Remembering Mozambique Independence

My, how the world has changed. 

Mozambique independence in 1975 was a kind of high water mark of communism. Fresh from victory in Portugal’s 1974 military coup and its triumph in Vietnam, 'world revolution' arrived in southern Africa on June 25, 1975 with the People’s Republic of Mozambique.

In the days before the Portuguese handover, pundits in what was still Lourenco Marques wondered whether the Frelimo liberation movement would embrace Soviet communism or its rival Chinese variant. Newly arrived foreign correspondents counseled that clues would be revealed by where dignitaries were placed on the dais. Would the Russians or Chinese be seated closest to Samora Machel and Frelimo leadership?

Ian Smith in a Rhodesia, awkwardly perched between Mozambique and soon to be independent Angola, warned that the Kremlin’s objective was a belt of compliant states stretched across the subcontinent. In South Africa the Financial Mail worried that Frelimo would squeeze Smith economically by closing Mozambican ports to Rhodesian commerce.

It was in Mozambique that I observed my first revolution, if that’s the right term. In late 1974 and 1975 I made three trips to the country, always exhilarated by the ease with which blacks and whites interacted compared to the stifling constraint of apartheid. 

But the shortcomings of Portuguese rule were equally visible. Why were the cab drivers in a black majority city almost exclusively white? Why in 300 years had the Portuguese failed to build a highway between the capital and Beira, the second city 1200 km north?

Mozambique and Angola were rushed to independence because the coup plotters in Lisbon wanted a quick end to Portugal's African wars. For all of its bluster Frelimo had liberated very little Mozambican territory. By its own admission the liberation group was ill-prepared to assume power. Significantly the independence agreements for Mozambique and Angola made no reference to free elections or democracy. Mozambique was to be a one party state ruled by the vanguard party.

As independence approached Beira was curiously silent. The only activity was in the port. British frigates could be seen off shore. At the airport despondent settlers lined the tarmac awaiting refugee flights to Portugal.  On the train to Rhodesia I was one of only a dozen passengers.

Mozambique independence was my first assignment for NBC News. As the midnight hour approached for the celebratory hauling down of the Portuguese flag seasoned correspondents headed not to Machava Stadium but the suburban home of Fernando Fernandes, everybody’s L.M. stringer, to be in the queue for the telex machines that would get the story out.

Returning to Johannesburg it was strange to listen to Radio Beijing where the English program consisted of reading verbatim from Chairman Mao’s little red book. ANC broadcasts from Dar es Salaam voiced the empty rhetoric of imperialism’s retreat and the certainty of African revolution.  

Fast forward 40 years and 1975 is a time warp. Portugal rather quickly abandoned socialism and moved to democracy and eventual membership in the European Union.

Communism was repudiated by its main practioners, China and Russia.  A modernizing China moved towards a market economy in the late 70s while maintaining only the trapplngs of communism. Mikhail Gorbachev said the Russians had tried but failed to make communism work. In 1991 the Soviet Union imploded and fragmented into multiple states.

For its part Frelimo abandoned communism in 1990 and dropped ‘peoples republic’ from the country’s name. Property and enterprises that had been nationalized were privatized. With huge gas and coal deposits in the north, foreign investment is propelling rapid economic growth.

In the globalized world China has emerged as the biggest winner. Millions have been lifted  out of poverty not by communism but by free market capitalism.  China has risen to be the world's second biggest economy.

A visitor to Mozambique today witnesses a Chinese presence that is large and growing. The Chinese built Maputo’s modern airport. They are big investors in liquefied natural gas, minerals and agriculture.

One doesn’t have to see where they’re seated on the dais to know that the Chinese are winners. Hopefully, the Mozambicans are making up for lost time are becoming winners as well.

Berkshire 2015: Notes from the Warren and Charlie Show

OMAHA: As usual the Warren Buffett and Charlie Munger show played to thousands of the faithful at Omaha’s main sports arena.  The day-long Saturday session was chock full of jokes and wisdom for investors.

This 50^th annual meeting (my fifth) was noteworthy for the principals pronouncements on the euro currency and China.

 The Young and Not So Young in Omaha

There have always been questions about the euro but this time both Charlie and Warren were more skeptical, arguing that changes are required for the system to be viable. Munger said the € has done well, but the flaws must be addressed.  “They created something that is unwise,” he said,  “they’ve got countries in there that shouldn’t be there.” Obviously referring to Greece, he said in his inimitable way,“you can’t do business with your drunken brother.”

He complained that Greece had submitted false statements (assisted by a US investment bank) to get into the system.  The Europeans, said Munger, have to face up to the system’s flaws. Surprisingly, Buffett chimed in saying, “in its present form it’s not going to work.”  Combined, this is a stronger critique than had been voiced at earlier meetings.

Munger was ecstatic about what China has achieved in boosting living standards. it’s “totally miraculous” what the country has done so far. “I would have not believed a country of that size could move so far, so fast.”

The 91-year-old Munger believes President Xi Jinping is consciously modeling the successes of Lee Kuan Yew’s Singapore, rooting out corruption, even putting some of his friends in jail. Munger sounded almost like a member of China’s politburo, saying “they’ve found a way to unlock the potential of their people.”

Buffett agreed, saying it is amazing what China has done. “It blows me away,” he said. “As Charlie says, China and the US are going to be the superpowers for as far as the eye can see.” He said despite inevitable conflicts China and the US have to find a way to work together.

There was, of course, the usual wit. They said,”we think that any company that employs an economist has one employee too many.”

Munger had this observation about Germany: “Germans work fewer hours than a lot of people and produce a lot more.”

Buffett corrected a questioner who asked about his giving away 90% of his enormous wealth. Actually, said Warren, “I’m giving away 99%.”  Most of those billions go to the Bill and Melinda Gates Foundation. Buffett quipped, “there’s no Forbes 400 in the graveyard.”

The weather was super, springtime in Omaha.  And the show goes on as neither Warren nor Charlie gave any hint of stepping down.

A Stunning Lack of US Support for the IMF

Thessaloniki, Greece.  Some years back, I wrote that the annual meeting of the International Monetary Fund in Washington was Davos on the Potomac. It is, but it is much more.  Held two out of every three years in the IMF headquarters city, it is a much larger and more important gathering than the World Economic Forum.  

Marco Annunziata of GE, formerly the chief economist at Italy's biggest bank, calls the IMF meeting "an extraordinary concentration of policy makers and market participants...an opportunity to take the pulse of the global economy."

Created in 1944 by the British/American partnership that led the western war effort, the IMF is in Washington because then President Roosevelt and his Treasury Department wanted to keep an eye on it. (They weren't sure the wily Brits who wanted US money could be trusted)  

As the Fund gathered strength in the 1960s making emergency loans to countries in distress, US dominance in the financial agency that has always been headed by a European became paramount.

It still is. Washington alone has a veto over all major decisions as votes are weighted in accordance with economic strength and the US accounts for over 16% of the total.

And so it was that this year's meeting took place while the US government was shut and its treasury secretary distracted by calamity.  Put in simplist terms, with finance ministers and central from virtually all the world's major economies in town, the US government presented itself as unable to produce a budget, a task the IMF identifies as basic. 

Embarrassment to describe the political gridlock is too mild. Shock was a more typical assessment from the high-powered visitors. Frustration with US dithering on global and domestic policy prompted editorialists at Xinhua in China to write that it is time for the global economy to be "de-Americanized." 

They also had in mind the disgusting refusal of the congress to even consider a replenishing of IMF resources that the Obama administration and over 180 IMF member countries agreed to  in 2010.  The lack of both congressional action and administration prodding is galling since it is essentially cost free to the US taxpayer. 

Myopic politicians in both parties fail to comprehend the extent to which the IMF promotes US goals of free markets, financial rectitude, and a rules-based open world economy. That China and former "third world" countries are demanding more say in the IMF should be seen as a triumph of US policy.

Indeed, some US officials privately support increased votes for emerging market countries, something the Europeans--overweighted in the IMF-- do not. Former Treasury official Tim Adams, who heads the Institute of International Finance, says "the old concept of the first world leading in the IMF is outdated." A determination to get more say in the IMF is one reason that seemingly disparate Brazil, Russia, India, China and South Africa have banded together as BRICS, creating their own credit lines with plans to create a development bank. 

The US remains the dominant world economy with its dollar the world's reserve currency. That privileged status shouldn't be taken for granted. With chronic trade and budget deficits, if the US were not respected, Washington could be like Greece coming cap in hand to the IMF for help. Far-fetched as that seems, it could someday happen.  Aware that the US is still recovering from its deepest recession since the 1930s, most policy makers abroad want the US to succeed. They recognize that robust growth and prosperity in the US is in their own interest.

But they also want an end to gridlock and a plan to bring our financial accounts into balance. Without this, US leadership in the global economy will continue to erode. #