Executing a successful forward contract: Lessons from practical implementations

 Friday, 13 July 2018

Among many, maintaining quality and continuous supply are the two most important things to an exporter. Some exporters go the distance by themselves to make sure these two are in order. However, most rely on third parties. These third parties are basically “Field Agents” who make sure the supply is continuous and up to standard.

Regardless of how the value chain is set up, a larger transaction cost is associated with maintaining quality and continuity of supply. Therefore, different tools are in place to make sure these transaction costs are reduced. A forward contract is such a tool, designed to ensure the security of supply and adherences to quality specifications. Yet, there are many instances where forward contracts fail.




There is plenty of literature that suggests how a forward contract should be designed and implemented. Yet, we all know that the real-world implementation is different to theories and ideas. This write-up discusses some of the essential factors to be considered in implementing a successful forward contract. All points discussed herein are based on practical experiences. 

Land characteristics

Land ownership varies. Farmers cultivate in their own land, rented or leased lands, collective cultivation (land is owned or leased by one farmers but cultivation is done by a group) and even on encroached lands. It is very important that the land under the forward contract has a clear ownership. Ideally, what you want is to tie a privately-owned land to a forward contract. This gives enough incentives for a farmer to commit to the forward agreement.

Leased or rented land will also have incentives to commit to the forward contract, but there can issues with the continuity. Forward contract for short-term crops can be renewed every season or for a year or two. This renewal process or commitment for a longer period such as a year or two is easily possible if the land is owned privately. Lands that are under forward contract will get developed as the cultivation moves on. For lands that are rented or leased, this gives incentives for the owners of the land to stop leasing or renting out when the next season comes.

One way to get around this is to ask the farmers to go for a longer-term agreement with the owner of the land; an ideal time would be five years. Forward contracts on collective farming might also not be ideal. In theory, collective action makes sense. However, unless proper agreements are in place (who will take care of what, how farmers invest on inputs and how the allocation of labour is determined), collective farming can fail easily. Encroached lands should never be used for forward contracts.

Soil type, fertility and soil health is important for a better harvest. However, this is hardly checked in implementing forward contracts. Most of the time, we tend to believe the farmer rather than examining these conditions of the soil. Farmers in the dry zone uses paddy lands for vegetable cultivation during the “Yala season”. These paddy lands have the potential to give farmers a good harvest, however at the same time, unless proper management practices are applied (using raised beds), these lands can produce undesirable conditions.

A small rainfall can flood these lands, and they can be under water for several days. In such a case, unless raised beds are used, the cultivation can be damaged. Determining soil fertility and heath is important for many things. Understanding these conditions of the soil will help determine the best use of fertiliser. Any crop will carry a fertiliser recommendation. But based on the soil fertility and health, these recommendations need to be adjusted. If already cultivated lands are used, there is a pretty good chance that the land is heavily exposed to agro-chemicals.

In such a situation, being vigilant about the Maximum Residual Limits (MRLs) is very important. Otherwise, the harvests can easily register some of these chemicals and this may result in rejections at the export and import points (at quarantine checking). In determining soil health, it might not be possible to check every land for MRLs, but there are widely accepted scientific sampling methods that can guarantee a sufficient understating of the situation. Therefore, before a forward contract is signed, it is important to evaluate these criteria of the lands in terms of soil type, fertility and health.

A Sri Lankan smallholder who grows paddy, fruits and vegetables will have on average 1-1.5 acres available for cultivation. However, there are many farmers who have less than that. In agriculture production, unless it is a high value crop (such as vanilla), profits are possible only if economics of scale are achieved. There are many factors to this aspect, e.g., managing inputs, crop management (land preparation, weeding, fertiliser application and pest and disease management, harvesting and managing quality), involvement of agents who manage the forward contracts (these can be field officer of the organisation that issues the forward contract) and logistics and transports.

All this becomes easy and efficient if the land is big enough. Therefore, issuing forward contracts to very small lands is not advantageous. If okra is your crop, then on average it will produce 200 kg per acre. Harvesting can be carried out every other day (or sometimes daily). There are 15 harvests in a single cropping cycle. For an order of 1500 Kg, packed in crates, a small ‘Dimo Batta’ lorry is sufficient. We can manage this by getting in to forward contacts for 7 acres, or 7 farmers with one acre or 14 farmers with 0.5 acres or 28 farmers with 0.25 acres (we may suggest a mix of sizes as well, but having a uniform size across all farmers is again easy to manage). Managing a small number of farmers with larger lands parcels is comparatively more efficient.

Farmers commit to a forward contract in terms of land size. However, through practices it is shown that farmers hardly commit to that promised and size. This will impact the harvest greatly and can impact the logistics as well. A crop comes with a recommendation for planting. For example, an okra seed packet will have 3,500 seeds. One hole in the ground needs two seeds, and with a spacing of 2*2, on average the seed packet requirement for an acre is 6. Since we know the average yield for an acre if 6 seed packets are used, it is easy to forecast the yield for the total area cultivated. But if farmers do not follow the seed recommendation then this will fall apart. Therefore, when farmers commit to a land size, it is always important to get them agree on the seed requirement as well.

Let’s assume that you want to establish a collection centre in order to manage these forward contracts. Otherwise a door-to-door collection must be set up and that is an uncontrollable cost for anyone who manages the forward contracts. Therefore, it makes good sense to establish a collection centre. Then it also makes perfect sense to establish forward contracts close to the collection centre, so that logistic operations are optimised. 

What is ideal is to have a “cluster” approach. For a particular value chain it is important to establish forward contracts as a cluster closer to the collection centre. For a given value chain, there can be several clusters, cultivated at the same time, or several with time gaps (for example 15 days apart) so that a continuous harvest is guaranteed.

Managing cultivation

It is important that all farmers cultivate at the same time. With respect to short-term crops, this has to be the same day. We project the harvest attached to forward contracts based on the cultivation day and the number of plants. Hybrid seeds will give harvest on an exact day (given that the cultivation happens with proper crop management). This makes it easy to implement a logistics plan. Logistic costs can be minimised only if they are done with economies of scale. To plan a successful logistic operation, we need harvests at the correct time in correct amounts.

Having plantations on different dates will increase the logistic costs. Moreover, it will decrease the chance of fulfilling quotas for buyer forward contracts, in this case it could be the exporters or ultimate buyers overseas. Therefore, it is really essential that all the farmers in the program cultivate on the same day.

For any crop, the Department of Agriculture (DOA) provides a fertiliser recommendation. However, their recommendations are not for hybrid seed varieties. Almost all the export-oriented short-term vegetables and fruits are based on hybrid varieties. With the seed act, seed importers are responsible for managing a supply chain for these hybrid seeds.

Before introducing a seed variety, seed importers must do field trails and determine the yields, spacing requirements, fertiliser recommendations, pest and disease management and harvesting. However, unless you directly engage with these seed suppliers, this information is not publicly available.

For example, if a particular value chain adopts a particular seed variety, the organisation that manages the value chain and forward contracts can partner with the seed suppliers in order to engage in training and information sharing. This is very important, since these short-term value chains can easily fail with the wrong information.

Now, the fertiliser recommendations at the DOA is not wrong. They might not be sufficient for a hybrid variety. Therefore, a proper fertiliser recommendation has to be attached to the forward contract, so that farmers know what to follow. But again, these recommendations have to be revised with the soil conditions explained before.

There are chemical pesticides as well as bio-pesticides. Both these pesticides are available at the pesticides store for purchase. In addition, farmers usually come up with different experimental bio-pesticides that sometimes can be effective, at least in the short run. Issue with these bio-pesticides is that they are not proven by scientific experiments and there can be side effects.

Forward contracts are usually attached to export-oriented value chains. These crops are short-term crops. Therefore, it does not provide much room for experiments and side effects of unproven bio-pesticides, which can harm the total cultivation. Therefore, it is really important that farmers do not apply un-proven bio-pesticides for these crops. They can apply any bio-pesticides that are proven and registered at the pesticide register. But these have to be approved by the organisation that manages the forward contract. These bio-pesticides might carry chemicals that are banned in some export destinations.

There are produce tests which check for MRLs in the harvests, and it is extremely costly to find unapproved chemicals which can cause a rejection of the whole supply. The same holds for chemical pesticides as well. They have to be approved by the organisation that manages the forward contracts. Pesticide retailers might suggest pesticides for marketing purposes, but farmers should not follow their advice without prior approval.

Whatever the pesticide is, farmers need to follow recommendations in applying. Excessive amounts should not be applied, and pesticide application during harvesting time has to be carefully planned. All this information needs to be explicitly explained in the forward contract.

There are mortalities at different stages. Seeds have close to 1-2% mortality rate. However, there can be exceptional cases, and this information needs to be followed through with the seed suppliers. If the seeds packets produce higher mortality rates, this information needs to be conveyed back to seed suppliers, and it is possible to ask for compensations (maybe replacing seed packets). In such a case, farmers need to replace plants.

This is not a serious issue for lower mortality rates – e.g. below 10% – but if higher, it will seriously affect the yield projections. Plants can die due to diseases/natural hazards as well. Again, these plants have to be replaced. If the mortality here is also greater than 10% then the plants needs to be replaced immediately. Ideally, we also want farmers to maintain a crop record book during the cropping cycle. For some farmers, this is a normal activity, but some hardly do this although it is very important. This will help to track whether farmers have followed fertiliser and pesticide recommendations, especially in a case of exceeding MRLs. All this information and instructions to follow must be a part of the forward contract.

Harvesting and

managing quality

Each and every crop will have quality parameters when it comes to harvest. This will be specified in the forward contract. Since these vary based on the crop, this can be something attached separately to the master contract. Studies show that farmers tend to deviate from maintaining these quality parameters. This will only increase the rejections.

There should be a warning process if farmers are not adhering to quality specifications. One can allow a three-strike process, then farmers needed to be taken out of the value chain. Having lower quality produce at the collection centre will only increase sorting times, and that can create many transaction costs to the organisation that manages forward contracts. 

For all short-term crops, there is a recommended harvesting interval. For example, okra needs to be harvested every day or every other day. A different quality parameter (this is mainly about the size of the fruit) can be achieved by harvesting daily or every other day. If this is not done then the harvest will exceed the quality parameters (such as the colour, maturity and size). Then the rejections will be higher. Also, logistic plans are based on the harvesting campaigns. Hence harvest needs to be done on the correct day. The harvesting time is also important. In general harvesting has to be done in the early morning, before noon, so plants and the harvests will not get stressed.

Most short-term cash crops can be harvested multiple times during a crop cycle. The size of the harvest varies during these multiple harvesting times, but that is not significant for most seed varieties (there are varieties that will have a uniform harvest size during the cropping cycle, some will have a bumper harvest in the beginning and will drop down gradually).

However, the first couple of harvests might not provide an optimal harvest and this applies to the latter parts of the crop cycle as well. Therefore, for example, okra can be harvested up to 15 times every other day, but the first two harvests will be lower and the last two harvests will also can be lower. Most of the time, the last two harvests will not be the required quality, since both the plant and the land is losing its potential. This can be evident by off-colour and oddly-shaped harvests. This need to be specified in the forward contract.

If the organisation that manages the forward contracts realises the last few harvests are not up to quality, they may stop buying from that farmer. Usually farmers realise the potential of the crops and the land during the last phase of the crop cycle, and there are farmers that may inform that they will not be able to supply. But there are farmers who will try to push low quality supply through and try to blame the organisation for not buying. Therefore, the forward contract need to specify that if the produce is not of the required quality, it will be rejected, and if a farmer reaches three strikes (number of strikes depends on the organisation) then he will be taken off from the value chain.

Because of these things, when implementing a forward contract, it is important to anticipate a loss of harvest of a certain percentage and plan for that. For example, if all the forward contracts are tied to a supply of 1,000 kg, we need to plan cultivation aiming at 1,500 kg. This leaves enough room for rejections and non-compliances.

For every crop, there is a forecasted harvest. For example, as explained before, okra: if the proper seed, fertiliser and other chemical recommendations are followed, one acre will give 200 kg per harvest. Based on this information, we need to set a limit to the quantity we accept from the farmer.

For example, we can say: We will buy a maximum of 200 kg and minimum of 100 kg (this is assuming farmers face some

diseases and lose half of the

harvest). Otherwise, farmers expect the organisation to buy over-production and it is not economical for them to buy an under-production as well. Farmers always have the ability to sell the over-production to other parties and this needs to be specified in the forward

contract.

Accepting harvests

and rejection handling

In an ideal situation, supply that is managed by a forward contract needs to be associated with crates. This is the opportunity for an organisation to track the produce from farmer to consumer. Crates needs to be given QR codes. A permanent QR code has to be on the crates that identifies details regarding the crate batch. Then there needs to be another QR code added for every harvest delivery, which will highlight the details on that particular harvest.

For any given crop cycle, before the first harvest, farmers need to come to the collection centre and receive crates. They will then bring in the harvest to the collection centre on them after doing the first level grading. Collection centre will issue another set of crates on the same day for the next harvest, or the same crates with a new QR code. There are only a few organisations that implement traceability for agricultural value chains, but we need to understand the importance of this. If we want to implement forward contracts with export-oriented value chains, traceability must be a part and parcel of the whole operation.

Quality checking and grading needs to happen at multiple points so the final rejection is minimum. Ideally the first level grading needs to happen at the farm gate. There isn’t enough incentives for farmers to do a proper quality checking and grading at the farm gate level by themselves, unless there are proper incentives attached. The forward contract therefore must specify that they need to have a grading and quality checking done, and whatever is rejected can be sold outside.

A dis-incentive must come in to play here, saying that if the second level grading at the collection centre finds higher percentages of rejections, even after the first level rejection, then farmers will be penalised. This will motivate farmers to have a proper first level quality checking and grading. A final quality checking could happen at the factory as well. What is rejected at the collection centre can be given back to farmers. But if there are rejections at the export factory, it might not be possible for farmers to receive those rejections with enough time for them to resell at the local market. Therefore, forward contract must make sure the first level grading and the grading at the collection centre is maximised.

Price and payments

Forward contract will specify a forward price. This can be for a season (one cropping cycle) or multiple cropping cycles. For short-term vegetables forward contracts are usually for a one cropping cycle. The price is guaranteed for all the harvests in that particular cropping cycle. At the same time, the price is a signal of quality. Different grades will have different prices.

In general, once a forward price is agreed, there is little or no room for negotiation during the period of the forward contracts. All this information must be clearly specified in the forward contract. Payments usually happen a few days after collection. A forward contract need to specify when can farmers expect their payments, how they will receive payments (money, cheques or direct bank transfer) and whether there will be notifications on how much of their harvest was accepted and paid for. Unless these are specified clearly, forward contracts with farmers can run in to problems.

Summary

A forward contract is a tool that manages quality and continuity of supply in agricultural value chains. There are organisations that run successful forward contracts but the number of failed attempts is larger. Conditions for a successful execution of forward contracts can only be known through actual field attempts. A forward contract must make sure it covers the whole agriculture production cycle from land selection to final delivery.

(The writer is an agriculture and environment economist. He can be reached via chatura_rodrigo@yahoo.com or 94 763599243).

Gunpoint at the checkpoint

Israeli soldiers staff a checkpoint in the Bethlehem area.

 Ryan Rodrick BeilerActiveStills

Rehab Nazzal-12 July 2018

Israel’s military checkpoints in the occupied West Bank regularly cause nightmares for Palestinians. They prevent us from traveling freely from one town to another, commuting to work or school, accessing medical services and visiting relatives.

Some of these checkpoints were established approximately two decades ago in a failed attempt by the colonizing power to normalize oppression. One of these is the notorious Container checkpoint in the Bethlehem area.

On 23 June, I had a frightening encounter with Israeli forces at this checkpoint.

That evening I was among seven passengers in a shared taxi traveling from Ramallah to Bethlehem. The taxi had to slow down as we approached the checkpoint – which includes a concrete watchtower.

There was a long line of vehicles ahead of us, moving very slowly. The message sent out was clear: we should expect to be delayed.

The passengers in our taxi chatted about news reports they had seen. According to those reports, a Palestinian had been shot at the checkpoint that morning.

Our driver, as it happened, could confirm that the reports were true.

He had been at the checkpoint earlier in the day and had seen the man, 34-year-old Maher Jaradat, lying on the ground after being shot. Our driver pointed to the spot where Jaradat had lain.

Israeli soldiers prevented a Palestinian ambulance from reaching the wounded man, our driver added.

Jaradat had been bleeding on the sidewalk for more than an hour before an Israeli military ambulance reached him. When the ambulance arrived, Jaradat was arrested.

Our driver told us the man had been shot in the leg while walking towards the soldiers at the checkpoint. Palestinians are not allowed to cross the Container checkpoint by foot; only in vehicles.

Other accounts indicate that Jaradat was shot for arguing with soldiers or attempting to stab one of them.

After the shooting, the checkpoint was shut down. Hundreds of vehicles had to wait on either side of it before it was reopened in the afternoon.

Painful memory

Around 9 p.m., it was our turn to cross the checkpoint.

I was sitting in the front seat beside the driver. In the dim light we approached a number of heavily armed soldiers. They were surrounded by concrete blocks and cabins.

As we came closer to the soldiers, we suddenly realized that one of them was pointing his assault rifle directly at us.

I felt like I was unable to breathe.

A painful memory came back to me. I recalled the time I was shot in the leg by an Israeli sniper. That shooting occurred in Bethlehem during December 2015.

With his assault rifle pointed at our faces, the soldier ordered us to pull into the right lane. He seemed to be instructing the drivers of all Palestinian-owned vehicles – with green license plates – to pull over into the right lane, so they could be inspected.

Israeli-owned cars – bearing yellow license plates – were, by contrast, allowed to pass through without being checked.

All the passengers in our taxi went silent and the driver rolled down his window. Terrified, I lifted both my hands to express confusion. The soldier kept his gun pointed at us.

“What is wrong?” I asked, as calmly as I could.

“You,” the soldier replied. “You are wrong, you are dangerous, this car is dangerous. And all of you are dangerous.”

“But you are the one holding a gun,” I said. “Not us.”

Hate and anger

At that moment all I could think of was the man who had been shot at the checkpoint earlier that day.

The young soldier pointing the gun at us seemed to only hear his own voice. It seemed as if he was unaccustomed to hearing the voices of Palestinians, that he was unfamiliar with having his actions questioned by the people he oppressed.

His eyes and voice were saturated with hate and anger.

He demanded the IDs of all the passengers in our taxi, then handed them to another soldier while he moved to scrutinize the next vehicle. The female soldier holding our documents dictated our ID numbers to another soldier sitting inside a cabin and looking at a computer screen.

I immediately thought of Israel’s “wanted list,” which includes huge numbers of Palestinians linked directly or indirectly to resistance activities.

Among those considered as “wanted” are former political prisoners and their relatives, the relatives of people killed by Israel and people who participate in protests. Everyone on the list is at risk of being arrested or subjected to movement restrictions.

None of us in the taxi was on the “wanted list.” Our IDs were returned to us and we were allowed through the checkpoint.

As we traveled on, I thought about the man who had been shot that morning. It is possible that the soldier who pulled the trigger was questioned by someone of higher rank. Yet the soldier is unlikely to face any serious penalty. It was evident from the way the troops we encountered behaved that they feel superior to us, that they think we must be controlled.

We all remained silent until we reached Bethlehem.

Traveling from Ramallah to Bethlehem used to take me half an hour. That was before the Israeli occupation shut down the road originally connecting the two cities and before Israel built its massive apartheid wall in the West Bank.

My journey that evening took three hours.

Israel steals our land and water. And our time.

Rehab Nazzal is a Palestinian-Canadian artist, currently living in Bethlehem and teaching at Dar al-Kalima University College of Arts and Culture.

Arab publics overwhelmingly reject Trump's foreign policy, poll shows

Palestine remains important issue for Saudis, but fear of giving honest answers explains unprecedented high attrition rate

Palestinians prepare to burn portraits of Trump and Saudi Crown Prince Mohammed bin Salman during protest in Gaza, 13 April (AFP)

Dalia Hatuqa

Thursday 12 July 2018

As the Trump administration prepares to unveil its much-vaunted plan for peace between Israel and the Palestinians, it is likely to face an Arab public that is wary of its foreign policy in the region, and specifically on the question of Palestine.

In a survey unveiled in Washington DC, which interviewed more than 18,000 Arab citizens in 11 countries, most respondents said they held a negative view of US policy towards Palestine – 87 percent – up from 79 percent in 2016.

The Arab Opinion Index, conducted by the Arab Center for Research and Policy Studies in Doha, Qatar, found that 81 percent of Arabs also perceived US foreign policy towards war-ravaged Syria negatively, as did 82 percent on Iraq.

The Trump administration would benefit from really understanding the real concerns of the Palestinian people, which are not economic, as the Trump peace team might think.

-Tamara Kharroub, Arab Center Washington DC

"Over the years, we said, 'It can't get any worse, it can't get any worse', and it does get worse," said Shibley Telhami, a leading pollster and the Anwar Sadat Professor for Peace and Development at the University of Maryland.

"It's quite stunning when you look at [the Arab publics'] views of American foreign policy, but also in terms of ranking US foreign policy in comparison with other countries. That is striking that the US is lowest of all those countries," he said, referring to Iran, Russia, France, Turkey and China.

The Index, which has been published yearly since 2011, has become a barometer of Arab public opinion from Lebanon to Mauritania on issues ranging from local economy to global foreign affairs.

Deal of the century

The poll showed that more than 75 percent of the Arab world population believes that the Palestinian cause is also an Arab one, while naming Israel and the US as the top two threats to national security. Almost 90 percent of Arabs named Israel as a source of instability in the region.

"We've seen the Trump administration's Middle East peace team shop around the deal of the century to Arab leaders," said Tamara Kharroub, assistant executive director and senior fellow at the Arab Center Washington DC.

"What's remarkable about this deal is the profound lack of understanding of what the Palestinian people want; but not only that, it largely underestimates how the Arab people feel about Palestine."

She added that Palestinians, who are the main players in any peace plan, are being ignored.

For the first time since 2011, pollsters had a difficult time gauging Saudi citizens on Palestine; a large number of Saudi respondents quit the survey all-together when asked about the Palestinian cause.

"It's counterproductive," Kharroub said. "The Trump administration would benefit from really understanding the real concerns of the Palestinian people, which are not economic, as the Trump peace team might think."

As Gulf countries like Saudi Arabia, the UAE and Bahrain recently began to court Israel more overtly (united in their animosity towards Iran), the survey showed that an overwhelming majority of respondents (87 percent) disapproved of their home countries recognising Israel. Asked to elaborate on their reasons, many cited Israel's mistreatment of Palestinians and its colonial policies.

Only eight percent said they would accept some kind of formal diplomatic recognition. Those who did made such recognition conditional upon the end of Israel's occupation of the West Bank and Gaza Strip and the formation of an independent Palestinian state.

According to Dana al-Kurd, a researcher at the Arab Center for Research and Policy Studies, political – not religious – reasons were given when asked whether or not countries should recognise Israel.

"Arab opposition to Israel is [often] painted in religious terms or it's claimed to be some sort of inherent anti-Semitism," al-Kurd said. "But our data shows that across self-identified religiosity levels, the majority of respondents oppose recognition of Israel. Religiosity or Islam versus Judaism are not the reasons behind this rejection."

Saudis reticent

For the first time since 2011, pollsters had a difficult time gauging Saudi citizens on Palestine; a large number of Saudi respondents quit the survey all-together when asked about the Palestinian cause. Approximately 36 percent of Saudi Arabian survey participants said they did not know or declined to answer, in contrast with 5 percent in the rest of the countries polled.

Saudi Arabia's repressive domestic political atmosphere coupled with the ascension of Mohammed bin Salman to position of crown prince as well the regional shift in Gulf-Israeli relations have affected the way Saudis engaged with the survey, pollsters believe. 

Saudi commentators have recently used public platforms to normalise relations with Israel. In a column published by Alsharq Alawsat in May, Saudi author Amal Abdul Aziz Al Hazzani, for instance, downplayed the impact of the US embassy move to Jerusalem, praising Trump as a man of his word.

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Chief Palestinian negotiator says US peace plan will 'normalise Israeli apartheid'

Al-Kurd said that pollsters used various survey methods, including what's known as 'list experiments' to illicit true feelings, and were able to ascertain that Saudis still supported Palestinians, despite reports of the contrary.

"The Palestinian cause remains important to the Saudi sample, but that fear of responding truthfully explains the lack of response and high attrition rate," al-Kurd said.

The issue of Palestine remains a central issue for all Arabs, agreed Kharroub. Since polling started in the Arab world, the data has been showing that the Palestinian cause is "an issue of justice that the Arabs see or lack thereof in the US approach to the region", she explained.

"That's why it remains an important factor driving developments in the region, from recruitment by extremist groups to regional stability, Arab attitudes towards the United States and even US national security."

'Lesser evil': how Brazil's militias wield terror to seize power from gangs

A favela in Rio de Janeiro, Brazil. Militias, which often includes former and serving police officers and firefighters, have taken control of swaths of Rio’s western suburbs. Photograph: Silvia Izquierdo/AP

Dom Phillips in Seropédica @domphillips-Thu 12 Jul 2018

Paramilitary groups implicated in the killing of Rio’s city councillor Marielle Franco have taken control of swaths of areas by imposing ‘violence, death and summary execution’

The gunmen wore black military fatigues and ninja masks when they arrived in Seropédica, a nondescript town of 84,000 near Rio de Janeiro, and began systematically driving out the drug gangsters.

Those who refused to leave were killed.

“There were three weeks of deaths,” said one resident – who like many locals was still unwilling to be named three years later. “Many people know. They just don’t open their mouths.”

Known as “militias”, paramilitary groups – which often include former and serving police officers and firefighters – have quietly taken control of swathes of Rio’s western suburbs since they emerged in the early 2000s.

As they did in Seropédica, they commonly arrive in a neighbourhood claiming they will drive out criminals and dealers – but soon start their own extortion and protection rackets.

“It was like a tax, that’s what everyone said, to keep the security of the neighbourhood,” the resident said.

Since then, various militia groups have exerted discreet yet effective control of Seropédica and other neighbourhoods across the hardscrabble flatlands around Rio, known as the Baixada Fluminense.
Militias commonly arrive in a neighbourhood claiming they will drive out criminals and dealers, but soon start their own extortion and protection rackets. Photograph: Wilton Junior/AP

Their money-making operations include controlling or extorting “taxes” on business including cooking gas sales, pirate cable TV and internet networks and minibus transport routes.

Unlike Rio’s drug gangs, they do not man checkpoints nor patrol on motorbikes with machine guns slung over their shoulders – but they routinely murder those who cross them, disobey them or speak too freely about them.

“Homicide is used as an instrument of force and to impose terror on the community,” said Daniel Braz, coordinator of Rio state prosecutors’ organised crime group.

After years in the shadows, Brazil’s militias are now back in the spotlight after the assassination in March of Marielle Franco – a black Rio city councillor – and her driver, Anderson Gomes.

Franco had been an outspoken critic of police killings in the city’s favelas, and her murder drew international condemnation and demands for an independent investigation.

No arrests have been made over the double murder, but police believe militias were involved.
“They have the capacity for this, they have the weapons for this, they are more organised than the drug trade for this,” said Detective Alexandre Herdy, head of Rio police’s organised crime department. Franco’s killers were “professionals, for sure”, he said.

Franco was on a council commission overseeing the “federal intervention” in which the army took over Rio’s crumbling security from its cash-strapped state government, which is so broke it can’t afford to repair police cars.

But before becoming a councillor, she had also assisted state legislature deputy Marcelo Freixo on a 2008 inquiry into the militias. That marked the first high-profile investigation of the groups, which before then had hidden under a veneer of respectability – and it led to hundreds of arrests. Freixo received death threats and lives under police protection to this day.

José Alves, a professor of social science and coordinator of a violence research group at the Federal Rural University of Rio de Janeiro in Seropédica, traced the militias’ roots to death squads formed in the 1970s by police officers in the Baixada.

“It is a growing power structure, built on violence, death, summary execution,” he said.
When militias began appearing in west Rio neighbourhoods around 20 years ago, many residents initially welcomed the paramilitary gangs who styled themselves as “community self-defence” groups and promised to cut crime and drug dealing.

People react at the scene where Marielle Franco and her driver have were shot to death in Rio de Janeiro, Brazil, on 15 March. Police believe militias were involved. Photograph: Leo Correa/AP
Many conservative Brazilians are happy to turn a blind eye to murderous solutions to the country’s violent crime epidemic.

And politicians initially refused to condemn the militias.

In 2006, Rio mayor Cesar Maia said they were “much less” of a problem than the drug trade. Eduardo Paes, who later served as mayor during Rio’s Olympics, said they had “brought tranquillity” to west Rio’s Jacarepaguá neighbourhood.

“That’s how they expanded. They had this pseudo-moral agenda, to maintain order in those communities, committing homicides related to the issue of drug users and petty criminals,” said Fabio Corrêa, from the prosecutors’ organised crime unit.

Nowawadays, some 2 million people live in militia-controlled areas, an investigation by the G1 news site found.

The groups are always looking for new revenue streams, Braz said. In some places they parcel up and sell areas of land whose ownership is unclear. In Seropédica, they also impose a “tax” on local sand quarries and construction companies.

But they also reduce street crime and obvious drug dealing – prompting some residents to describe them as a lesser evil.

“Taking aside the bad things that the militias do – the way they kill people, their cruelty – in general I think they are a good thing,” said one Seropédica resident.

Connections to police officers and elected politicians help the militias sell this line of argument.
When arrested, milicianos often try to convince police officers that they are on the same side, Herdy said, adding that police see drug gangsters and militia members differently because of the ways they react to arrest.

“The drug trade is dirtier,” he said. “The trafficker will shoot at you, the miliciano still has the culture to not react … this has some weight.”

Image of a Facebook video of a militia member. A Seropédica resident said: ‘Taking aside the bad things that the militias do – the way they kill people, their cruelty – in general I think they are a good thing.’ Photograph: Facebook

Freixo’s 2008 inquiry into militias in Rio recommended charges against 225 people, including city councillors, police officers, prison officers and firefighters.

Among those later jailed were two former police officers turned lawmakers: state legislature deputy Natalino Guimarães and his brother Jerônimo Guimarães Filho, a city councillor. The two men were found guilty of running a militia group in west Rio called the Justice League and remain imprisoned.

Under different leaders, a version of the Justice League is still Rio’s most powerful militia group, police and prosecutors said – and it is believed to have expanded its loose network into towns of the Baixada, including Seropédica.

The militias’ control of electoral propaganda in their territories has helped them build strong links with some local politicians. Speaking anonymously, a police source said that at least three of Rio’s serving councillors are believed to have close ties with the groups.

“They are the only criminal group in Rio who transform territorial domination into political power,” said Freixo.

In May, Rio’s O Globo newspaper reported that a collaborating witness had testified to police that Franco’s killing was organised by Orlando de Araújo, a former police officer and militia member and Marcello Siciliano, a Rio councillor.

De Araújo – who is imprisoned for illegal possession of a firearm and faces charges of homicide and armed criminal organisation – denied the allegation in a letter from prison, local media reported. Siciliano denied the allegation in a press conference.

Brazil’s security minister, Raul Jungmann, confirmed both men were being investigated.

Days later, TV Globo show Fantastico broadcast police wiretaps between Siciliano and an alleged militia member from Rio’s west zone. Siciliano addressed the man as “brother” and signed off saying: “I love you, brother.”

He told the programme he had no connections with militias.

Today Rio’s militias are changing, said prosecutor Corrêa. Some militias allow drug dealing in their territory, or have even made deals with the drug gangs. Meanwhile, some drug gangs started taxing businesses and services.

It is increasingly hard to tell Rio’s criminal organisations apart.

French President Macron’s method is motion

At last week’s European summit, the leaders spent most of the time discussing immigration restrictions. Yet, the Syrian rush through the Mediterraneanis now a trickle. The African migration is down by 95%. 

2018-07-07

No wonder that Emmanuel Macron, the young (40) President of France, was frustrated. Although he spent hours trying to liberalize the consensus on immigration restrictions, he really wanted to spend most of the summit on reforming how the Eurozone works. An inner-group of 19 members uses the Euro as their currency. 
The heads of State went backwards, spending most of the summit’s time on yesterday’s problem. Macron wanted to focus on the future, to stave off a repeat of the near collapse of the Euro eight years ago. 

A month ago, he and Chancellor Angela Merkle of Germany fashioned the Meseberg Declaration, an 8-page document. The two countries make up nearly half of the Eurozone economy. The novel idea pushed by Macron and, until Meseberg, resisted by Merkel is a Eurozone budget. The smaller countries like the Netherlands and Denmark don’t see a need for it. Macron sees it as a must priority for Europe. In the end, Macron and Merkle won the tentative support of the summit. It would be funded by a financial transaction tax. There is also, they say, a need to overhaul the European Stability Mechanism (ESM) which overseas bailouts to troubled member States. Macron and Merkel also want to see a Eurozone budget with its own finance minister. (Merkel wants it to have only a small budget.) 
The next summit is in October. Macron in his usual way (he only takes four hours sleep) will argue and push to make sure that he will then get the go ahead. A lot depends on Merkle, Macron’s good buddy, still being in power. Only she can stand up to the German economists and politicians who resist the idea. 
Who is this Emmanuel Macron? He came up so fast and unexpectedly in the May election last year that we non-French only know him superficially. A new book, “Revolution Francaise” by the long-time Economist’s correspondent in Paris, Sophie Pedder, gives us real insights. It’s a piece of writing that has dug deep into his character and activities, laced with many interviews. 

Before his own presidential campaign, Macron watched replays of Donald Trump’s speeches. He grasped the way in which Trump forged a link with the people, using their language and harnessing anti-establishment rage

After reading the book, it becomes clear that if anyone has the brain, the clarity and the forcefulness to drive Europe into the future it’s Macron. “The politicians’ word is exhausted,” he told Pedder. Although not a religious man, he has a moral instinct. He wants to pull Europe further together so it can live up to its founders’ aim to avoid any more war on a continent that has seen more wars than any other part of the world. 

Macron is certainly not a conventional person. His whole campaign for the presidency when he shoved aside the traditional parties including the quasi-fascist but popular National Front, broke all the rules. His romance and later marriage with a woman 23 years older than him, which began when he was a schoolboy and she, his teacher, is rare in any country. It still looks strong after many years of togetherness. As Christian Dargnat, a friend said, “He puts his own liberty above everything.” This seems to give him the conviction he needs to push his antiquated country and Europe forward. 

Already, he has done what every recent president has failed to do: persuaded the unions that they can’t avoid root and branch reforms. Many if not most thought that this was an impossible task. It impresses the Germans who are worried about France’s long time economic profligacy. 

In one interview, Macron told the author, “If we want a modernizing agenda, we need to put together two-thirds of the Socialist Party (of which he used to be a member), all of the centrists, and part of the centre-right. That would give us a pro-European market-friendly majority in favour of modernizing the social model.” For starters 45% of his party’s members of Parliament are women. 

His attitude towards the economy has been much influenced by Indian economist Amartya Sen who won the Nobel Prize. Sen has shown that a more equal society produces more growth as well as empowering the people. Sen, Macron says, “Structured a lot of my thinking on social justice.” One of the first measures Macron put in place was to halve the size of primary-school classes for 5 and 6-year olds in poor neighbourhoods.  

Macron is certainly not a conventional person. His whole campaign for the presidency when he shoved aside the traditional parties including the quasi-fascist but popular National Front, broke all the rules

Before his own presidential campaign, Macron watched replays of Donald Trump’s speeches. He grasped the way in which Trump forged a link with the people, using their language and harnessing anti-establishment rage. Of course, he’s not Trumpian. He’s more like Obama, cerebral and unflappable. Unlike Obama, he has a majority in Parliament. Macron, I think, is going to get things done. His method is motion. 

Copyright: Jonathan Power. 

Note: See my website: www.jonathanpowerjournalist.com 

 (Note: For 17 years Jonathan Power was a foreign affairs columnist/commentator for the International Herald Tribune/New York Times.)   

‘Take Back Control’? Brexit Is Tearing Britain Apart

Prime Minister Theresa May thinks it’s her duty to deliver Brexit, but the outcome could entail splitting her party and impoverishing Britain.

A man protests against Brexit outside the Houses of Parliament in London July 5. (Dan Kitwood/Getty Images)

BY ROBIN OAKLEY-

 JULY 12, 2018, 1:14 PM

When U.S. President Donald Trump half-suggested that he should postpone his visit to Britain because of the country’s state of turmoil, he was for once guilty of understatement. Since the 2016 referendum on leaving the European Union, turmoil has been Britain’s default setting — and it looks likely to get worse rather than better. It has taken British Prime Minister Theresa May all that time to achieve even a modicum of agreement in her cabinet on the negotiating stance to be put to the EU. When she finally produced her plan, it precipitated the resignation of David Davis, the minister in charge of Brexit negotiations. Within hours of Davis resigning so, too, did Boris Johnson, the uber-ambitious foreign secretary; he could not bear to be outflanked as the hero of the Euroskeptics. A weakened but persistent May remains in her job only because neither side of the Brexit argument can agree on who should succeed her.

Virtually every other function of government outside Brexit has been sidelined. Both major parties are split on Europe and the referendum vote that was called by the careless former Prime Minister David Cameron — not out of national interest but as a tool of Conservative Party management — to help put an end to the bickering over Europe. Instead, the bickering has intensified; it has brought a sourness, a sheer nastiness to national politics that has never been seen before.

There simply is no Brexit model that satisfies the Conservative Party’s right wing; the cabinet; Northern Ireland’s Democratic Unionist Party, on which May depends for a parliamentary majority; and the Conservative members of Parliament who voted — along with 48 percent of the country — for Britain to remain in the EU. The Brexiteers, including Johnson, Davis, and another would-be candidate for the Tory leadership, the backbencher Jacob Rees-Mogg, never believed that they would win the referendum. They have never offered their own detailed alternative to May’s plans. Cameron handed them a surprise bonus, and they are determined to hang on to every shred of it. Anything that falls short of their referendum slogan “Take Back Control” would be seen as a treasonous denial of the people’s will; they see themselves as the only legitimate interpreters of that will. Successful negotiations require both sides to make concessions, but anything May does with a view to achieving a deal with the EU the Brexiteers seize upon as a betrayal.

It all goes back to the Conservative Party’s deposition of Margaret Thatcher after she won the party three elections. Alarmed by her increasingly shrill denunciations of the EU, Thatcher’s fellow ministers feared she would lose them the next vote. They dumped her and were never forgiven by the party’s right, for whom opposition to the EU has ever since been a badge of loyalty to be worn in celebration of the great days of Thatcherism. Thatcher was a politician who made the weather, a leader who made a real difference taming the unions, winning back the Falklands, and negotiating back a chunk of what she called “our money” from Brussels. But she also turned the Conservative Party into an ideological party as much interested in winning arguments as winning elections — and her successor is now paying for that.

The Conservative Party has traditionally been the business party, and as a result opinion polls have usually found it rated as the best party to run the economy — an important advantage. But lately, as business chiefs have implored May and her colleagues to get their negotiating act together and to save jobs and inward investment by staying in as much of the single European market as possible, the Conservative Brexiteers have dismissed such advice as the voice of white flag-waving “Remoaners.” They insist it is all propaganda, calling it “Project Fear.” While former Conservative Prime Minister John Major was warning his part to be concerned not just with the “will of the people” as expressed in the referendum but with the “well-being of the people,” Johnson’s reaction was to say, “Fuck business.” Even his replacement as foreign secretary, Jeremy Hunt, claimed it was “completely inappropriate” for Airbus to comment on Brexit negotiations despite the aerospace giant generating more than $2 billion in taxation and employing 14,000 people. As other Conservatives pointed out, Labour’s leader, the left-winger Jeremy Corbyn, will always win any contest with the voters in criticizing business.

Many Brexiteers greeted the referendum by insisting that a competitive Britain — freed from Brussels’s regulatory shackles — would strike deals all over an eager world; there was nothing to fear from the cold, fresh breeze of competition. Instead, Britain faces a protectionist president in the United States and a growing world trade war that looks a rather less enticing prospect. Concern about immigration was also a major factor in the referendum “no” vote. The Leavers promised to take back control of British borders, implying a major cut in the number of immigrants to the country. As a former home secretary who had failed to keep previous Conservative manifesto promises to reduce the number of immigrants to tens of thousands a year — rather than hundreds of thousands — May long seemed obsessed with the issue. The fact that free movement of labor between EU countries is a condition of single market membership was why she rapidly insisted that Britain would leave it. But all along, the number of immigrants to Britain from the rest of the world, over which ministers have full control, far outnumbered those from the EU.

Immigration is an essential driver of the British economy. A recent Migration Advisory Committee report consulting more than 400 employers found that most worried about any restriction of their access to EU labor. They consider EU workers more motivated, skilled, and willing to work unsocial hours. In social care, health care, and the hospitality industry, the proportion of the workforce from the European Economic Area (EEA) has tripled since 1997. May has learned on the job: she has come to realize that the easy transfer of workers across borders is vital to modern global commerce.So now she talks of an “appropriate labor mobility framework.” Johnson grumbles that that means she will make further concessions on EU immigration.

With Johnson returned to the backbenches (and no doubt to lucrative columns in Brexit-supporting media), life will only get harder for May. But in trying to strike a deal on Britain’s withdrawal from Europe, the prime minister hasn’t had to deal just with enemies within. The EU has been angered by how long it has taken her to frame what she wants. It is in no mood to give a good deal to the first country to quit the organization. And pettiness isn’t confined to the Brexiteers. By saying it will exclude a Brexited Britain from the Galileo satellite system and EU arrest warrants, the EU is showing it, too, can bite off its own fingers. Nor will May receive any help against her Brexiteers from a Labour Party led by Corbyn.

Though Labour is theoretically now a pro-European party, and though he talks of a “new and strong relationship” with the single market, Corbyn has spent most of his career criticizing the EU as a capitalist conspiracy. Labour is not a party campaigning for a soft Brexit and ready to vote accordingly. It is as badly divided as the Tories. We recently saw the biggest Labour rebellion of this Parliament: Corbyn told his MPs to abstain from participating in a key vote, but 90 of them defied him. Seventy-five voted for the United Kingdom to stay in the EEA, and 15 voted to pull out of the EU. Labour will go on calling for the unachievable so as to be able to vote against the ruling government. Oppositions exist to oppose: Corbyn’s aim is to see the maximum possible mess in the hope of provoking an early general election.

Turmoil will continue. Many Brexiteers would clearly prefer no deal to any deal. Britain’s departure from the EU is being driven by a prime minister who clearly now accepts the advice of many economic authorities and leading business figures that it will harm the country but sees it nonetheless as her duty to deliver Brexit. She will either impoverish the country or split the Conservative Party forever. She could well do both.

In a deeply revealing news conference, Trump tips his hand on his thinking about Putin

On July 12, President Trump said he would ask Russian President Vladimir Putin "again" whether Russia had meddled in the 2016 presidential elections. (The Washington Post)

By Philip BumpJuly 12 at 9:30 AM

As he left the White House on Tuesday, on his way to meetings with foreign leaders in Europe, President Trump made an odd assertion.

Those at his first stop, the member nations of NATO, have “not treated us fairly” because “we pay far too much and they pay far too little,” he said. As for Britain, where he headed on Thursday, “that’s a situation that’s been going on for a long time” and, following the resignations of senior officials on Monday, the country is “in somewhat turmoil.”

“And I have Putin,” Trump said, referring to a summit with Russian President Vladimir Putin next week. “Frankly, Putin may be the easiest of them all. Who would think? Who would think?”

Under normal circumstances — a phrase that under normal circumstances we use less regularly than we do now — a presidential summit with the leader of a long-standing foreign adversary would be considered a high-risk event, necessitating a great deal of analysis and input to establish the important boundaries and desired outcomes. It would look, at least, more like Trump’s meeting with North Korean leader Kim Jong Un last month: Something to be treated as exceptional with clear-cut aims and focus. Under normal circumstances, too, a meeting with NATO allies would be comparatively simple. A casual trip to Britain? A walk in the park, perhaps literally. Yet Trump sees Putin as the simple one.

Why? For reasons he evidenced during an impromptu news conference before departing the NATO summit.

Asked by The Washington Post’s Philip Rucker how he would respond if Putin denied Russia’s interference in the 2016 election, Trump waved it away.

“I mean, look, he may,” Trump replied. “You know, what am I going to do if — he may deny it. I mean, it’s one of those things. So all I can do is say, ‘Did you?’ and ‘Don’t do it again.’ ”

As our Aaron Blake noted, this stands in stark contrast to how Trump approaches America’s putative friends in NATO. Even before arriving at this week’s summit, Trump was hectoring Germany and other NATO nations about their spending on defense. On Wednesday, he claimed that Germany was “totally controlled” by Russia because it gets a portion of its natural gas from the country. During the news conference, he declared that his relentless hammering of America’s allies was successful and that the allies have committed to increased spending, something French President Emmanuel Macron later denied.

With our friends, Trump is more than happy to tug whatever levers he has within reach, even ones that U.S. presidents are generally loath to pull, like the veiled threat of undercutting the alliance. With Putin, Trump is more likely to suggest that there really are no good levers. Even the strict sanctions imposed against Russia with his signature last year came only grudgingly, with Congress doing most of the pulling on that particular lever.

Trump’s position toward the NATO allies is one of aggression. His position toward Russia and Putin is much more passive. A sort of shrugging, we’ll-see-what-happens approach to America’s foremost geopolitical opponent over the past century.

President Trump spoke to reporters July 12 after a two-day summit with NATO leaders in Brussels. Here are his full remarks. (The Washington Post)

In a remarkable quote from that news conference, though, Trump explained why he refused to treat Putin the way most American presidents would treat the leader of Russia.

“He’s a competitor. He’s been very nice to me the times I’ve met him. I’ve been nice to him. He’s a competitor.” 

“Somebody was saying, is he an enemy? He’s not my enemy. Is he a friend? No, I don’t know him well enough. But the couple of times I’ve gotten to meet him, we get along very well.” 

“I hope we get along well. I think we get along well. But ultimately, he’s a competitor. He’s representing Russia. I’m representing the United States. So, in a sense, we’re competitors. Not a question of friend or enemy. He’s not my enemy. And, hopefully, someday, maybe he’ll be a friend. But I just don’t know him very well. I’ve met him a couple of times.”

There are two things about that statement that are, for lack of a better word, staggering.

The first is that Trump frames the interaction with Putin almost exclusively in personal terms. Putin is a competitor to him. He is not Trump’s personal enemy and, who knows! Maybe he and Putin can eventually be personal friends. One of the first things that mediocre middle managers say their first day on the job is that they aren’t there to be employees’ friends; it’s all about the job. Trump’s telling Putin, in short, that Russia’s relationship with the United States depends almost entirely on Putin being friends with Trump. For a Russian leader with few scruples and little to lose, that kicks open a very big door of opportunity.

The second thing about Trump’s statement is how his framing of the relationship as personal undercuts his own case.

Why isn’t Putin a friend or an enemy? Because Trump “[doesn’t] know him well enough.” Well, the United States knows Putin quite well, and both historians and intelligence analysts can describe in great detail the relationship between our countries and Putin’s efforts to undercut American geopolitical standing. America knows Putin well, but Trump actively chooses to set that knowledge aside. Putin looks the way Trump thinks a leader should look, and Trump clearly admires that. That Putin’s approach to leadership is broadly antithetical to how American leadership is expected to behave is an important but ignored complication.

America has a complex relationship with NATO that requires things of the United States and its leadership. Its leadership expects to be able to treat the president as a peer. Putin, on the other hand, is willing to flatter and hype Trump because he has no relationship to protect — and Trump has expressed little interest in pressing the Russian on issues considered vitally important elsewhere in his administration. Can’t be friends with a guy if you come out of the gates yelling at him, even if Trump were inclined to yell at Putin about helping him win his election.

No wonder the Putin meeting is easier for Trump than the NATO one.

The lingering question, of course, is why this is Trump’s approach to Putin. His most fervent opponents would suggest that the true answer to that question is known only to special counsel Robert S. Mueller III, or, perhaps, by former British intelligence officer Christopher Steele. It seems clear, though, that a significant part of Trump’s approach is simply how he sees dealmaking. NATO is a contract that was thrust upon him. Putin is a deal waiting to be made between two strong-minded individuals. That others insist such a deal is unwise or can’t be done is all the more reason for Trump to run toward it.

The experts told Trump he wasn’t going to win the presidency, too, after he spent months he insisted he knew what he was doing. It’s hard to overestimate how much his electoral victory probably reinforced his sense that, when it came to the presidency, he knew better.