President Cristina Fernández this week decreed the takeover for a 60-day period of Compañía de Valores Sudamericana SA (CVS), the only company (or institution) able to print the Argentine peso. Officially, the decision was taken so that the state could regain sovereignty over the printing of money; the opposition, however, argues that the takeover is part of a strategy intended to remove Vice-President Amado Boudou and the head of the tax agency (Afip), Ricardo Echegaray, from the eye of a corruption storm relating to the 2011 purchase of the company (better known for its previous name, Ciccone Calcográfica), which had declared bankruptcy in December 2010.

The state’s weakness in relation to the printing of money of legal tender became particularly obvious after a consignment of paper money recently printed by Ciccone lacked standard security measures and was even made to the wrong size, failing to fit inside Automated Teller Machines (ATMs). The bills were those commemorating the 60^th anniversary of the death of Eva (‘Evita’) María Duarte de Perón, arguably the most important of all Peronist icons. This blunder was in many ways the proverbial straw that broke the camel’s back; while Fernández had not intervened in the so-called Boudou-gate at all, last week’s charging of Echegaray, who became the second member of her administration to face legal proceedings over the suspicious bankruptcy rescue of Ciccone after Boudou, followed by the 100-peso-bill debacle, forced her to take action.

That said, Decree of Necessity and Urgency (DNU) 1338/12, which was signed by Fernández and all members of the cabinet, does not mention in any of its six articles the corruption scandal involving the vice-president or the Evita bill gaffe. It does, however, announce that Fernández will send a bill to congress declaring Ciccone of “public utility and subject to expropriation” – the bill has already been submitted and the commission of constitutional matters and the budget commission should approve it before the end of this week. It would then go to the plenary of the senate. Considering that the ruling Frente para la Victoria (FPV) has a majority in both chambers, the bill should be approved easily.

However, Boudou will have to preside over the senate session, in which he has no voice (or vote lest there is a tie), and face the accusations the opposition will hurl at him. At the top of the list will be his personal relationships: both with members of the company’s administration until the takeover [WR-12-08], and with those who will administer on behalf of the state. The government administrators are close associates of Boudou: Minister of Economy Hernán Lorenzino was promoted to the post as per Boudou’s recommendation when he left that portfolio vacant to take over the vice-presidency; the head of the Casa de Moneda, Katya Daura, worked for Boudou at the social security agency (Anses) when he was in charge of the institution and was also promoted to head the mint as per his recommendation. Making matters worse, Daniel Reposo, the controversial head of the Sindicatura General de la Nación (Sigen), will be in charge of controlling Lorenzino and Daura’s administration of Ciccone.

Compensation unlikely

The Argentine state should compensate the owners of Ciccone, but the issue of who owns the company remains the proverbial ‘million-dollar question’ (see sidebar). In fact, it is a subject of formal judicial investigations in three countries: Argentina, Uruguay and the Netherlands. Several questions also remain as to how the value of the company is to be calculated. The issue is very sensitive as it could result in further corruption allegations. Ciccone owes the Afip some AR$300m (US$65.28m). If the state were to pay the company’s market value without taking into account this debt, it would allow the owners of The Old Fund to make a profit on a company they stand accused of purchasing illegally.

• The elusive owners

So far, it is known that 30% of Compañía de Valores Sudamericana SA belongs to the founders (the Ciccone family) and the remaining 70% to The Old Fund. The Old Fund seems to be controlled, in equal parts, by the Dutch fund Tierras International Investments CV – which was dissolved in the Amsterdam public registry in February when the scandal broke as its capital was almost non-existent and those who presented the paperwork to set it up feared prosecution in Europe for money laundering – and to the Uruguayan limited company Dusbel SA. The owners of both companies remain virtually anonymous. Lately, two Argentine bankers have claimed that they own part of The Old Fund, Raúl Juan Pedro Moneta and Jorge Brito.

The guerrillas of the Ejército del Pueblo Paraguayo (EPP) have resurfaced after the appointment of Federico Franco as successor to Fernando Lugo (2008-2012) in the presidency with two minor raids (in one of which a life was claimed) and a series of communiqués in which they call for ‘struggle’ against the new government and promise to avenge the peasants killed last June in Curuguaty. While dismissing the official version of that event as a fabrication, the EPP avoids any mention of its purported direct or indirect involvement in that incident.

On 28 June armed men raided the Brazilian-owned Terrado farm in Azote’y, Concepción, killing a Brazilian employee and setting alight three tractors. On 1 July police found in a nearby farm a handwritten letter from the EPP claiming responsibility for the attack, which they justified by saying: ‘On repeated occasions we have warned tractor drivers found cutting down the forest that they will be sentenced to the maximum penalty for the crime they are committing.’ The letter also says, ‘The Ejército del Pueblo Paraguayo will avenge the death of the brave peasants who in a display of courage and heroism engaged the forces of repression in an unequal confrontation.’

In another letter, sent to Radio Ñanduti on 2 July, the EPP issued a call to ‘struggle against the present ultra-right-wing de-facto government’. The letter alluded to ‘the murder of 11 heroic peasants in Curuguaty’ — the 15 June episode that triggered the impeachment and removal from office of President Lugo — and said, ‘We have always maintained that the ousted government acted as a shield to protect the interests of the rich, deceiving the people with its socialist discourse [...] The people well know that the Lugo government’s tale about the existence of infiltrators [in the Curuguaty event] is a fiction thought up by the ousted government to cover up its crimes.’

On 9 July three armed persons wearing fatigues and bulletproof vests with the initials EPP turned up at the La Mami farm in the western department of Boquerón, set fire to the caretakers’ house and left behind a letter demanding that the proprietor should slaughter 20 head of cattle and distribute them to poor communities in the area. The farm is owned by a relative of Juan Néstor Núñez, former president of the umbrella farmers’ body, the Asociación Rural del Paraguay (ARP). Boquerón is not within the usual area of operations of the EPP.

The new government is following in Lugo’s footsteps by announcing a new major operation against the EPP. On 6 July, just before the latest EPP raid, Interior Minister Carmelo Caballero, accompanied by the top brass of the national police, turned up at Hugua Ñandu, Concepción, to distribute arms, ammunition and new vehicles to the police unit charged with operations against the EPP. Hugua Ñandu has been the target of several EPP attacks.

Caballero said that this force, based at the premises of the Agrupación Táctica Especializada Hugua Ñandu, which includes 150 officers of the Cuerpo de Operaciones Rurales (COR), trained to operate in the bush, ‘will enjoy the unrestricted support of the President, the interior ministry and all agencies of the state [... All those social and peasant organisations that resort to the institutional path will progressively obtain the things they are justly demanding, but the violent ones, who attempt to gain them by resorting to crime, will encounter the firmest possible response from the Paraguayan state.

“It is like night and day.” That was the succinct response of the president of Uruguay’s central bank, Mario Bergara, when asked to compare the economic and financial status quo with the situation 10 years ago. Then, Uruguay was reeling from the financial meltdown across the River Plate in Argentina; now, the economy is in burgeoning health after years of strong recovery – and better prepared for a possible repeat of events in Argentina. But as the government of President José Mujica seeks to attract more foreign investment and foreign businesses by cutting red tape and reducing bureaucracy, what is it like doing business in Uruguay?

Bergara rattled off a series of statistical comparisons between the Uruguay of 2002 and the Uruguay of 2012. Poverty affected 38% of the population in 2002; extreme poverty, or indigence, stood at 4%; and unemployment had soared to 20%. Poverty is now 13%; indigence just 0.5%; and unemployment is 5.5%, the lowest rate in history. It is worth noting that Chile, which pushes Uruguay into second place in Latin America in almost every annual league table, has a poverty rate of 14.4% and indigence of 2.8%, according to Chile’s just-published triennial socio-economic characterisation report (Casen).

Foreign investment in Uruguay was just 1.2% of GDP in 2002 but this figure has all-but quintupled to 5.7% over the last decade. Uruguay, which regained its investment grade rating earlier this year after being stripped of it in 2002, is also trying to attract Uruguayan expatriates and skilled foreign labourers to come to the country to keep the economy expanding.

The economy grew by 4.2% year-on-year in the first quarter of 2012 after expanding by 5.7% in 2011. A monthly survey of analysts published by the central bank in late July, however, downgraded its growth forecast for the economy in 2012 to 3.57%, which is below the government’s projections. President Mujica warned that the “exceptional times” that Uruguay has enjoyed in recent years could not go on “ad infinitum”, and the economy minister, Fernando Lorenzo, admitted that there were clear signs of a slowdown, due in no small part to trade restrictions by “other countries in the region”.

The opposition Partido Colorado (PC, Colorados) and Partido Nacional (PN, Blancos), whose combined mishandling of the 2002 economic and financial crisis spelt the end for the alliance and brought the left-wing Frente Amplio (FA) to power for the first time in 2005, launch almost daily attacks on the Mujica administration for failing to stand up to Argentina on the issue of trade restrictions. Uruguay has managed to diversify its exports since then (China is now the second largest recipient of Uruguayan exports, leapfrogging Argentina in 2011) and it is less vulnerable to a run on its banks: in 2002, more than 40% of deposits in foreign currency in Uruguay were Argentine.

Bergara also pointed out that the business climate in Uruguay was now “very good” as a result of “political stability, clear rules of the game and respect for legislation”. But is it really that good? President Mujica has made no secret of his determination to roll back bureaucracy in Uruguay. His main target is a bloated and inefficient State, but he is also keen to remove obstacles to investment and a flourishing business environment.

Uruguay finished 90^th out of 183 countries worldwide for ease of doing business in the World Bank’s 2012 Doing Business report. This less-than-impressive position is also 17 places better than the 2011 report, due in large part to a huge 107-place surge up the table of the ‘starting a business’ sub-category to 32^nd. Uruguay made starting a business easier by establishing a one-stop shop for general commercial companies. It now takes seven days to set up a firm in Uruguay compared with an average of 54 days in Latin America and the Caribbean and 12 days in the Organisation for Economic Co-operation and Development (OECD).

Uruguay also finished 67^th for ‘Getting Credit’, after improving its credit information system by introducing a new online platform allowing access to credit reports for financial institutions, public utilities and borrowers. Elsewhere, however, Uruguay did not perform particularly well, finishing in 160^th for ‘paying taxes’ and 165^th for ‘registering property’. The 2012 Doing Business Investor Protection Index gave Uruguay a middling score of 5 out of 10, ranking 97^th out of 183 countries, down four places on 2011. Investor protection in Uruguay was below the average of 6 out of 10 achieved by members of the OECD in 2012, and just down on the 5.1 average for Latin America and the Caribbean. Uruguay fared poorly, scoring just 3 out of 10, on the transparency of related-party transactions (extent of disclosure index).

In a regional table for overall ease of doing business, Uruguay finished only 15^th out of 32 with Chile, Peru and Colombia filling the top three places, although it is worth noting that its fellow members in the Southern Common Market (Mercosur), Argentina and Brazil, finished in 22^nd and 26^th respectively (113^th and 126^th out of 183 countries worldwide).

Mercosur’s entire dynamic is poised to change shortly with the incorporation of Venezuela (see sidebar), a country which languishes near the foot of every table in the Doing Business report. Venezuela came 177^th out of 183 countries worldwide in the 2012 ease of doing business table, three places beneath Haiti (the next worst in the region) and sandwiched between Guinea-Bissau and the Democratic Republic of Congo.

• Venezuela

President Mujica has openly championed Venezuela’s admittance to Mercosur, arguing that Venezuela would “very shortly” become Uruguay’s third largest trade partner. This clearly offset any scruples he might have felt about the manner of Venezuela’s entry as a full member (after Paraguay’s suspension). Mujica said that trade with Venezuela had grown by more than 30% every year since 2001, adding that there could not be a more complementary country for Uruguay; “we sell it more expensive meat than we do Europe” and “products that we cannot sell anyone else, like apples and chicken”.

• Marijuana

In an interview with the weekly current affairs magazine Búsqueda on 26 July President Mujica said he was gaining a lot of enemies in the drug world for his proposal to legalise the production and sale of marijuana. The plan has yet to be presented to the legislative assembly in the form of a draft bill so details are sketchy, although Búsqueda claimed that a proposal to plant marijuana in a military barracks in order to guarantee its security was being considered. Mujica has conditioned his backing for legalising the production and sale of marijuana on the support of 60% of Uruguayans for the initiative. According to official figures there are 150,000 marijuana consumers in Uruguay.

The Partido Revolucionario Institucional (PRI) is again on the defensive. The post-electoral row over the legitimacy of the victory of the party’s presidential candidate, Enrique Peña Nieto, took a new twist last week when the Partido Acciόn Nacional (PAN) sided with the left-wing coalition Movimiento Progresista (MP) led by Peña Nieto’s defeated rival Andrés Manuel López Obrador to accuse the PRI of using illicit campaign funds.

The PAN, it is important to note, is not throwing its weight behind López Obrador’s legal efforts to invalidate the elections. It still recognises Peña Nieto’s victory. But, the PAN’s decision to cooperate with the MP is a clear shot across the bows of the PRI. The subtext is that the PAN will not just do the PRI’s bidding by backing reforms that Mexico needs without the PRI engaging in some internal reforms to ensure more democratic party-political practices, and that it will not tolerate any form of collusion with organised crime by the PRI.

PAN president Gustavo Madero held a joint press conference with his peer Jesús Zambrano of the Partido de Revoluciόn Democrática (PRD), the senior partner in the MP, on 19 July. He argued that there was “strong and conclusive evidence” that illicit funds had been used by the PRI in the elections. Zambrano alleged the “triangulation” of money through front companies to fund Peña Nieto’s campaign, suggesting money laundering. Both leaders insisted that the Instituto Federal Electoral (IFE) investigate whether these were used to purchase some M$108m (US$8.2m) worth of pre-paid debit cards, disbursed among voters, to conceal the origin of the money. They also called for a probe by the attorney general’s office (PGR). The PRI conceded that some US$5m of funds had been paid to “local party operatives” through debit cards from the Mexican bank Monex, but insisted this was separate from campaign spending.

On 20 July López Obrador presented a ‘plan for the defence of democracy and dignity’ in Mexico, calling for the public to contribute evidence to invalidate the elections and prevent the installation of “a market republic where money resolves everything”. He accused the IFE of “turning a blind eye” to “very serious violations” and promised to erect informative stands in squares across the country between 29 July and 5 August to explain how the PRI bought 5m votes. “Yo soy 132”, a student movement that sprang up during the campaign to oppose Peña Nieto’s candidacy, staged a “nationwide mega-march against the imposition (of Peña Nieto)” on 22 July, with 15,000 people marching in central Mexico City. Promising more marches, the movement’s leadership warned of “a serious risk of social explosions” if Peña Nieto takes office on 1 December.

Starting to feel the heat, and concerned about potentially irrevocable damage to the legitimacy of Peña Nieto’s future presidency, the PRI launched a counter-offensive on 23 July. Jesús Murillo Karam, Peña Nieto’s legal adviser, claimed the MP had concealed the origin and destination of M$1.2bn (US$88m) of campaign funds, exceeding spending limits. PRI president Pedro Joaquín Coldwell called on the IFE to investigate the “triangulation of resources” by the MP through civil associations such as Honestidad Valiente. He said these had functioned as “parallel structures” to enable the MP to divert public funds to López Obrador’s campaign.

Coldwell insisted the allegations were “serious”, although the use of exactly the same terminology employed by the MP in its attacks on the PRI somewhat undermined his assertion. The MP dismissed the allegation as old and groundless.

President Hugo Chávez was “compelled by circumstances” to speak out this week in order to “unmask” the man who “says he is going to be commander-in-chief”. Chávez was responding to a message from Henrique Capriles Radonski, the presidential candidate for the opposition coalition Mesa de la Unidad Democrática (MUD), directed at the armed forces, which was aired on private television stations on 12 July.

President Chávez does not often appear rattled. His speech at the Fuerte Tiuna military academy in Caracas on 14 July, however, indicated that he might not be quite as confident as a freshly released opinion survey by national pollster Datánalisis suggested he should be: the poll showed Chávez with a comfortable 15-percentage point lead over Capriles (46% to 31%).

Capriles delivered his short televised message on 12 July promising that as commander-in-chief he would approve a new social security system, including family cover, for members of the armed forces. “Behind every one of our military, there is a family that has been waiting for a long time for life to improve,” Capriles said. He argued that Chávez had raised expectations in the armed forces, but after 14 years these had not been met.

Capriles and his campaign team later produced a document purportedly drawn up by the defence ministry banning “expressly and absolutely” military and civil members of the armed forces from watching “any television programme” in which Capriles appeared. Capriles added: “My proposals are employment, security, housing, health, education and opportunities; the government has three proposals - threats, fear and division.” Chávez claimed the document was a forgery. It is not clear who is telling the truth but even if the document is genuine it was probably a mistake by Capriles to produce it as it has allowed the government to distract attention from the import of his message.

Teodoro Petkoff, editor of the Caracas weekly Tal Cual and a fierce critic of Chávez, opined that Chávez, who habitually addresses the armed forces as if they are a closed shop, found it unpalatable that his opponent had even mooted the possibility of becoming commander-in-chief. Petkoff might be naturally inclined to suspect the worst of Chávez, but a number of his remarks at the academy lend credence to Petkoff’s argument. “They hate my (our italics) armed forces so much,” Chávez argued, while calling for his adversary to show “respect” for the armed forces which he called “Bolivarian, revolutionary, Socialist and Chavista”.

Chávez went on to maintain that, “Not one single soldier would ever be swayed by the bastard interests of the unpatriotic bourgeoisie (used here as a catch-all synonym for anyone who is not Chavista) we have here… or stain the glorious uniform of the Liberator’s army”. He said there was “a strategy to attack our armed forces,” adding that “If the Right comes to power there will be a witch hunt”, rooting out Chavista loyalists.

Chávez, it should be noted, has done a good job of rooting out those suspected of not being Chavista loyalists, and promoting those showing unswerving fealty. General-in-Chief Henry Rangel, for instance, became defence minister soon after his much-publicised statement in 2010 that “a hypothetical opposition government would sell the country, and the armed forces are not going to accept that”. Capriles would be sorely tempted to depoliticise the armed forces if he won power, as he suggested in his televised message, spelling the end of the road for Rangel et al.

Chávez is probably most concerned that Capriles’ social security proposal could sway the rank-and-file. Rangel’s unconditional loyalty is shared by the top brass, who have benefited most from Chavismo, such as the two men promoted by Chávez while at the academy: strategic operational commander, Wilmer Omar Barrientos Fernández, and army commander, Carlos Antonio Acalá Cordones. Chávez spoke of his commitment to the armed forces, flagging up his most recent purchases of new T72 tanks from Russia and US$500m on modernising navy equipment. The average soldier might prefer a better pension, however, than some of the expensive toys Chávez buys.

• Campaigning

President Chávez violated the electoral law 217 times in the first week of the campaign while Henrique Capriles broke it on no fewer than 165 occasions, according to a study by Venezuela’s Universidad Andrés Bello (UCAB) released this week. UCAB said that the transgressions by Chávez consisted of insulting and discrediting his opponent; using state funds to promote his candidacy; using public buildings for propaganda; and using public officials in campaign activities. Capriles was guilty of campaigning before the formal launch of the campaign period; making offensive remarks; and using national emblems. UCAB also criticised the national electoral council (CNE) for failing to fulfil its constitutional duty to observe and denounce violations of the law.

Cuban President Raúl Castro visited China and Vietnam in early July on his first visit to either country since he formally took over from his brother Fidel in February 2008. He stopped over in Russia en route back home, his second visit to the country. Marino Murillo, the main architect of Castro’s tentative economic reforms, spent a week in Beijing in late February, where he met China’s deputy PM Hui Liangyu and spent much of his time at China’s national reform and development commission.

China’s President Hu Jintao, who has visited Cuba three times, emphasised that political and economic relations between China and Cuba “have continued to deepen and develop” and announced eight new agreements in support of those ties. He gave few details but alluded to fresh Chinese financial aid, including a new interest-free loan and a credit-line for joint sectors like health care and technology. China-Cuba bilateral trade was worth US$1.8bn in 2010 (the last available Cuban figure), up from US$590m in 2004. China supplies Cuba with manufactured goods and equipment, while Cuba provides China with about 14% of its nickel requirements (for steel production), as well as sugar, rum, cigars and high tech medicines and vaccines. Cuba’s anti-lung cancer vaccine, CimaVax-EGF, developed by the Cuban-Chinese Biotech Pharmaceutical Ltd, is undergoing trials in China. China’s Sinopec provided the Scarabeo 9 deepwater drilling platform currently off Cuba’s northern coast. The lack of official statistics makes it difficult to estimate Cuba’s total debt with China but according to a 2010 European Union report, it was of the order of US$3.2bn in 2008.

Vietnam is Cuba’s main supplier of rice, with bilateral trade worth some US$269m in 2010. The secretary general of Vietnam’s Communist Party, Nguyen Phu Trong, visited Cuba in April and urged Castro to stick with his version of doi moi. Warmly welcoming Castro on 11 July, Russia’s President Vladimir Putin said that relations had become “more pragmatic”. Bilateral trade of US$224.1m in 2011 “does not correspond with potential” noted Kremlin adviser Yuri Ushakov. Russian companies including the oil firms Zarubezhneft and Gazpromneft are present in Cuba.

Worth noting: Cuba’s foreign investment law will be updated by the end of the year, according to Yamila Fernández, finance director at the external trade and foreign investment ministry.

The most violent yet eviction of land invaders triggered a highly irregular impeachment and removal from office of President Fernando Lugo, only nine months before presidential elections scheduled for 23 April 2013. This in turn led to the suspension of Paraguay from the South American blocs to which it belonged. Nothing in this sequence of events was straightforward: questions remain unanswered regarding what actually happened, who was responsible and what was being sought in the three areas affected: security, internal politics and regional diplomacy.

The catalyst was the 15 June eviction of a large number of families (some say 100) from an estate owned (the invaders say by irregular means) by a prominent businessman, Colorado politician — former senator and presidential candidate — and businessman, Blas Riquelme, in Curuguaty, in the northern border department of Canindeyú.

The invaders had been led by the Liga Nacional de Carperos (LNC, ‘National League of Tent People’) an organisation set up two years ago that advocated more radical action to settle idle and ill-acquired land that that pursued by the existing organisations of peasants and landless people. The eviction had been ordered by a court and was entrusted to a large force of police (by some accounts more than 300), including elements from the Fuerzas de Operaciones de Policía Especializada (Fope), spearheaded by the Grupo Especial de Operaciones (GEO) from Ciudad del Este.

There was a shootout in which six police officers and 11 civilians were killed. Both sides concurred in blaming infiltrated provocateurs for having fired first: the squatters blamed gunmen in the hire of the landowners, while the government was more vague, saying that it could not rule out the involvement, direct or indirect, of the guerrillas of the Ejército del Pueblo Paraguayo (EPP). No evidence of the latter was produced; Canindeyú is not among the areas where the EPP has been known to be active, but links between the LNC and the EPP had been suggested in the past.

One thing is clear: the police did not fire first. The first two fatalities were the chief and deputy chief of the GEO unit, and the former was filmed as he prepared to lead the approach, assessing that there were no more than 50-or-so squatters in the area and ordering that, should resistance be encountered, only tear gas and rubber bullets were to be used. A photograph taken by the police and analysed by military intelligence was said to show the squatters armed (with handguns and shotguns) and deployed in ambush formation as the first officers approached. Later video evidence showed scenes of great confusion.

In the political arena, the immediate reaction to the news was to portray the event as the worst episode yet of excessive use of force by the police. From across the political spectrum in congress came demands for the dismissal via vote of censure or impeachment, of Interior Minister Carlos Filizzola and the chief of police, Paulino Rojas. President Lugo promptly demanded and got the resignation of both and replaced them, the former by Rubén Candia Amarilla, a Colorado politician who had served as chief prosecutor, the latter (provisionally) by Arnaldo Sanabria, the senior police officer in the district where the Curuguaty episode had taken place.

The reaction was a sudden change of focus in congress. The opposition Colorados called for Lugo’s impeachment, a proposal swiftly taken up by the Partido Patria Querida (PPQ)  and the Unión Nacional de Ciudadanos Éticos (Unace) — and within hours also be the Partido Liberal Radical Auténtico (PLRA), the biggest force in the Alianza Patriótica por el Cambio (APC), the coalition that had secured Lugo’s election in 2008.

There have been previous bids by the opposition to impeach Lugo, most notably on charges of having encouraged land invasions and of having acted against Paraguay’s national interest by signing Mercosur’s December 2011 Ushuaia II protocol that amended the Ushuaia I Democratic Commitment protocol, mandating sanctions not only for the ‘rupture of democratic order’ but also for the ‘threat of rupture [..] a violation of constitutional order or any situation that should place at risk the legitimate exercise of power and the rule of democratic values and principles’. As on prior occasions, this latter impeachment bid failed, chiefly because the PLRA held back, but the Paraguayan congress refused to ratify Ushuaia II.

In the wake of the Curuguaty incident, the PLRA sided with the opposition, for reasons unknown, and ordered its members holding ministerial positions to resign. On 21 June the lower chamber of congress almost unanimously voted to proceed with impeachment, drew up a charge sheet and submitted it to the senate, constitutionally entrusted with acting as the judge in such proceedings. Lugo was accused of mal desempeño de sus funciones (somewhere between ‘improper performance of his duties’ and misfeasance), citing his alleged fostering of land invasions and of a permanent climate of confrontation, his signing of the Ushuaia II protocol, and responsibility for the Curuguaty incident.

That same day the senate took up the case and gave Lugo 24 hours to prepare his defence. Almost immediately the leading member countries of Alianza Bolivariana para las Américas (Alba) — Venezuela, Bolivia, Ecuador and Nicaragua — rejected the impeachment as tantamount to a coup. Argentina concurred. Other countries went as far as to state that the proceedings were ‘illegitimate’ (though not necessarily illegal) because they denied Lugo a reasonable opportunity to answer the charges brought against him. Brazil led others advocating a wait until a consensus had been reached in Mercosur and Unasur.

The Alba countries called for non-recognition of the Franco government and the exclusion of Paraguay from regional bodies until the ‘restoration of democratic order’. Mercosur announced the exclusion of Paraguay from the Mercosur summit scheduled for 28 June in Mendoza, Argentina; Unasur did likewise for one to be held the following day. On 26 June the permanent commission of the Organization of American States (OAS) was unable to reach a consensus, but the secretary-general, José Miguel Insulza, decided in any case to send a fact-finding mission to Paraguay.

On 22 June Lugo was ruled guilty as charged and removed from his post. His Vice-President, Federico Franco, long openly estranged from Lugo, was immediately sworn in as Lugo’s successor; Lugo, while describing the proceedings as a farcical ‘express impeachment’, conceded that the congress had observed the letter of the pertinent constitutional provisions, and accepted the senate’s decision.

The consensus reached in the Mercosur and Unasur summits was to suspend Paraguay until democratic order was restored (which in the normal course of events, means until August 2013 – when the new president of Paraguay takes office). Neither went for the imposition of sanctions. There was, however, an extra twist to Mercosur’s resolution: the members agreed to incorporate Venezuela as a full member, a decision held up since 2006 because the legislatures of two countries withheld ratification: Brazil (whose lawmakers relented in 2009) and Paraguay, whose senate has remained adamant — ironically invoking reasons similar to the clause they reject in the Ushuaia II protocol, which has now been invoked against them. So far, the only answer to cui bono? in the international aspect of this affair is: Venezuela.

The escalating confrontation between President Cristina Fernández and Hugo Moyano, the secretary general of the union of truck drivers (Schoca) and of the general confederation of labour (CGT), was like watching the head-on collision of two articulated lorries: everyone could see it coming for miles but neither ‘driver’ could apply the brakes to stop it. When Moyano called a general strike last week, it became clear that after some eight months of increasingly hostile verbal diatribes, the union leader was ready to show his hand.

By all counts, the mobilisation to the Plaza de Mayo this Wednesday (27 June) was not as impressive as expected. Local press estimates put the number of marchers at 25,000, when it was widely known that Moyano wanted to occupy the symbolic square with at least 70,000 people – believed to be the plaza’s full capacity. President Fernández’s supporters have read this as an indication that, while Moyano’s mobilisation ability is quite impressive, it is not as impressive as he thinks. In fact, according to the local daily La Nación, an unnamed minister said Fernández described the mobilisation as “skinny [i.e. with poor turnout] and aggressive”.

If in fact Fernández feared that the spirit of the march was intended to “oust” her as she had declared last week, the relatively small size allowed her to breathe a sigh of relief. But she would only have found this out in the early hours of the evening and long after Moyano had finished speaking since she decided to ignore the union leader publicly on the day. Not only did she schedule an official event in the province of San Luis to be quite far from the seat of the executive - the Casa Rosada demarcates the eastern border of the Plaza de Mayo - but she also ensured that she delivered her own speech an hour late and was still greeting her supporters while Moyano spoke.

According to Moyano’s supporters, the lower-than-expected turnout was partly the result of presidential intimidation. On Tuesday, Fernández announced she was withdrawing all police presence during the mobilisation, which many said caused widespread fear of violence and prevented many would-be marchers from attending. Moyano said that while many union leaders had been intimidated by the government and not participated in the march, the workers they represent had turned out en masse. He also called on demonstrators to show the government they knew how to behave and, just like they had arrived peacefully at the plaza, they should leave in the same fashion. Apart from the normal pushing in an event of this magnitude, there was no violence on the day.

Words that pierced like bullets

While the march was officially intended to show the government that workers want the threshold of the income tax to be raised as soaring inflation is eroding their real purchasing power, it turned into an opportunity for Moyano to voice many of the criticisms made by the opposition parties for years. Moyano, who was the only speaker, came out all guns blazing and was intent on showing that despite the political differences that had kept them on different sides of the fence for the past nine years, he was able to represent a widespread group of interests, ranging from the far Left, social movements, unionised workers and even the middle class. In his speech, he said the Peronist definition of “workers” did not just apply to blue-collar workers or those who depended on physical labour to earn their bread, but that it also encompassed the widest possible definition of the term, including white-collar workers, retirees, professionals, retailers and businessmen.

Moyano, a highly-divisive figure, is unlikely to become a political contender overnight, but the vast majority of those who participated in the march likely voted for Fernández in her landslide re-election victory last October. Moyano said he is in favour of Fernández seeing out her term (which ends in December 2015), but he was also clear that she should not seek a third re-election – for which she would have to secure a constitutional reform. Many of those present agree - and the fact that they voted for Fernández less than a year ago does not mean they would do so again. “This is a national and popular project that stopped being so national and so popular,” Moyano quipped.

Regarding his supposed wish to oust Fernández, he said “It seems that a legitimate claim constitutes extortion; it seems that a strike action by the workers wants to distort democracy. It seems that a national strike is a coup d’état”. He then went on to accuse Fernández of dictatorial tendencies: “what bothers us and we don’t like is the imposing manners that they [the government] have, to do everything as if they were a dictatorship.”

The union leader was also very critical of the government’s human rights credentials. He said that the low income perceived by retirees, the fact that many people still live in slums – and that the government has not delivered “on any of the four” housing plans it has announced – and that the children of many workers are not covered by the so-called ‘family assignations’ all constitute human rights violations. “I ask myself about when many of us stayed in the country after the [military] coup of 1976. There were two kinds of exile: those who exiled themselves outside the country and those who exiled themselves in the Argentine south to make a profit out of the [Central Bank’s circular] 1050”. (The 1050 was a directive that allowed banks to issue mortgages without setting the interest rate, which fluctuated according to the market. This meant annual rates climbed over 100% and many had their homes repossessed. Néstor Kirchner and Fernández built their real estate empire by purchasing those homes at auction). “While we were fighting the dictatorship, some were hiding under their beds,” he rounded off.

Development: On 22 June Paraguay’s senate voted to impeach President Fernando Lugo, immediately removing him from office and replacing him with his vice-president, Federico Franco.

Significance: Lugo becomes the first Paraguayan president to be impeached by congress. The process took place in record time: within a 48 hour-period. The speed of the process raised concern, prompting regional leaders to question whether there has been an effective break in the democratic order. Politically, this could result in Paraguay’s temporary suspension and/or expulsion from regional organisations, turning Paraguay into a regional pariah.

Key points:

• In a swift trial, which took place only 24 hours after the impeachment process was approved by congress, the 45-member senate found Lugo guilty of “poor performance of his duties” with 39 votes in favour, four against and three abstentions. The vote met the constitutional requirement that a two thirds majority is needed to impeach a president.

• An hour later, Lugo, whose 2008 general election victory ended the rule of the traditional Asociación Nacional Republicana-Partido Colorado (ANR-PC), which had run Paraguay uninterrupted for 72 years, offered a short speech from the presidential palace in which he recognised the congressional decision to strip him of his office. He said that the decision represented “a blow [‘golpe’], not to Fernando Lugo, but to Paraguay and to democracy”.

• Immediately after, Franco was formally invested as the new President in a ceremony in congress. Franco, who hails from the traditional opposition Partido Liberal Radical Auténtico (PLRA), is the first PLRA president to take office since 1936. He will finish Lugo’s term, which ends in August 2013, following scheduled general elections on 26 April next.

• A mission from the Union of South American Nations (Unasur), which arrived in Asunción on 22 June ahead of the impeachment, issued a communiqué stating that the process may have violated the democracy clauses in the Unasur constitutive treaty “by posing a threat to the democratic order by not respecting due process”. Unasur argues that although the process may have been conducted legally according to the Paraguayan constitution, it was flawed due to its failure to respect international notions of due process.

• Several Unasur member states including Argentina, Bolivia, Ecuador and Venezuela have described the process as an “institutional coup d’état” and refused to recognise the Franco government. Argentina, Ecuador and Venezuela have recalled their ambassadors to Asunción in protest. President Hugo Chávez of Venezuela has already imposed sanctions by suspending shipments of oil (crude) to Paraguay. Other Unasur members such as Brazil, Chile, Colombia, Peru and Uruguay have expressed concern about the change in power and have recalled their ambassadors for consultations. Ironically, Paraguay holds the pro-tempore presidency of Unasur, which it was due to hand over to Peru in November. Unasur has scheduled an emergency meeting to be held in Lima in coming days and has intimated that it could bring forward Peru’s turn at the helm.

• Paraguay is a founding member of the Southern Common Market (Mercosur). Its three partners, Argentina, Brazil, and Uruguay, have now withdrawn their ambassadors and have declared Paraguay temporarily suspended from the group as per Mercosur’s democratic clause. Argentina has said that Paraguay may not attend the upcoming Mercosur heads of state summit, scheduled for this week (27-28 June) in Mendoza. The summiteers will discuss measures against Paraguay.

• Argentina’s President Cristina Fernández is clear that “what happened in Paraguay was undoubtedly a coup”. Brazil’s Dilma Rousseff has recognised that Mercosur has clear “penalties in place” for breaks in the democratic order. Rousseff’s special advisor on international affairs, Marco Aurelio García, said that Brazil condemned the “summary decision” taken by Paraguay’s congress, which has “compromised the fundamental pillar of regional integration, democracy”. Uruguay’s foreign minister, Luis Almagro, said that Lugo’s impeachment had “all the characteristics of a summary judgement” with no “essential guarantees of due process”.

• Franco rejected Paraguay’s suspension from Mercosur, but said that he had no plans to attend the Mendoza summit as it was not the “right time”. In contrast, Lugo, who on 24 June appeared to backtrack from his earlier position to declare that he would challenge the impeachment process, has reconvened his cabinet and says that he intends to attend the summit as the “legitimate” representative of the country.

Pointer: Mexico has recalled its ambassador to Paraguay for consultations. In Central America, Nicaragua and El Salvador refuse to recognise the new government. Further afield, Canada has already recognised the Franco government, along with Spain, Germany and The Holy See.

Enrique Peña Nieto entered the second and final televised debate on 10 June knowing that anything short of a decisive defeat would surely be sufficient to return the opposition Partido Revolucionario Institucional (PRI) to government after a 12-year hiatus. He did not particularly excel in the debate but neither did he commit any gaffes. Instead, with a large lead in the polls, he concentrated on presenting his campaign proposals, and refused to be drawn into mudslinging with his rivals. This predominantly came from Josefina Vázquez Mota, of the ruling Partido Acción Nacional (PAN), who, desperate to halt her downwards trajectory in the polls, gave a feisty performance in the debate. There were no fireworks from Andrés Manuel López Obrador of the left-wing Partido de la Revolución Democrática (PRD), who, having eclipsed her in the polls, was more concerned about appearing moderate and credible.

The debate was split into three sections: politics and economics; foreign policy; and sustainable development and social issues. Peña Nieto made the populist gesture of promising to cut the size of the chamber of deputies from 500 to 400 and the senate from 128 to 96 to streamline the political system. Intent on showing his caring side after being savaged as “cold” and showing “no heart” during a recent event organised by the poet and peace activist Javier Sicilia [WR-12-21], Peña Nieto also outlined his (still slightly vague) proposal for a universal social security system. He lamented the fact that half of Mexicans lived in poverty and argued that Mexico’s GDP growth under the PAN (2000-2011) was just 2.2% a year; only El Salvador, he said, had fared worse over this period in the region.

Taking a longer view of history, López Obrador said Mexico’s economic stagnation began under the PRI government of Miguel de la Madrid (1982-1988). Not coincidentally, 1988 was the year in which López Obrador opted to leave the PRI. His membership of the PRI before this date, however, formed part of the fierce attack launched by Vázquez Mota in which she argued that both of her opponents were scions of the corrupt PRI of the past. She argued that as the PRI and the PRD were two sides of the same coin, there were only really two choices in the elections: the PAN or the old PRI model.

Vázquez Mota questioned López Obrador’s sudden professed affinity with Mexican students, which she said rested on some highly dubious foundations. She called on him to explain why in 1971 he had joined the PRI just after the notorious student massacre in Tlatelolco in 1968 and the Corpus Christi massacre exactly 41 years before the day of the debate (10 June 1971). López Obrador said she had got the date of his membership of the PRI wrong: he joined the PRI in 1976 to collaborate in Carlos Pellicer’s campaign for a senate seat for the state of Tabasco. Still, Vázquez Mota’s barb definitely drew blood and just might have prompted some members of the #YoSoy132 student movement that has rallied behind López Obrador to think twice.

The problem for Vázquez Mota is that key figureheads in her own party are undermining her campaign. While she sought to make the case that the PRI would bring about a return to authoritarianism, consorting with organised crime and abusing power, and that the PRD would bring populism and economic crisis, former president Vicente Fox (2000-2006), the man who ended seven decades of PRI hegemony in Mexico no less, urged voters to “close ranks” behind Peña Nieto if he wins on 1 July, adding that it was “clear” he was going to win.

President Felipe Calderón could not resist getting involved in the debate either. When López Obrador promised 6% GDP growth and 1.2m new jobs each year, while saving M$314bn (US$22bn) by cutting the salaries of top officials, Calderón tweeted that his figures simply did not add up. “If the government fired every top official, from director to president, it would save M$2bn not M$300bn,” he said.

Calderón’s intervention did force López Obrador after the debate to produce a document showing how he came by the figure of M$314bn. The document put up on his coalition’s website was short on details but it included a pie chart showing how the savings would be split, including reducing the salaries of top government officials and civil servants at state institutions and autonomous entities. It calculated that M$175bn of the total would be saved, however, through cutting government operating costs. 

López Obrador opted for a different tactic in the second debate, outlining proposals and going on the defensive, as if he were the frontrunner, rather than launching attacks on Peña Nieto. He seemed intent on conveying the impression of moderation but it was a somewhat surprising performance given that #YoSoy132 had staged a protest against Peña Nieto earlier in the day and allegations of PRI corruption and collusion with organised crime have been proliferating. The day after the debate, the PRI jettisoned one of its municipal candidates in the southern state of Chiapas, Ulises Grajales Niño, after he was arrested on suspicion of involvement in the murder of PAN activist, Edgar Hernández Corzo. The PRI president, Pedro Joaquín Coldwell, put out a statement insisting that the party “does not support any militants that engage in illegal acts”.

Peña Nieto had made precisely the same comments in the same week while campaigning in Tamaulipas, a border state beset with violence. “We may be members of the same party but in no way will I cover up, let alone lend myself to complicity with those who lack legality,” he said, in reference to the recent arrest of former (PRI) Tamaulipas governor Tomás Yarrington [WR-12-22]. Tamaulipas is one of the states in Mexico where the PRI has never relinquished its grip and is a prime target for criticism from the other parties of endemic corruption in the PRI.

Peña Nieto also emphatically denied claims by his rivals that the PRI intends to reinstitute a cosy system of rule where the activities of drug traffickers are condoned or even collaborated with. “There will not in my government be a deal or agreement with organised crime,” Peña Nieto said. “That is not the means or the path to achieving real security conditions for the Mexican people.”

Beyond beefing up the federal police, Peña Nieto has never really explained how he plans to achieve these “real security conditions”. He will have his work cut out. A study just published by the Tijuana daily Zeta based on, inter alia, statistics collated from federal, state and municipal level police forces and prosecution services, maintains that drug-war deaths in Mexico are significantly higher than the national daily Reforma has been recording in its oft-cited ‘Ejecutómetro’. It counted 71,804 fatalities between 1 January 2007 and 30 April 2012 compared with the 42,357 calculated in the ‘Ejecutómetro’.

Also this week the latest Global Peace Index (GPI) was published showing Mexico down in 135^th place out of 158 countries worldwide, beneath Honduras and above only Colombia (144) in the region. Mexico fell from 121^st (out of 153 countries) in 2011 and 107^th in 2010. The GPI is produced by the Institute for Economics and Peace (IEP) and seeks to gauge on-going domestic and international conflict, safety and security in society, and militarisation, taking into account 23 separate indicators.

• #YoSoy132

Enrique Peña Nieto turned down the opportunity to appear in a third debate, organised by the student movement #YoSoy132. Peña Nieto said the requisite conditions of impartiality and neutrality would be absent: the movement has been particularly critical of corruption within the PRI and Peña Nieto’s ties to media companies. His two rivals, desperate to land a blow on Peña Nieto, have flattered the students as discerning youths and hastened to accept participation in a debate organised by the movement in the Universidad Iberoamericana on 19 June. They are likely to intensify attacks on Peña Nieto during the debate which will take place less than two weeks before the elections on 1 July.