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In a previous episode (Madrid: the Capital of Capitalism), we explored the nature of governance in Spain's capital. However, the bigger picture for the largest country on the Iberian peninsula is one of political turmoil and deadlock. Economist Daniel Lacalle joins us for a thought-provoking discussion and a somewhat cautionary tale for the Caribbean region.

The current political stalemate stems from the 2017 Catalonia Declaration of Independence, which Lacalle describes as more of an unconstitutional pantomime of an actual coup d'état. Despite having no legal or even historical basis for independence, Lacalle notes the knock effects that this event has had on Spanish politics even to this day. The parties who engineered and participated in the coup have been allowed to form a coalition government which is unsurprisingly and consistently at loggerheads with the ideologically dissimilar ruling party it is now bonded with. A major point of contention is a recently passed amnesty law that allows the most egregious offenders, to be pardoned for sedition and thus remain in power. The result is a stagnant legislative and executive arm of government that is paralyzed by infighting. 

How does Spain's prosperity persist against these odds? Lacalle posits that the country is not where it should be economically. And that the government's growth reports are mostly deceptive, hiding inflationary gains following the downturn from the COVID-19 pandemic. This resembles the reporting from some Caribbean countries, keen on maintaining the delusion of a rebound after the hard-hitting effects of global tourism shutdowns. 

The key takeaway is the air of distraction from the real economic and political thorns in Spain's proverbial sides and the lengths to which a discordant government will go, to deflect from these issues. Once again, how can the Caribbean region learn from the pitfalls of political fracturing that can grossly impede the progress of even the world's largest economies? 

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On this episode of the show, Rasheed is joined by international lawyer Thomas Laryea, who specializes in the mediation process for sovereign debt restructuring. As a senior lawyer with the IMF, Thomas holds a unique vantage point at the tables of the negotiation between state debtors and creditors when financial instability requires a reevaluation of ongoing agreements.

The Caribbean is no stranger to Laryea's field, with several members having undergone their own restructuring processes. Of particular note is Suriname's own recent restructuring, which came under scrutiny in the public eye for it's long-winded execution and apparent delays brought about by the largest creditor, China. Thomas explores the intricacies of of the negotiation process, an outlines factors that could lead to the perception of overdrawn negotiations.

What makes a good or bad deal? There's no one size-fits all for restructuring. Sovereign debt restructuring is handled case-by-case. Dynamic solutions must be brought to the table to bring each party as close as possible to their perceived conditions for a win. The negotiations must also account for future investment opportunities and ideally provide new vehicles for additional financing in the long term.

Climate change poses a significant threat to the Caribbean region with many territories lacking the necessary financing to implement infrastructural and policy changes needed to weather the upcoming crises. Here, Thomas offers advice for governments seeking funding solutions across both private and public liquidity pools. The climate conundrum will be a broad challenge for small island states, and broad solutions will therefore be required to meet that challenge. 

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Navigate the Barbadian political landscape with Rasheed Griffith and CPSI Podcast Producer Shem Best. In this episode, we discuss the evolution and decline of governance on the island, starting with one of its most prolific Prime Ministers, Owen Arthur. What tipped the scales for the David Thompson administration's rise after over a decade of BLP rule? What disastrous decisions paved the way for Mottley's landslide victory in 2018? 

Barbados' Westminster-style government structure has created one of the world's most stable democracies with over three centuries of an uninterrupted parliament  (the 3rd oldest in the Western Hemisphere). However, its two-party arrangement has also generated predictable levels of stagnation throughout all levels of leadership which can result in knee-jerk reactions from the electorate, easily swayed by domestic and international pressures.  

We explore milestones in industry and policymaking that have produced one of the most tumultuous political environments the island has experienced since the early years of independence. From self-harming fiscal and monetary legislation to the resulting physical deterioration of the island's infrastructure and the compounding shocks of international events, join us in this two-part series on how the Gem of the Caribbean lost its luster. (All over afternoon tea)

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Where does Caribbean tech infrastructure stand today? Join Cybersecurity expert Neil Harper as we investigate the slowdown in innovation and standards adoption that could further erode the region's competitiveness and digital integrity.  

Could 5G benefit the Caribbean? Neil says yes, outlining the surface benefits of the latest in cellular data technologies and how they could provide resilience in a disaster-prone region. 5G offers the opportunity to bolster telecommunications infrastructure with a smaller footprint that is less susceptible to natural phenomena like hurricanes.

What about security? The Caribbean has become a breeding ground for nefarious cyber activity, owing to a failure to adopt more stringent policies to protect its citizen's data. With the digitization of entire industries underway, a more systematic and meaningful approach to how information is handled, both at the business and legislative levels, will be required.

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What lessons can we learn from the current tech regulation climate in the United States? CPSI Director Shane Glynn joins us for a great discussion on efforts to reign in the juggernauts of the technology sector and the market factors driving the latest wave of scrutiny over household brands like TikTok and Amazon.

The Caribbean may not be a major player in global information and technology, but it is a notable customer and beneficiary. Social media proliferation in the region facilitates the dissemination of news and politicians have jumped on the latest trends to reach a younger and more socially active electorate. Facebook, WhatsApp, Instagram, and TikTok allow ideas and movements to propagate throughout the region in mere seconds. The importance of these platforms has not gone unnoticed by US regulatory bodies. The courts argue that the ubiquity of these public forums has crossed the threshold for which they can operate without increased oversight. 

In the case of TikTok for example, the geopolitical tension between Washington and Beijing has brought the popular video-sharing network within the crosshairs of Congress. Shane discusses the broader implications of recent congressional hearings and the shift it could cause in the greater regulatory landscape. America's competitive and technological edge is often said to be driven by its open markets and de-regulatory practices. A leader in innovation and information access, The U.S. is powered by a thriving tech sector that largely functions without the fear of government incursion. But could this edge be dulled by a renewed focus on censorship?  What could this increased oversight mean for privacy, free speech, and accessibility for the satellite regions of the Caribbean and greater Americas?  

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In this fascinating episode, we dive into a more nuanced discussion for implementing dollarization in Argentina. Nicolás Cachanosky joins our Executive Director, Rasheed Griffith, for a detailed and technical rundown of the steps needed to transition the beleaguered economy to the US Dollar. 

Firstly, there's the equilibrium rate. How many pesos would be needed to redeem one US dollar? How would this price be established? The government could remove the country's capital controls, which have been used to maintain an inflated and unsustainable rate. This would allow the market to determine a new rate at which the country would dollarize. 

Secondly, you must dollarize the bank deposits. The checking and savings accounts of citizens and businesses must be converted to USD. This is the most straightforward step, as this form of money is purely digital. Bank deposits also act as a method of converting the physical currency into dollars when withdrawals are processed and redeemed in USD. 

Thirdly, there's the dollarization of the central bank. Argentina's central bank is insolvent. Government bonds would be a viable solution if Argentina's trust rating on global markets weren't firmly in junk territory. To get around this problem, Cachanosky suggests using a special purpose vehicle, transferable bonds, equities, and other financial instruments based on assets in the government's portfolio, such as pensions and health insurance. 

None of this can happen in a vacuum. Measures will also need to be taken to ensure that the policy changes are concrete enough to withstand a regime change. If successful, it could cause a cascade of financial reform across the Southern Cone and usher in a new financial era in Latin America.

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Citizenship by Investment or CBI programs tend to get a bad rap due to the misconceptions surrounding how they work and how they came to be. Dr Kristin Surak shares some valuable insights on the origins of "passports for sale" and goes into more depth on the true meaning of citizenship through the eyes of the people and the state. 

Several islands in the Caribbean offer prominent CBI opportunities. It is estimated that more than 40% of Dominica's government revenue is derived from their own CBI program, financing wide-scale infrastructure projects across the island, such as additions to their green energy generation and a new international airport. To truly understand the lucrative nature of CBIs, we'll explore the historical context behind their inception, the motivations behind those who invest in these programs, the suppliers involved, and the complexities of successfully executing such a multifaceted process. 

A passport may not necessarily mean citizenship.  Dr. Surak posits that to grasp the motivations behind CBIs, a better understanding of modern state and personhood concepts is required - what exactly does a foreign passport offer, and how does it differ from the perks of naturalization?

The history of CBI programs also sheds light on the driving factors behind their persistence. For example, Hong Kong's handover to China fueled much of the initial success of many CBI programs in the Caribbean and Canada. A passport can be an assurance or fail-safe against government-induced insecurity, evident by the number of Hong Kongers who took up the offer. 

But are these programs also a backdoor for unsavory individuals to bypass global restrictions? Not necessarily. The screening process for many of these programs is vigorous, even more so than Visa approval from countries like the USA. Bad apples are not unheard of, but this is not an indictment on the industry as a whole.

These programs are the lifeblood of several smaller economies and are a legitimate source of revenue for vulnerable small island states. The question should not be if CBIs are harmful because they aren't, but how best they could be utilized to enable development in the countries that rely on them. 

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Should Canada dollarize? Should sovereign debt be modeled as risk-free? Why is monetarism unfit for modern financial markets? John Cochrane, Senior Fellow at the Hoover Institute and blogger at The Grumpy Economist, joins Rasheed on the podcast. They discuss core themes in macroeconomics and why financial tools are underutilized in stabilizing economies to make them more conducive for growth.


Links and Recommendations

1. Toward a Run-free Financial System by John H. Cochrane
2. Fiscal Histories by John H. Cochrane
3. The Fiscal Theory of the Price Level by John H. Cochrane
4. Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks by Robert Shiller
5. Indexed Units of Account: Theory and Assessment of Historical Experience by Robert Shiller
6. Central Banking 101 by Joseph Wang (also, previous podcast with Joseph)
7. Money Changes Everything: How Finance Made Civilization Possible by William Goetzmann

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If you were asked to rank cities based on their level of libertarian policy implementation, it is very unlikely that at the top of the list, you would intuitively put Madrid. Of course, liberalism, classical liberalism, libertarianism, or capitalism are not usually thought of as being abundant in European cities.  But on today's episode, we are going to be discussing with Diego Sánchez de la Cruz his newest book, "Liberalismo a la Madrileña" (Madrid-style Liberalism). How and why Madrid has become the region in Spain that grows the most, generates the most income, offers the best public services, collects the most, and lowers the most taxes. 

Madrid achieved all of this while implementing the most radical liberal reforms in any European city in the last 15 years.  How exactly did Madrid become the Capital of Capitalism in Spain?

Book Link
Liberalismo a la Madrileña, Diego Sánchez de la Cruz

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Former Minister of Finance Manuel Hinds joins us for an eye-opening account of how El Salvador dollarized. We get down to the nitty-gritty of monetary policy and prudent governance in what should serve as a poignant lesson for the Caribbean region. 

Dollarization in Latin America is back in the economic headlights. The policy is simple. Encourage the use of US dollars as a unit of an account in a country other than the USA to aid the fiscal stabilization and long-term growth of that country, yet from all corners, you have professional economists slinging unjustified objections to dollarization.

Always in these cases, they never gave actual examples of countries that have dollarized. How did they do it? What happened on the ground? What were the empirical results? Instead, they retreat into abstract theorization. 

Through this discussion based on the world as it is, and not mere abstraction, it can be seen that dollarization is a simple, elegant, and powerful policy that any economy in Latin America and the Caribbean should adopt.