Hoteliers identify prospects, hurdles in South America

Speaking at the recent Hotel Opportunities Latin America conference, experts shared insights into South American markets like Chile, Argentina, Peru and Colombia. MIAMI—Investors looking to sink money into hotels in South America need to be aware of the …

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Amphibious Vehicles Are the Military’s Latest Tax Dollar Sinkhole

One of the worst symptoms of the paralysis in Washington and at the Pentagon has been the inability to correctly match weapon systems with current enemy threat capabilities. Hence the United States Marine Corps is set to announce the final winner between defense contractors BAE Systems and SAIC to build and field their new Amphibious Combat Vehicle, or ACV.

Or should we say the old Amphibious Combat Vehicle? Because after 46 years and tens of billions of dollars, the Marines are right back where they started with this technology, which leaves no one—except maybe the contractors feeding off this farcical routine—feeling very satisfied.

So how did we get here?

The naval campaigns in the Pacific theater of World War II were successful due to the capability of the Marine Corps to conduct amphibious assaults against Japanese-held islands. Following the war this capability was written into law via the National Security Act of 1947, which stipulated that the Marine Corps was responsible for the seizure of advanced naval bases.

In order to move from Navy ships to enemy-held territory, the Marines must be transported across a distance of water and rely on what is generally called a connector. Both the Navy and Marine Corps operate various connectors from ship to shore, while the job of the Marines is to fight their way into enemy territory. Marine connectors only carry one weapon: Marines. Step one is to take the beach.

During World War II, the Navy ships could move to within a few miles of the Japanese-held islands before loading Marines into connectors. But with the advent of ballistic missile technology during the Cold War, a new weapon made its debut: the anti-ship missile.

The idea is simple. If Navy ships are within range of an anti-ship missile, they risk being severely damaged or even sunk. The solution is standoff. The Navy ships must stay outside the effective range of the missiles or use defensive measures to shoot the missiles down. This forces the ships further out to sea and increases the distance the connectors must travel over the open ocean to transport the Marines.

The connector vehicle the Marines adopted in 1972 was the Amphibious Assault Vehicle or AAV. AAVs are stored in hollow lower sections of naval ships known as well decks, which can be flooded so the AAV can exit the aft end of the ship into the ocean. The vehicle moves through the water using two traditional water propellers and also has tracks similar to a tank in order to drive on land. The AAV can carry around 20 Marines, swim through the water at seven knots (nautical miles per hour; seven knots is eight mph for comparison), and has an advertised water range of approximately 20 nautical miles, which in reality is closer to five nautical miles.

But anti-ship missile technology advanced in the 1980s, and proved deadly in the 1982 Falklands War between Great Britain and Argentina as the British lost two ships* to French-built Exocet missiles. So the Marine Corps and Navy rewrote their doctrine to move their ships over the horizon to approximately 12 nautical miles.

This strategy necessitated a new connector vehicle. Marine amphibious doctrine requires a “swift introduction of sufficient combat power ashore.” If the AAV can only swim at seven knots and the ships are 12 nautical miles away, you are looking at close to a two-hour ride to the beach. Time equals distance divided by speed. For the Marines stacked like sardines in full combat gear in the sweltering troop compartment of the AAV, this bumpy two hours becomes a rather nauseating and incapacitating experience.

So work began in earnest on the Expeditionary Fighting Vehicle, or EFV, in the 1980s. It was designed with a powerful jet propulsion system that allowed it to plane above the water like a speedboat and achieve 25 knots, three times as fast as the AAV with a water range of approximately 65 nautical miles. Over the course of 20 years, more than $3 billion was invested in the program. Operational EFVs were due to be in service by 2015, completely replacing the aging AAVs.

But potential adversaries didn’t stagnate. They developed a defensive Anti-Access/Area Denial (A2/AD) strategy. Waters around potential landing sites would be mined, and the range, speed, and lethality of anti-ship missiles enhanced significantly.

The increasing complexity of the operating environment did not go unnoticed. During the Obama administration’s first term, Undersecretary of the Navy Robert O. Work envisioned an either/or type of scenario for the future of amphibious conflict. Either Marines would land essentially unopposed as in Grenada in 1983 or the A2/AD posture of our enemies would be so preventative as to require a massive bombardment using long-range stand-off weapons like Tomahawk missiles and bombers to clear out anti-ship missiles and other defenses. Neither situation necessitated the use of a high-speed, heavily armored connector like the EFV.

Secretary of Defense Robert Gates canceled the EFV program in 2011. Immediately afterwards, the Commandant of the Marine Corps, General Amos, decided to pursue the next iteration of troop connector named the Amphibious Combat Vehicle, or ACV. High speed on water remained a top priority as late as 2013.

After some research proposals were explored, General Amos decided in January 2014 that the ACV would be developed in a phased approach with a decreased need for speed on water. The ACV 1.1 was to be an off-the-shelf, armored, wheeled vehicle that met requirements for armor protection on land but would rely on connectors like the Navy’s Landing Craft Air Cushion (LCAC, aka Hovercraft) to move it swiftly from over the horizon at 40 knots to a few miles from its objectives, where it would then swim the last few miles. The LCAC has a large deck area that can accommodate several ACVs. Traditionally the LCAC would bring in heavy equipment like tanks or trucks after Marines secured a beach since the LCAC lacks armor protection.

The phased acquisitions approach was a tacit admission that you can’t have your cake and eat it too. The Marine Corps asked industry for a vehicle that offered protection first and then speed on the water at some point in the future.

The ACV 1.1 would not be able to self-deploy and swim from a ship like the AAV or EFV. The Marine Corps would buy a smaller number of the ACV 1.1, upgrade older AAVs and keep them in service until 2030, and research and develop ACV 1.2, a high-speed, fully amphibious vehicle.

But this solution appears to have been smoke and mirrors. In March 2015, Marine Commandant Joseph Dunford testified before the Senate Armed Services Committee concerning the program. He said industry might merge the ACV 1.1 and ACV 1.2 requirements together.

BAE Systems and SAIC were awarded $100 million each in December of 2015 to develop 16 test vehicles for ACV 1.1. And lo and behold, abracadabra, both company’s test vehicles could self-deploy and swim from a ship at, wait for it, seven knots—as fast as, you guessed it, the 1972 version.

Since the introduction of the AAV, almost 50 years have passed and many billions have been spent in research and development. And now the taxpayer will be footing the bill for a connector that holds fewer Marines than in 1972 (13 versus 20), swims at the same speed, and is more expensive.

The Marine Corps and industry are touting the fact that the ACV is under cost and ahead of schedule. The program is projected to cost $1.2 billion with 204 vehicles operational by 2020.

In October 2017, deputy Marine commandant Lieutenant General Beaudreault stated that “we have to find a solution to getting Marines to shore, from over the horizon, at something greater than seven knots. We’ve got to have high-speed connectors.”

It appears the deputy commandant didn’t get the memo. As the F-35 and USS Gerald Ford programs have shown, whenever the system wins, the warfighter and taxpayer lose.

*Story has been changed to reflect the British loss of one destroyer and one container ship during the Falklands War in 1982.

Jeff Groom is a former Marine officer. He is the author of American Cobra Pilot: A Marine Remembers a Dog and Pony Show (2018).

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Argentina’s latest IMF trial – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise

If ever there was a country in need of an International Monetary Fund-supported adjustment programme, it is Argentina. Whether the country will have the political will to comply with the IMF’s conditions is another matter. Argentina’s previous painful experience with the fund and its presidential election in 18 months further complicate matters.

Argentina is suffering from a twin budget deficit and external current account deficit crisis. The peso is in free fall. There is a serious inflation problem. The government’s credibility has been undermined by its attempts to curb the central bank’s independence.

IMF involvement could be highly beneficial. The fund’s seal of approval and monitoring of an adjustment programme could restore the government’s market credibility. In addition, the IMF’s financing could stabilise the peso and rescue Argentina from an inflationary spiral.

On a positive note, Argentina is in a much better position to implement an IMF programme than it was in the late 1990s. Argentina is not stuck in a ‘convertibility plan’ straitjacket, as when it pegged the peso to the dollar between 1991-2002. That plan precluded the use of monetary and exchange rate policy to offset the impact of budget belt-tightening on economic growth. Now, with a freely floating exchange rate, that is no longer the case.

The greatest obstacle is a question of political will. The government may not be prepared to undertake the degree of budget adjustment that the IMF is likely to demand.

Already before the present crisis, Argentina was running a primary budget deficit of around 3% of GDP and an overall budget deficit of around 6% of GDP. In the absence of new budget measures, the country’s deficit is bound to increase appreciably. The decision of Argentina’s central bank on 4 May to raise interest rates to 40%, an attempt to defend the peso, is likely to have tipped the country into economic recession. This would depress the government’s tax revenue collections.

High interest rates are bound to lead quickly to increased government interest payments. This is especially worrying, as Argentina relies heavily on short-term borrowing to finance its budget deficit.

Approaching the IMF has probably hurt President Mauricio Macri’s popularity ahead of the presidential elections scheduled for October 2019. Regardless, he will hopefully find support for the implementation of an enhanced IMF adjustment programme, for the sake of Argentina and other emerging markets. Monetary tightening by the Federal Reserve is already leading to a more taxing global liquidity environment, and elections in Mexico and Brazil could increase political instability in Latin America. The last thing the region needs is for Argentina to spiral out of control.

Fortunately, both the IMF and US Treasury seem to appreciate the gravity of the situation and have indicated that they are willing to help stabilise the Argentine economy. Hopefully Macri’s government will seize the opportunity and drum up support for more disciplined economic policies.

Desmond Lachman is a Resident Fellow at the American Enterprise Institute. He was formerly a Deputy Director in the International Monetary Fund’s Policy Development and Review Department and the Chief Emerging Market Economic Strategist at Salomon Smith Barney.

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