Guatemala on some fairly suspicious grounds. 

In July, CALAS, an anti-mining organization, convinced the Supreme Court of Guatemala to issue a provisional decision closing the mine pending the outcome of a lawsuit it filed that claimed the Xinca indigenous community was not properly consulted before the mine was built. 

The decision came despite the fact that, according to the most recent Guatemalan census, 98.6% of the area is nonindigenous and no Xinca are party to the lawsuit. 

The court overturned the decision in early September, but protesters have formed a roadblock near the mine, blocking entry a la the Dakota Access Pipeline protests in South Dakota. Also, Guatemala’s Ministry of Energy and Mines has declined to renew the mine’s export credential, which expired during the time the suspension was in effect.

The result is that nearly 8,000 people who live in one of the poorest parts of the Western Hemisphere and benefit financially from the mine are idled because activists from international groups such as United for Mining Justice, Mining Injustice Solidarity Network, the Center for International Environmental Law, and others convinced a court to stop work on a project because people who do not live near a mine and had not expressed any problems with the mine were perhaps offended.

The company is paying the workers for now, but the cash-starved government of Guatemala is missing out on $9 million per quarter in royalty payments and tax revenue, and Tahoe Resources, which operates the mine, is deferring a $12 million investment in the region. 

President Trump has called for reducing immigration at its source — in part by helping countries such as Guatemala become more hospitable to industry that could provide growth and keep residents from wanting to migrate. But hisaAmbassador there until recently, Obama-holdover Todd Robinson, seemed to work against those principles.

According to an article in the Daily Caller, Robinson made clear to Guatemalan lawmakers that Washington wanted Gloria Porras, an activist lawyer who had scandal problems of her own, to lead the Constitutional Court, Guatemala’s highest judicial body. One lawmaker said Robinson went so far as to supervise the vote and make clear to members they could lose their U.S. visas if they went against the ambassador. 

Trump’s ambassador, who recently just arrived in Guatemala, should make it clear that the new administration will support American interests in the region — making good on a promise to put “America first.”

Guatemala’s Supreme Court has acknowledged CALAS does not have a case, but its Constitutional Court is now headed by a lawyer who is expected to side against the mine. 

These cases — this state-sanctioned harassment of legally operating businesses — don’t come without costs. 

Losing high-paying jobs will mean a massive hit on government budgets, the elimination of $1 billion in American investment dollars and another generation of Guatemalans heading north in search of menial jobs in the U.S. or worse.

The government is already so cash-strapped that the U.S. military’s second-largest drug program is hindered by the Guatemalans’ inability to help. The president, Jimmy Morales, has said jobs, business and economic development are the keys to recovery and to stop the nation from hemorrhaging its young residents.

Guatemala can’t do much in terms of crops, but it is blessed with unique natural resources. Those resources can’t bring prosperity by themselves, but they can provide good-paying jobs that get the country up and running, improve its educational attainment, brighten its prospects and cause young Guatemalans to be excited about staying put in their home country.

We’ll soon know if Guatemala takes its responsibility to its young seriously. In late-September, the Supreme Court clarified that the mine had to reach out to Xinca communities in just four municipalities and denied a request by the mine to renew its export credential. The Constitutional Court, with its American-influenced corrupt chief judge, is expected to rule by the end of the year. 

The Trump administration does not have a lot of options when it comes to intervening in a court case in Guatemala. But it should inform the people there that our ambassador and our policies have changed, and we don’t support the loss of high-paying jobs for thousands of people in one of the world’s poorest regions. 

Brian McNicoll is a freelance writer based in Alexandria, Va.

Guatemala faces many challenges — a 59 percent poverty rate, deadly drug trafficking, the lowest literacy rate in Central America, and topographic realities where only five percent of the soil can support permanent crops, yet agriculture accounts for half the jobs. 

On top of that, its low-growth economy and violent, largely unchecked drug trade have convinced a generation of Guatemalans to look elsewhere for peace and prosperity. Today, nearly eight people leave the country for each one that comes in. By comparison, nearly 16 people move to the U.S. for every person who moves out. 

Considering this epic drain of talent and resources, it is puzzling that Guatemala’s government, with the acquiescence if not approval of some elements of the U.S. government, has shut down the third-largest silver mine in the world in San Rafael in southern Guatemala on some fairly suspicious grounds. 

In July, CALAS, an anti-mining organization, convinced the Supreme Court of Guatemala to issue a provisional decision closing the mine pending the outcome of a lawsuit it filed that claimed the Xinca indigenous community was not properly consulted before the mine was built. 

The decision came despite the fact that, according to the most recent Guatemalan census, 98.6% of the area is nonindigenous and no Xinca are party to the lawsuit. 

The court overturned the decision in early September, but protesters have formed a roadblock near the mine, blocking entry a la the Dakota Access Pipeline protests in South Dakota. Also, Guatemala’s Ministry of Energy and Mines has declined to renew the mine’s export credential, which expired during the time the suspension was in effect.

The result is that nearly 8,000 people who live in one of the poorest parts of the Western Hemisphere and benefit financially from the mine are idled because activists from international groups such as United for Mining Justice, Mining Injustice Solidarity Network, the Center for International Environmental Law, and others convinced a court to stop work on a project because people who do not live near a mine and had not expressed any problems with the mine were perhaps offended.

The company is paying the workers for now, but the cash-starved government of Guatemala is missing out on $9 million per quarter in royalty payments and tax revenue, and Tahoe Resources, which operates the mine, is deferring a $12 million investment in the region. 

President Trump has called for reducing immigration at its source — in part by helping countries such as Guatemala become more hospitable to industry that could provide growth and keep residents from wanting to migrate. But hisaAmbassador there until recently, Obama-holdover Todd Robinson, seemed to work against those principles.

According to an article in the Daily Caller, Robinson made clear to Guatemalan lawmakers that Washington wanted Gloria Porras, an activist lawyer who had scandal problems of her own, to lead the Constitutional Court, Guatemala’s highest judicial body. One lawmaker said Robinson went so far as to supervise the vote and make clear to members they could lose their U.S. visas if they went against the ambassador. 

Trump’s ambassador, who recently just arrived in Guatemala, should make it clear that the new administration will support American interests in the region — making good on a promise to put “America first.”

Guatemala’s Supreme Court has acknowledged CALAS does not have a case, but its Constitutional Court is now headed by a lawyer who is expected to side against the mine. 

These cases — this state-sanctioned harassment of legally operating businesses — don’t come without costs. 

Losing high-paying jobs will mean a massive hit on government budgets, the elimination of $1 billion in American investment dollars and another generation of Guatemalans heading north in search of menial jobs in the U.S. or worse.

The government is already so cash-strapped that the U.S. military’s second-largest drug program is hindered by the Guatemalans’ inability to help. The president, Jimmy Morales, has said jobs, business and economic development are the keys to recovery and to stop the nation from hemorrhaging its young residents.

Guatemala can’t do much in terms of crops, but it is blessed with unique natural resources. Those resources can’t bring prosperity by themselves, but they can provide good-paying jobs that get the country up and running, improve its educational attainment, brighten its prospects and cause young Guatemalans to be excited about staying put in their home country.

We’ll soon know if Guatemala takes its responsibility to its young seriously. In late-September, the Supreme Court clarified that the mine had to reach out to Xinca communities in just four municipalities and denied a request by the mine to renew its export credential. The Constitutional Court, with its American-influenced corrupt chief judge, is expected to rule by the end of the year. 

The Trump administration does not have a lot of options when it comes to intervening in a court case in Guatemala. But it should inform the people there that our ambassador and our policies have changed, and we don’t support the loss of high-paying jobs for thousands of people in one of the world’s poorest regions. 

Brian McNicoll is a freelance writer based in Alexandria, Va.



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Obama Looted Fannie Mae and Freddie Mac


President Obama never was shy about using his phone and pen to achieve what he could not get from Congress on regulatory matters.

But documents revealed last week show the Obama administration may have been willing to get around congressional decisions on spending by using a slush fund of sorts funded by the profits of Freddie Mac and Fannie Mae, the two government-sponsored home loan giants.

Fannie and Freddie are federally chartered enterprises which buy mortgage loans from banks and bundle them into securities that are sold to investors, thus freeing up capital so that banks can make more home loans.

They are government-sponsored enterprises, which means the government guarantees their loans. But they are run as private enterprises, with private leadership, a board of directors and, most significantly for this purpose, investors. They’re even listed on the stock market.

In response to the mortgage crisis of 2008, Congress passed the Housing and Economic Recovery Act, which provided $187.5 billion in government loans for Fannie and Freddie and placed them in conservatorship under the newly established Federal Housing Finance Agency.

But Fannie and Freddie were not in such bad shape after all, and in just a few years, they were turning profits and on course to pay back the government with interest and still have money to pay dividends to their investors.

In 2012, the Obama administration came up with a plan to divert those profits to the Treasury that became known as the Net Worth Sweep. Officials said the profits had to be diverted back into the Treasury because Fannie and Freddie were in a “death spiral” and would have to return for loans, and this money would be used for those loans. In other words, Treasury would take all the profits from Fannie and Freddie and hold them for future loans when they again found themselves in trouble.

But — the administration knew Fannie and Freddie were healthy for the long term, were unlikely to need any more loans and, in fact, had enough money to pay dividends. The dividends were a problem for the administration because it made it hard to explain why it needed to abscond with Fannie and Freddie’s $241 billion in profits, execute an improper taking against the shareholders, and spend the money without congressional approval. Some even pushed to change accounting methods to make Fannie and Freddie look worse on paper and/or force them to “need” loans to survive.

In 2013, Fairholme Funds, one of those investors, filed suit, charging that, in sweeping the money back into the Treasury rather than pay dividends as required by law, the government exceeded its authority and ignored the law’s requirements that it conserve the assets of the enterprises. The government’s response indicates Fairholme’s accusations are probably dead on.

One of the documents released last week said the proposal to sweep the funds into Treasury would have “three primary benefits:”

It would “eliminate the circularity of Treasury funding the GSE’s dividends payments to Treasury.” It would “…capture all future earnings at the GSEs to help pay back taxpayers for their investment in those firms,” and it would “reduce future draws… so such draws would only be made when needed to fund quarterly net losses.”

The administration could have “eliminated the circularity” by following the law and paying the dividends. There is no legal basis for unilaterally deciding to “capture all future positive earnings at the GSEs” — in fact, the law specifies otherwise. And the government’s own economists acknowledged future quarterly losses were highly unlikely.

Another document suggested announcing the change on Friday after markets had closed. “Rationale: GSE’s will report very strong earnings on August 7, that will be in-excess of the 10% dividend to paid to Treasury.” In other words, wait till late on an August Friday night — a media dead zone almost the equivalent of Christmas – to say that, even though the GSEs reported “very strong earnings” earlier in the week, it needed these prudent protections.

The documents released last week were made public only after years of government protest. The government has tried to keep 77,000 related documents from being released publicly and 11,000 from being shared even with attorneys for Fairholme.

The government’s out in this always was to claim that “since we intend to wind down the GSEs over time, the GSEs do not need to retain income in excess of amounts required to pay the 10 percent dividend,” which by making the government the largest investor with preferred stock, meant the money went to the Treasury and not the initial investors, such as Fairholme.

But the administration never offered a plan to wind down the GSEs, and the proposal would make little sense at this point.

What happened here is not hard to discern. The Obama administration had a convenient boogey man in the GSEs and a need for cash because of a recalcitrant Congress. It did not take into account the legal rights of the investors. The courts are slowly coming to this conclusion.

In the meantime, we’re left with another abuse of the public trust by double-dealing government insiders. If that’s not an argument for limited government, what is? 

President Obama never was shy about using his phone and pen to achieve what he could not get from Congress on regulatory matters.

But documents revealed last week show the Obama administration may have been willing to get around congressional decisions on spending by using a slush fund of sorts funded by the profits of Freddie Mac and Fannie Mae, the two government-sponsored home loan giants.

Fannie and Freddie are federally chartered enterprises which buy mortgage loans from banks and bundle them into securities that are sold to investors, thus freeing up capital so that banks can make more home loans.

They are government-sponsored enterprises, which means the government guarantees their loans. But they are run as private enterprises, with private leadership, a board of directors and, most significantly for this purpose, investors. They’re even listed on the stock market.

In response to the mortgage crisis of 2008, Congress passed the Housing and Economic Recovery Act, which provided $187.5 billion in government loans for Fannie and Freddie and placed them in conservatorship under the newly established Federal Housing Finance Agency.

But Fannie and Freddie were not in such bad shape after all, and in just a few years, they were turning profits and on course to pay back the government with interest and still have money to pay dividends to their investors.

In 2012, the Obama administration came up with a plan to divert those profits to the Treasury that became known as the Net Worth Sweep. Officials said the profits had to be diverted back into the Treasury because Fannie and Freddie were in a “death spiral” and would have to return for loans, and this money would be used for those loans. In other words, Treasury would take all the profits from Fannie and Freddie and hold them for future loans when they again found themselves in trouble.

But — the administration knew Fannie and Freddie were healthy for the long term, were unlikely to need any more loans and, in fact, had enough money to pay dividends. The dividends were a problem for the administration because it made it hard to explain why it needed to abscond with Fannie and Freddie’s $241 billion in profits, execute an improper taking against the shareholders, and spend the money without congressional approval. Some even pushed to change accounting methods to make Fannie and Freddie look worse on paper and/or force them to “need” loans to survive.

In 2013, Fairholme Funds, one of those investors, filed suit, charging that, in sweeping the money back into the Treasury rather than pay dividends as required by law, the government exceeded its authority and ignored the law’s requirements that it conserve the assets of the enterprises. The government’s response indicates Fairholme’s accusations are probably dead on.

One of the documents released last week said the proposal to sweep the funds into Treasury would have “three primary benefits:”

It would “eliminate the circularity of Treasury funding the GSE’s dividends payments to Treasury.” It would “…capture all future earnings at the GSEs to help pay back taxpayers for their investment in those firms,” and it would “reduce future draws… so such draws would only be made when needed to fund quarterly net losses.”

The administration could have “eliminated the circularity” by following the law and paying the dividends. There is no legal basis for unilaterally deciding to “capture all future positive earnings at the GSEs” — in fact, the law specifies otherwise. And the government’s own economists acknowledged future quarterly losses were highly unlikely.

Another document suggested announcing the change on Friday after markets had closed. “Rationale: GSE’s will report very strong earnings on August 7, that will be in-excess of the 10% dividend to paid to Treasury.” In other words, wait till late on an August Friday night — a media dead zone almost the equivalent of Christmas – to say that, even though the GSEs reported “very strong earnings” earlier in the week, it needed these prudent protections.

The documents released last week were made public only after years of government protest. The government has tried to keep 77,000 related documents from being released publicly and 11,000 from being shared even with attorneys for Fairholme.

The government’s out in this always was to claim that “since we intend to wind down the GSEs over time, the GSEs do not need to retain income in excess of amounts required to pay the 10 percent dividend,” which by making the government the largest investor with preferred stock, meant the money went to the Treasury and not the initial investors, such as Fairholme.

But the administration never offered a plan to wind down the GSEs, and the proposal would make little sense at this point.

What happened here is not hard to discern. The Obama administration had a convenient boogey man in the GSEs and a need for cash because of a recalcitrant Congress. It did not take into account the legal rights of the investors. The courts are slowly coming to this conclusion.

In the meantime, we’re left with another abuse of the public trust by double-dealing government insiders. If that’s not an argument for limited government, what is? 



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A Proposed Free Speech Tax from Republicans?


Congress is talking about an advertising tax again, and official Washington has returned to familiar battle stations.

The anti-taxers oppose it because it is a tax, and we clearly have enough taxes.  The comprehensive-reform crowd sees it as a reasonable revenue-raiser that conveniently seems to come exclusively from the pockets of the 1 percent.

Indeed, Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee and the man charged with writing the pro-growth tax plan, got a head start on generating economic activity last month when he said he was still considering the revenue-sweeteners in the plan his predecessor, Rep. David Camp (R-Mich.), submitted in 2014.

Among them was a proposal to allow businesses to deduct 50 percent of ad costs in the first year, then the other 50 percent over the next ten.  Since 1913, when the income tax was created, all ad expenses have been deductible in the first year because they are rightly viewed as business expenses – the same as rent, equipment, and salaries.

This set off a beehive of activity on K Street, as lawyers and lobbyists rushed out to make their clients’ views known again about an idea that has been proposed – and strenuously opposed – three times now in the last five years.

Brady also engendered some of that always elusive true bipartisanship with his announcement when 124 of his colleagues, led by Rep. Kevin Yoder (R-Kansas) on the right and Rep. Eliot Engel (D-N.Y.) on the left, signed on to a letter in opposition that read, “The potential for strengthening our economy through tax reform would be jeopardized by any proposal that imposes an advertising tax on our nation’s manufacturing, retail and service industries.”

Engel’s heartfelt conversion to pro-growth tax policy is encouraging even if it has more to do with the fact that ad agencies are disproportionately located in New York than any epiphanies on free-market economics. 

But this is not a pro-growth issue.  This is not about sticking it to the 1-percent business owners who count on the additional income to buy their fourth yacht and seventh mansion.  And it’s not about where advertisers are located – ads are created, sold, and placed everywhere in America.

More and more, the country is divided into The People Who Know What’s Best for Others and The People Who Think They Know What’s Best for Themselves.  This would be an enormous victory for the first group at the direct and severe expense of the second.  And if you think government won’t take advantage in such a situation, ask any Tea Party group about its tax status and ability to gather donations.

Advertising was taxed once, and only once, in American history.  An ad tax was enacted during the Civil War, when because of the dire situation of being virtually surrounded by his enemies, President Lincoln took unprecedented and never repeated liberties with the First Amendment.

Similar taxes, such as a levy on sales of ink and paper in Minnesota, have been struck down by the courts.

If such a tax were to become law, how long, in today’s charged political environment, until it would be doubled for disfavored products, such as tobacco or ammunition?  How long until companies owned by people who publicly favor one side are rewarded for their loyalty and those who run afoul of the powers that be see their tax bills go to unattainable heights?

Don’t think it couldn’t happen.  Numerous bills forbidding or taxing ads on alcohol, tobacco, and other societally controversial products have been introduced, as have some clearly self-interested bills, such as one to outlaw direct-to-consumer pharmaceutical ads.

Rep. Rosa DeLauro, a Democrat congresswoman from Connecticut, introduced legislation in 2013 that would have removed the deduction entirely for advertising “unhealthful food products” to children.  Then-rep. Dennis Kucinich (D-Ohio) introduced a similar measure in 2010.

Giving government the power to determine what is an advertisement; whether an ad advocates disfavored behaviors; and how much tax should be paid on ads that, for instance, criticize the government would effectively eviscerate the First Amendment.

Ads are information.  They provide signals that are essential to a free market and help consumers find the products they want at the prices they can pay.  The Supreme Court is clear that they are covered by the First Amendment’s “freedom of the press” provision.  The power to tax information is the power to control a message.

“Prohibiting full business deductions for advertising expenses would be indistinguishable from a government fee on the exercise of the First Amendment right to speak in a public park,” wrote Bruce Fein, constitutional scholar, at the Huffington Post.  “Such government conditions placed on the enjoyment of constitutional rights would be presumptively unconstitutional.”

The Joint Committee on Taxation said the Camp proposal would raise $169 billion from 2014 to 2023.  That’s decent coin, but there is no way it is worth it – especially when considering that advertising spending generates 16% of the nation’s economic activity.

Congress is talking about an advertising tax again, and official Washington has returned to familiar battle stations.

The anti-taxers oppose it because it is a tax, and we clearly have enough taxes.  The comprehensive-reform crowd sees it as a reasonable revenue-raiser that conveniently seems to come exclusively from the pockets of the 1 percent.

Indeed, Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee and the man charged with writing the pro-growth tax plan, got a head start on generating economic activity last month when he said he was still considering the revenue-sweeteners in the plan his predecessor, Rep. David Camp (R-Mich.), submitted in 2014.

Among them was a proposal to allow businesses to deduct 50 percent of ad costs in the first year, then the other 50 percent over the next ten.  Since 1913, when the income tax was created, all ad expenses have been deductible in the first year because they are rightly viewed as business expenses – the same as rent, equipment, and salaries.

This set off a beehive of activity on K Street, as lawyers and lobbyists rushed out to make their clients’ views known again about an idea that has been proposed – and strenuously opposed – three times now in the last five years.

Brady also engendered some of that always elusive true bipartisanship with his announcement when 124 of his colleagues, led by Rep. Kevin Yoder (R-Kansas) on the right and Rep. Eliot Engel (D-N.Y.) on the left, signed on to a letter in opposition that read, “The potential for strengthening our economy through tax reform would be jeopardized by any proposal that imposes an advertising tax on our nation’s manufacturing, retail and service industries.”

Engel’s heartfelt conversion to pro-growth tax policy is encouraging even if it has more to do with the fact that ad agencies are disproportionately located in New York than any epiphanies on free-market economics. 

But this is not a pro-growth issue.  This is not about sticking it to the 1-percent business owners who count on the additional income to buy their fourth yacht and seventh mansion.  And it’s not about where advertisers are located – ads are created, sold, and placed everywhere in America.

More and more, the country is divided into The People Who Know What’s Best for Others and The People Who Think They Know What’s Best for Themselves.  This would be an enormous victory for the first group at the direct and severe expense of the second.  And if you think government won’t take advantage in such a situation, ask any Tea Party group about its tax status and ability to gather donations.

Advertising was taxed once, and only once, in American history.  An ad tax was enacted during the Civil War, when because of the dire situation of being virtually surrounded by his enemies, President Lincoln took unprecedented and never repeated liberties with the First Amendment.

Similar taxes, such as a levy on sales of ink and paper in Minnesota, have been struck down by the courts.

If such a tax were to become law, how long, in today’s charged political environment, until it would be doubled for disfavored products, such as tobacco or ammunition?  How long until companies owned by people who publicly favor one side are rewarded for their loyalty and those who run afoul of the powers that be see their tax bills go to unattainable heights?

Don’t think it couldn’t happen.  Numerous bills forbidding or taxing ads on alcohol, tobacco, and other societally controversial products have been introduced, as have some clearly self-interested bills, such as one to outlaw direct-to-consumer pharmaceutical ads.

Rep. Rosa DeLauro, a Democrat congresswoman from Connecticut, introduced legislation in 2013 that would have removed the deduction entirely for advertising “unhealthful food products” to children.  Then-rep. Dennis Kucinich (D-Ohio) introduced a similar measure in 2010.

Giving government the power to determine what is an advertisement; whether an ad advocates disfavored behaviors; and how much tax should be paid on ads that, for instance, criticize the government would effectively eviscerate the First Amendment.

Ads are information.  They provide signals that are essential to a free market and help consumers find the products they want at the prices they can pay.  The Supreme Court is clear that they are covered by the First Amendment’s “freedom of the press” provision.  The power to tax information is the power to control a message.

“Prohibiting full business deductions for advertising expenses would be indistinguishable from a government fee on the exercise of the First Amendment right to speak in a public park,” wrote Bruce Fein, constitutional scholar, at the Huffington Post.  “Such government conditions placed on the enjoyment of constitutional rights would be presumptively unconstitutional.”

The Joint Committee on Taxation said the Camp proposal would raise $169 billion from 2014 to 2023.  That’s decent coin, but there is no way it is worth it – especially when considering that advertising spending generates 16% of the nation’s economic activity.



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