The US and Brazil are once more at loggerheads over foreign policy. Mike Hammer, the US Assistant Secretary of State for Public Affairs, called for “more action” from Brazil to pressure Syria’s President Bashar al-Assad on 1 June. In a swift and firm riposte Brazil’s foreign minister Antonio Patriota insisted that Brazil’s commitment to supporting the plan of UN Secretary General Kofi Annan for settling the Syrian crisis was “perhaps greater than that of the US”. He added that Brazil not only supported the Annan plan but also a resolution by the UN Human Rights Council (UNHRC) calling for Assad to allow it to send an independent team, led by a Brazilian, to investigate the massacre of some 100 civilians in the town of Houla on 25 May.

Foreign policy divergences, most notably over Iran, and later Libya, are one of the primary reasons why Washington has withheld unequivocal support for Brazil’s aspirations to fill a seat on the UN Security Council. “We want action on the UN Security Council - and we want Brazil to be a part of that,” Hammer said in a press conference in Washington, calling for Brazil to throw more support behind Annan and make a greater effort to put pressure on Assad. Patriota delivered his response in a joint press conference on 2 June with his Venezuelan peer Nicolás Maduro, who was visiting Brazil to deepen bilateral ties (see box below): Venezuela, it is worth noting, accepts the line peddled by Assad that his government is the victim of a foreign-backed insurgency and that human rights violations have been perpetrated by rebel groups conspiring against the people and the government.

The Brazilian government has been very cautious. It certainly has not aligned itself with Venezuela in expressing unconditional support of the Assad regime but neither has it explicitly condemned a bloody crackdown on dissent by security forces in Syria. Patriota said that Brazil stood full square behind the UN Security Council. “If the Annan mission suggests sanctions should be imposed, such as an arms embargo, Brazil will support it,” he said, but he opposed unilateral sanctions, or actions taken “outside of the authority of this Council”, a prospect raised by the US ambassador to the UN, Susan Rice, if “the Council’s unity is exploded, the Annan plan is dead and this becomes a proxy conflict with arms flowing in from all sides.”

Patriota chose to cite the evaluation of a Brazilian former human rights secretary, Paulo Sérgio Pinheiro, designated by the UNHRC to lead a UN commission to investigate atrocities in Houla, that military intervention in Syria would be “catastrophic”. Pinheiro, who was recently named by President Dilma Rousseff to sit on the truth commission to examine human rights abuses during Brazil’s dictatorship [WR-12-19], told the national daily O Globo unequivocally in an interview on 1 June that “There is no military solution for the Syrian crisis.” He explained: “Syria is not Libya. Syria’s armed forces function… The Syrian army has 300,000 men. To put that into perspective, this is the same as Brazil’s armed forces, except that we have a population of 200m people.”

Pinheiro added that “the militarisation of the conflict – by foreign intervention or arming the rebel groups – would lead to a civil war with many more victims than the 10,000 so far...” The problem, however, as he himself conceded, is that the alternative - negotiations - “will not be easy as this conflict has an international political complexity greater than others” and that it is very doubtful whether they can avert a civil war: Syria, as Kofi Annan said at the weekend, has reached “a turning point (and) the spectre of all-out civil war, with a worrying sectarian dimension, grows by the day.” If this happens, and the Assad regime perpetrates further human rights abuses (details of another brutal massacre, in the province of Hama, emerged on 6 June), it will be increasingly difficult for Brazil to remain mute.

• Deepening ties with Venezuela

Foreign Minister Antonio Patriota fended off questions about Syria after meeting his Venezuelan peer Nicolás Maduro in Rio de Janeiro. The two men agreed to create a bilateral planning group, made up of different ministries from both countries, to “accelerate integration”. This ‘group of reflection and strategic planning’, Patriota explained, would first meet in Brasília in July where it would cover areas such as infrastructure, trade, agriculture and housing cooperation.

Patriota said the recommendations of the group would help increase bilateral trade, which reached a record US$5.86bn last year (five times greater than in 2003 he noted). He added that he would assist with organising a visit by a Venezuelan business delegation to Brazil in search of investment.

The president of Brazil’s ruling Partido dos Trabalhadores (PT), Rui Falcão, declared his “total support” for President Hugo Chávez, ahead of Venezuela’s elections on 7 October, and “any government that doesn’t accept imperialist hegemony”. Maduro profusely thanked the PT for its support during his visit to Brazil. Venezuela’s opposition coalition Mesa de la Unidad Democrática (MUD), whose candidate Henrique Capriles Radonski maintains that he would follow the model of the PT’s most famous son, former president Lula da Silva (2003-2010), if he were elected, tried to downplay the significance of the comment, arguing that it was not necessarily representative of the government’s view. The pro-opposition weekly Tal Cual slammed what it described as imperialist interference in Venezuela’s internal affairs.

• Amazon

Deforestation of the Amazon has fallen to its lowest annual level since records began in 1988, according to the national institute for space research (Inpe). The announcement that deforestation totalled 6,418 square kilometres in the year up to 31 July 2011 (down 8% on the same period a year earlier) seemed timed to coincide with Brazil’s hosting of the UN conference on sustainable development in Rio de Janeiro (Rio+20) between 20 and 22 June.

Colombia’s ‘new paramilitary’ organisations, or Bacrims as the government calls them, have struck alliances with Mexican drug trafficking organisations (DTOs) and are fighting each other for the control of areas along the northern border with Venezuela. This development has been revealed in a recently published study, which also claims that the Fuerzas Armadas Revolucionarias de Colombia (Farc) and the Ejército de Liberación Nacional (ELN), while still a threat in those regions, have been overtaken by these alliances as the main menace.

The study, entitled ‘La frontera caliente entre Colombia y Venezuela’ (‘The hot border between Colombia and Venezuela’), was conducted by Ariel Avila, a Colombian analyst at the Corporación Nuevo Arco Iris, and was launched in book form by Random House Mondadori on 25 April. Avila spent two years researching the situation in two sets of border areas: on the Colombian side it included La Guajira, Norte de Santander and Arauca-Vichada; in Venezuela it included Zulia, Táchira and Apure.

Avila summarises developments there as fostered by three situations:

1. The intensification of activities by the illegal armed groups in border areas since the late 1990s.

2. The increase in those areas of different illegal activities: the smuggling of fuel from Venezuela into Colombia; and the routing of Colombian drugs through Venezuela towards Central America and Africa

3. The growing instability of local and regional administrations on both sides of the border.

He does admit, with caveats, that there have been improvements since Juan Manuel Santos became president of Colombia in August 2010. ‘There is no doubt’, he says, ‘that there has been greater pressure on the guerrillas and interesting cooperation with the Venezuelan authorities [thanks to the rapprochement and the dialogues between the two presidents]. However, it is necessary to broaden the debate over the real problems of the region.’

One of those problems, he says, is that smuggling is no longer a ‘decentralised’ affair: ‘It is being managed by large structures like the Urabeños and the Rastrojos [and] there is evidence of corruption in the institutions of government’. This, he says, is aggravated by the connections with foreign DTOs: ‘There are three clearly visible alliances: that of Los Rastrojos with Los Zetas, who have representatives in Maracaibo; that of Los Urabeños with Sinaloa and the Dominican cartels; and that of the heirs of ‘Jorge 40’ with the Tijuana cartel. All of these alliances are fighting for control of the border.’

(‘Jorge 40’ is the nom de guerre of Rodrigo Tovar Pupo, the former leader of the paramilitary Autodefensas Unidas de Colombia (AUC)’s northern bloc, which operated in Colombia’s northern border departments. His 2,000-strong bloc formally demobilised in 2006. In 2008 he and 12 other former paramilitary leaders were extradited to the US for having breached the terms of their demobilisation.)

One of Avila’s claims may have political repercussions in Venezuela. He says that in the Venezuelan state of Zulia, ‘the police appear as yet another criminal organisation’. The current governor of Zulia is Pablo Pérez Alvarez, who was one of the contenders for the united opposition’s presidential nomination. ‘It is clear,’ says Ávila, ‘that the [Zulia police] is under the control of the opposition. It is said, for example, that it handed over Valenciano in order to take control of his cocaine business.’ (‘Valenciano’ is Maximiliano Bonilla Orozco, a former leader of the Oficina de Envigado, who was arrested in Maracay, Aragua, in November 2011.)

Informal gold mining in Peru is not only being targeted as a threat to the environment and a source of fiscal evasion but also as a major illegal industry that generates more revenues than cocaine. At a recent symposium in Lima a proposal was floated to create a special body, similar to the anti-drugs commission Devida, to coordinate the efforts to ‘formalise’ that activity, currently dispersed among several government agencies.

At the X Simposium del Oro held in mid-May in Lima, Elmer Cuba, director of Macroconsult (an affiliate of Global M&A), laid out a set of figures showing the extent to which illegal gold mining has expanded. He noted that since 2005, the country’s formal gold production has been declining steadily, but exports of gold have not. Of the 5m ounces of gold that Peru exports, he said, more than 1m oz are of unknown provenance — in other words, 22% of the exported gold comes from illegal mining.

Moreover, if domestic consumption of gold is taken into account, countrywide one out of every five ounces is illegal, and in the south eastern region of Madre de Dios, one out of every three. Exports of illegally mined gold, Cuba calculates, reach US$1.8bn, more than the estimated US$1.2bn generated by cocaine exports. He reckons that the profits from illegal gold mining amount to US$1bn, which means that the public purse is deprived of some US$305m.

Cuba says that there are many telltale indicators of the expansion of illegal gold mining. One is population growth in the areas where that activity is concentrated. He cites San Antonio de Putina, in Puno, where the population grew by 80% between 1993 and 2007, as against a national average of 24%. Another is family incomes, which in Madre de Dios rose from US$370 a month in 2004 to US$882 in 2010. A third is relative energy consumption, which in Madre de Dios is more than three times higher than the national average. Cuba reckons that about 100,000 people are engaged directly in illegal gold mining, and four times that many are indirectly connected with it.

When Cuba proposed the creation of a Devida-type agency to address the issue of illegal gold mining, it was immediately endorsed by former environment minister Antonio Brack, and both put the notion to Energy & Mines Minister Jorge Merino. Cuba believes that such an agency could be more successful than Devida, because the exporters of illegally mined gold are known, whereas those involved in exporting cocaine are not.

The environment ministry has focused on another consequence of illegal gold mining: the destruction of about 18,000 hectares of Amazonian forest; the previous Alan García administration (2006-2011) had previously focused on the impact of mercury contamination on areas of such renowned biodiversity as Madre de Dios. Illegal miners are highly suspicious of the government’s drive to ‘formalise’ their activity: they believe that the arguments deployed to justify this are just a cover for a move designed to favour big mining companies [WR-12-12].

When a crossword writer is hauled in by the intelligence service for allegedly concealing details of an assassination plot to destabilise the government, it gives a strong indication of that country’s prevailing political climate. This is the Venezuela of today; with President Hugo Chávez absent for long periods in Cuba undergoing life-or-death medical treatment and elections looming on the horizon, political tension and uncertainty has penetrated to the heart of the Bolivarian Revolution and threats seem to lurk in every corner.

The crossword in question was published in the national daily Últimas Noticias on 9 May. It was created by veteran crossword writer Neptalí Segovia. A television presenter, Miguel Ángel Pérez Pirela, on the official news channel VTV reported that “a group of specialists” had discovered a cryptic message within the crossword giving instructions to kill the President’s brother Adán Chávez, the governor of the western state of Barinas. The presenter said that Charles de Gaulle had sent such messages via crosswords from the French resistance to London during World War II. “They have to take this seriously and not just claim it is paranoia,” the presenter said, pointing out that the crossword contained the words “Adán”, “kill”, “firing” and “flat plains” (Barinas is located in Venezuela’s llanuras) though he never speculated on for whom these instructions were meant (see overleaf).

The most remarkable thing about the claim is the lengths to which the government is prepared to go - employing mathematicians and psychologists to assist the Bolivarian intelligence service (Sebin) to trawl through the papers - in order to unearth a destabilisation plot. It begs the question what else is the Sebin doing? Whether the plot is genuine or not is largely immaterial. It serves the government’s purposes either way.

With so much uncertainty surrounding the future of the Bolivarian Revolution given the precarious state of health of its talisman, and so much riding on the electoral outcome in October for a host of civilian and military officials upon whom Chávez has bestowed his favour, those enjoying the fruits of power feel threatened. Adding to the climate of political uncertainty and insecurity by accusing the opposition coalition Mesa de la Unidad Democrática (MUD) of plotting to overthrow the Revolution at this delicate juncture not only aims to discredit the MUD as a destabilising force but could also be used to justify a decision by the government in the near future to take emergency measures (potentially unconstitutional) to counter this threat, such as the cancellation of October’s elections. This decision could be taken by the newly created council of state in the event of Chávez losing his battle against cancer in the run-up to elections.

The MUD denounced the crossword episode as “bordering on the ridiculous” and designed to distract public opinion from the country’s real problems. It also questioned the use of state resources to combat illusory threats rather than the very real threats posed by drug-trafficking and organised crime. The government’s credibility is far from unimpeachable: shortly after shots were fired at the entourage of the MUD presidential candidate Henrique Capriles Radonski during a visit to the Caracas parish of Cotiza on 4 March, the government claimed the Sebin had uncovered a plot to assassinate Capriles by members of the opposition; no details of this plot have ever been provided [WR-12-12].

President Chávez has been highly successful in the past at stoking residual distrust of the opposition. Convincing the public of the sincerity of his intentions, when, for instance, he promises to maintain the social programmes introduced by Chávez (but to depoliticise and improve them), is a big challenge for Capriles. Perhaps an even bigger challenge, however, is gaining any kind of attention for his campaign amid the rarefied political atmosphere in Venezuela right now. So far opinion polls (which admittedly often need to be treated with considerable caution in Venezuela) suggest he has failed to meet the first of these challenges; media coverage suggests he has not really found an answer for the second challenge either.

Given the target of the alleged plot, it was interesting that Capriles should have been in Barinas as part of his pre-electoral campaign last week. “Barinas tops the poverty table in Venezuela,” he said. The remark was carefully chosen. Barinas is the native state of President Chávez. The clear implication was that, if after 14 years in power Chávez had not even managed to improve the prospects of his home state (now governed by brother Adán) then what did that say for the rest of the country. It was an audacious visit, right into the enemy heartland. Opposition candidates in the past have given up Barinas as a lost cause and concentrated on winning more populous, less “red”, states. Capriles promised more jobs and an end to the “failed” policy of expropriation which he said was drying up investment and employment opportunities.

“Venezuela needs a full-time president,” Capriles said while visiting the safe opposition-controlled western state of Zulia days later. The opposition argues that the government is operating on the margins of the constitution, at best, by refusing to provide accurate information on the state of health of Chávez. It has called for the supreme tribunal of justice (TSJ) to designate a medical team, made up of five specialists, to evaluate the real state of health of Chávez and to see if he is fit to govern. It is very difficult to see any judge on the TSJ having the temerity to back this proposal.

Meanwhile, Vice-President Elías Jaua argues that those discussing a political transition are, contrary to appearances, not pragmatists but rather intent on operating outside of the constitution. The opposition says that Jaua should assume the reins of power in the absence of Chávez, something he has repeatedly ruled out as unnecessary. The opposition does so in the safe knowledge that neither Jaua nor any other figure in the ruling Partido Socialista Unido de Venezuela (PSUV) has anything like the popular support of Chávez and would in all likelihood lose the elections to Capriles.

• Sport nationalism

Both the government and the opposition scrapped for pole position at the weekend to heap praise on Pastor Maldonado, who became the first Venezuelan ever to win a Formula One Grand Prix, with victory in Spain. In an eruption of activity on the social networking site Twitter, the foreign minister, Nicolás Maduro, anointed Maldonado a “son of Bolivarianism”. President Chávez tweeted: “Our Pastro Maldonado won, making history”. The opposition presidential candidate Henrique Capriles tweeted: “Congratulations for Pastor… and for all our Venezuela. Long live Venezuela!”

Development: On 14 May Peru’s President Ollanta Humala swore in three new ministers to head up the defence, interior and production portfolios.

Significance: Humala was forced to make this mini cabinet re-shuffle just five months after a major cabinet overhaul in December. The latest changes resulted from the resignation last week of Daniel Lozada and Alberto Otárola from the interior and defence ministries. Both men quit in order to avoid a move by congress to censure them, and their departure was widely interpreted as an effort to shield Prime Minister Oscar Valdés Dancuart, who had backed the two ministers. Yet their replacements are already under fire, while Valdés’ position looks increasingly untenable.

Key points:

• The new defence minister is José Urquizo, who was transferred from the production ministry. The opposition immediately challenged the appointment, pointing out that Urquizo’s performance at the production ministry had been heavily criticised by his colleagues. Patricia Maljuf resigned on 5 May as the deputy minister for fisheries in protest at the ministry’s handling of protests by fishermen in northern Peru, describing Urquizo as “incompetent”. Gladys Treviño Chang, formerly the deputy minister of industry at the production ministry, will replace Urquizo.

• The opposition also came out against the new interior minister, Wilver Calle Girón, a retired army general, who was promoted from his post as deputy defence minister. Humala has been accused of “militarising” the cabinet by appointing former military officials, including Valdés. Previously, Humala retorted by pointing out that the two ministers in charge of the country’s security - Lozada and Otárola - were both civilians. As such, Calle Girón’s appointment has been interpreted as a step back.

• The former president Alejandro Toledo (2001-2006), whose Perú Posible (PP) party backed the calls in congress to censure Lozada and Otárola, questioned why such a ‘militarised’ cabinet has made so little progress in resolving the country’s security problems. “We have a president who is a former commander, a prime minister who is a retired colonel……a presidential advisor, Adrián Villafuerte, who is also a military man” Toledo noted, calling on them to “do your jobs”. Toledo added that he “understood” the calls for Valdés to step down.

Development: On 13 May President Hugo Chávez tweeted “a thousand congratulations” to the mothers of Venezuela and to Pastór Maldonado, the first ever Venezuelan to win a Formula One motor race.

Significance: In an interview to mark yesterday’s Mother’s Day, Mónica Radonski, the mother of the opposition presidential candidate, Henrique Capriles Radonski, said she was urgently looking for a wife and first lady for her bachelor son. Mrs Radonski is jumping the gun, if the polls are anything to go by. According to the latest Datanálasis survey, Chávez is still running well ahead in the 2012 race, with 43% of voting intentions to just 26% for Capriles. Chávez arrived back in Caracas on Friday (11 May) and in a national TV and radio broadcast declared that he had “successfully concluded the entire round of radiotherapy” for his cancer.

Key points:

• A visibly brighter Chávez sang a little ditty and promised that the pending first quarter GDP results, which are late in appearing, would be “very good”. That’s no surprise - thanks to continued record high oil prices, the government is aggressively pump priming the economy this election year, with national treasury disbursements up 28% year-on-year in real terms in the first four months of 2012, on the latest finance ministry figures.

• The opposition Mesa de la Unidad Democrática (MUD) has been unable to hide its disappointment with Capriles’s poll standing. After the euphoria of his landslide primary election win in February, the MUD could taste victory. Since then, Capriles has been criss-crossing the country non-stop in an effort to connect with voters and set out his stall, all the time spinning a relentlessly upbeat, energetic and inclusive message (and deliberately avoiding any personal attacks on Chávez). However his efforts have been completely overshadowed by the constant speculation about Chávez’s health and Capriles's promises on job creation and social progress have basically fallen on deaf ears.

• The presidential campaign formally gets underway on 1 July and runs to 4 October (ahead of the 7 October vote), and senior ministers insist repeatedly that Chávez is Plan A, B and C.

• Luis Vicente León, the director of Datanálasis, pointed out in June last year (when the president’s cancer first became public knowledge) that Chávez in fact does not need to pound the pavements like Capriles. After 13 years in power, such is his recognition and continued popularity that he can probably get away with a “virtual campaign” run largely over the airwaves, with limited public appearances. In fact, that might work better than betraying his physical frailties out on the stump. Venezuelans are well used to government over the airwaves. At the end of the day, all Chávez has to do is to convince his support base – which still numbers some 50% of the electorate – that he will govern the next presidential term (January 2013-December 2018).  Everything after that is secondary.

• For instance, despite reservations amongst Chavistas about runaway crime and public insecurity, along with frustrations over the state provision of basic social necessities (food, housing, health and education), and doubts about corruption in the government, low income voters in particular are intensely loyal to Chávez the man. They firmly believe that he is the only one that represents them and is the only one capable of seeing through the Bolivarian movement’s social promises.  These same voters, previously disenfranchised, are also easily swayed by Chávez’s deliberately polarising tactics, whereby he warns that a vote for the opposition “oligarchy” means a return to the bad old days. The fact that Capriles is running a ‘new-left’ campaign and has had to promise to retain the bulk of Chavez’s social programmes says it all.

• Capriles, who last week went to Colombia on the first of several planned regional trips, associates himself with the centre-left social democratic model so successfully implemented in neighbouring Brazil by Lula da Silva (2003-2010) and his successor Dilma Rousseff. Indeed both Capriles and Chávez have hired Brazilian PR advisors for their campaign teams.  Lula, however, has recently made known his support for Chavez’s re-election. Like Colombia, Brazil wants stability on its borders. It is also the case that Brazilian companies, public and private, have done well out of the Lula-Chávez relationship.

• With five months to go, the Venezuelan opinion polls have to be taken with a large pinch of salt. The electorate (of 18m) has been split almost evenly down the middle under Chávez. There is an unusually high proportion of undecideds this year; many want more information about the president’s illness before they make up their minds. These voters may decide the election. Despite the continued uncertainty surrounding Chávez, the government insists that the vote will go ahead as scheduled. Ahead of the official campaign, the next month will likely see a lot more smoke and mirrors in Caracas.

Pointer: As if the political scenario wasn’t surreal enough already, last week Venezuelan intelligence agents turned up at the offices of a local daily, Ultimas Noticias, to question its crossword puzzle editor, Neptali Segovia, who was accused of placing a coded message in a recent daily crossword urging the assassination of the president’s hard-line brother (and a rumoured potential successor), Adán Chávez. Answers to some of the clues in the crossword included the words ‘kill’, ‘blast’ and ‘Adán’. The accusation was made by a state TV presenter Miguel Angel Pérez Pirela, who noted that the French Resistance used similar tactics in the Second World War.

As Mexico gears up for presidential elections in July, things are not looking good for President Felipe Calderón and his ruling Partido Acción Nacional (PAN). The traditional Partido Revolucionario Institucional (PRI), which ruled Mexico for 71 years until its historic defeat in 2000, is set to make a remarkable comeback. The political resurgence of the PRI is a damning assessment of the Calderón years.

The perception of failure surrounding the Calderón administration has a lot to do with the president’s declared ‘war’ on drugs and the violence and insecurity it has unleashed. But it is also related to the administration’s meagre policy achievements in other areas, including economic growth, which was the central plank of Calderón’s campaign when he was running for president. This has been a disappointing sexenio (six year term). In aggregate, the outgoing president will leave Mexico in worse shape than he found it – and an electorate that is deeply disillusioned with the country’s dysfunctional political system. The analysis below seeks to understand how and why.

The search for legitimacy and the war on drugs

Calderón came to power in 2006 after winning the presidential election by the narrowest of margins, 233,831 votes, out of 41m valid ballots. It was a bitterly contested race and there were widespread concerns of bias and flaws in the electoral system, reminiscent of the old PRI days. Even the Tribunal Electoral del Poder Judicial de la Federación, Mexico’s highest electoral court, conceded that the playing field in the run up to the election had not been levelled, and that there had been improper incursions by the-then president Vicente Fox (2000-2006), of the PAN, in favour of Calderón. The runner-up Andrés Manuel López Obrador, the former mayor of Mexico City (2000-2005) and candidate for the left-wing the Partido de la Revolución Democrática (PRD), refused to recognise the results and set up an ‘alternative government’ instead.

Upon taking office, Calderón thus found himself facing a deeply polarised population, with the credibility of his mandate hanging in the balance. Like other presidents before him who came to power under a shadow of suspicion and distrust, including Carlos Salinas de Gortari in 1988 and his successor Ernesto Zedillo in 1994, Calderón’s immediate challenge was to build the legitimacy of his rule. Salinas sought to do this through by negotiating the (1994) North American Free Trade Agreement (Nafta) with Canada and the US that would purportedly bring Mexico into the First World. Zedillo, for his part, launched an ambitious project of political decentralisation intended to divest power, resources and authority. For Calderón, the lynchpin of his search for legitimacy became the war on drugs and organised crime, which he launched immediately upon taking office in December 2006. From the moment Calderón first sent troops to the state of Michoacán (which, incidentally, was governed by the PRD at the time) in late 2006, the war on Mexico’s formidable drug trafficking organisations became the flagship of his administration.

Calderón’s bold gambit seemed to pay off – at least in the short term. The war on drugs provided a critical rallying point around which all Mexicans could unite to fight against a common enemy that threatened to undermine Mexico’s stability, political institutions and very social fabric. But it also proved a remarkably short sighted move on which to stake the whole of a presidency. Over the past five years it has become evident that the Calderón administration is ill-equipped to fight this war effectively and to deal with its fallout. As multiple security experts have pointed out, Calderón launched into the ‘war’ without a sound understanding of the nature of the enemy, adequate planning, or a clear exit strategy. While the war has so far shown very little in terms of results, its social costs have been staggering. It has claimed roughly 50,000 dead and has led to spiralling violence and insecurity in many different parts of the country. The rule of law has been a prime casualty, and impunity reigns throughout. There are also concerns that the Calderón administration has remained indifferent towards the escalation of human rights violations at the hands of both the police and the military.

There is a growing sense amongst the population that Mexico cannot win the war, at least not in the way it is currently being fought. This does not mean that the solution is to return to the tacit accommodation of the past, as the government likes to insinuate of those who are critical of its approach. But it does mean that there is a need for a radical rethinking of the strategy to combat drug trafficking, which is not easy, especially given the sensitivities in the US. Tellingly, all four 2012 presidential candidates agree that the situation cannot continue as it is, because it is untenable, yet none of them have a different strategy to offer.

Limited progress on campaign promises

Of course, it is also essential to keep in mind that there is more to Mexico than this war and that Mexico is far from turning into the failing or failed state that is often portrayed in the international media and policy circles. On the other hand, part of the problem has been that the Calderón administration has focused on this issue with obstinate single-mindedness. This sexenio has offered little else in the form of an alternative discourse focused on other national priorities, while the president himself has displayed a remarkable reluctance to admit fault or describe in honest terms the state of his signature initiative.

Progress on other areas of key importance to the country has remained limited. This is particularly the case in terms of economic growth and job creation, which was the cornerstone of Calderón’s presidential campaign (if not of his actual administration). Admittedly, the middle class has continued to grow in Mexico, and has access to greater opportunities (e.g. housing and credit) and higher standards of living. This has been an ongoing trend since the days of the Fox administration and has been sustained over the past six years. In addition, targeted anti-poverty programmes, notably the conditional cash transfer programmes known as Oportunidades, have been expanded, and there have also been limited investments in infrastructure.  Other countries in the region, notably the Southern Cone commodity exporters, led by Brazil, have enjoyed much faster growth in recent years and on the back of this have made big inroads into overall poverty levels (which were higher than in Mexico). Poverty and other leading social indicators in Mexico have not matched the same rapid pace of improvement since 2006, but neither has earlier progress been reversed.

In contrast to the Southern Cone, in Mexico economic growth remains heavily bound up, for good and ill, with the fortunes of its main trade and investment partner, the US. President Calderón has made much of the fact that his administration navigated successfully the global crisis that that began in September 2008. While it is true that the country’s economy has bounced back strongly from the global crisis, it has still underperformed in comparison to its emerging market peers, despite the fact that oil prices have been at an all-time high. Under Calderón, real GDP growth will have averaged just 1.5% annually (from 2007 to 2012 inclusive, based on officially forecast growth of about 3.6% this year). That is simply not enough to promote the kind of job generation the country needs, especially given its large young population. Nor has it provided the resources necessary to take care of other vital social needs, including security and education.

In addition, there has been very little progress in promoting structural reform within the state oil company, Petróleos Mexicanos (Pemex), and the big national monopolies, while corruption remains endemic. The latest scandal regarding the graft that enabled Wal-Mart’s astonishing expansion in Mexico is a stark reminder of this. Mexico seems to have acquired a reputation, especially at the international level, that there is a lack of commitment from the top to follow through on reforms, and under his sexenio Calderón was not able to do enough to alter that perception.

An immature political system

Calderón’s woes have been exacerbated by a democratic political system that remains immature, in part due to legacies from one-party rule. The “winner-takes-all” mentality that the old system was built on remains alive and well. The three major political parties, the PAN, the PRI and the PRD, seem to be consumed with electoral politics and the need to win the next contest (be it at the municipal, state or national level), above and beyond any concern with the national interest, and this has generated a fiercely competitive and often acrimonious dynamic between them. As a result, the parties have failed to develop any kind of basic agreement on how they might work together to address the multiple challenges that beset Mexico. The divisions among them are not purely ideological (they adroitly manage to build strategic electoral coalitions when it seems to suits), but also calculated and interest-driven. Their refusal to collaborate across party lines and to build consensus has kept Mexico in a state of governmental gridlock since the advent of democratic rule.

As a result, much of Calderón’s legislative agenda has been stalled, blocked or diluted beyond recognition. This happened, for example, with proposed reforms to the energy sector. Attempts to reform the political system have yielded little more than a narrow electoral reform that is considered deeply unsatisfactory and even problematic, because it seems to have strengthened the established political parties even more. And almost six years into the war on drugs, important laws to reform the police and the judiciary have yet to materialise.

An enormous challenge here is that there is no re-election – another legacy from Mexico’s single-party rule past. This poses a fundamental problem: because politicians depend on party bosses rather than on voters for their political future, they tend to be much more accountable to their party than to the electorate. Among other things, this makes it difficult to build coalitions across parties in congress, because it behoves representatives to toe the party line. Unions, another integral part of the political system under one-party rule, remain extremely powerful in Mexico and are often opposed to reform. Given their ability to mobilise votes, they continue to hold sway over politicians, and as such they have held considerable veto power over important reforms, notably in the oil and education sectors.

• Where to from here?

The legacies of this sexenio are daunting. There is a fundamental lack of trust and confidence in government and in the political process more generally, which remains deeply dysfunctional. According to Consulta Mitofsky, Mexico's most trustworthy pollsters, only 30% of the voting public believe that the country is headed in the right direction.

• Support for democracy

A poll conducted by Vanderbilt University for the Latin American Public Opinion Project found that public satisfaction with democracy in Mexico dropped to just 40.6% in 2010, from 50.3% in 2004. This is a worrisome trend. Mexico gives many reasons for hope in the resilience of its institutions and its people, but it is not clear that things can be easily improved in the next six years. Unless the leading 2012 presidential candidate, Enrique Peña Nieto (of the PRI), is a Gorbachev-type figure committed to deep-rooted structural and institutional reforms, it is not likely that patterns of corruption and paternalism will change substantially. But neither is it apparent that the other two main candidates, Josefina Vázquez Mota of the PAN and López Obrador (running again for a PRD-led coalition), have anything different and innovative to offer. The struggle for change in Mexico will be long and arduous, especially against the backdrop of drug-related violence and insecurity – and everyone, including the US, has a stake in the process.

Immigration is always a hot topic in Mexican and US politics, especially during an electoral year for both countries. US President Barack Obama stoked the fires by promising during the VI Summit of the Americas last month to push for an immigration reform in the first year of a second term. This is a promise he would be unlikely to be able to keep, as the Republicans would have to suffer a serious reverse in congressional elections, but it was designed as a gesture to the large Latino vote in the country. Immigration is one of three topics, along with Cuba and drugs, which the US-based think tank Inter-American Dialogue argued in a recent report “stands in the way of a real partnership” between the US and Latin America, and yet given the highly charged political debate over the issue the average voter in the US would probably be amazed by the findings of two recent reports, both of which claim that Mexican migration to the US, historically very high, has halted, and might even be reversing.

A report by the Pew Hispanic Center found that from 2005 to 2010, a total of 1.4m Mexicans emigrated to the US. A fairly substantial figure. It also found, however, that over the same period 1.4m Mexican immigrants returned to Mexico from the US. Net migration flow: zero. There are, according to the report, several factors at play: “weakened US job and housing construction markets; heightened border enforcement; a rise in deportations; the growing dangers associated with illegal border crossings; the long-term decline in Mexico’s birth rates; and changing economic conditions in Mexico.”

The fall in net migration from Mexico over the last five years has also had an impact on the number of unauthorised Mexicans living in the US (see overleaf). As of 2011, some 6.1m unauthorised Mexican immigrants were living in the US, down from a peak of almost 7m in 2007, according to calculations in the report based on data from the US Census Bureau. Just over half (51%) of all current Mexican immigrants are unauthorised. Over the same time span, the population of authorised immigrants from Mexico rose from 5.6m in 2007 to 5.8m in 2011.

To some extent tightened US border security measures have contributed to the fall in the number of unauthorised Mexicans entering the US. Apprehensions of Mexicans trying to cross the border illegally, according to the Pew report, have fallen by more than 70%, from more than 1m in 2005 to 286,000 in 2011. In 2010, nearly 400,000 unauthorised immigrants - 73% of them Mexicans - were deported by US authorities, according to the study. However, another report, which coincides with the publication of Pew’s, argues along with the Pew Center that the US security buildup is just one factor in the fall. This report, by the US-based think tank Washington Office on Latin America (Wola) and Mexico’s College of the Northern Border (Colef), entitled ‘Beyond the Border Buildup: Security and Migrants along the US-Mexico Border’, cites other causes for the drop: “The US security buildup is a factor, but the US economic crisis is at least, if not more important,” it argued.

The report also highlights the size of the fall in migrants attempting to cross at the border, pointing out that since 2005, the number of migrants caught by the US Border Patrol on the Mexican border has nosedived by 61%, to the lowest level in 40 years. It argues that this is in no small part down to the manifold difficulties associated with attempting to cross the border: “… the dangerous gauntlet of abuses at the hands of criminal organizations--and certain Mexican officials--through which migrants must pass on the way to Mexico’s northern border causes some to reconsider the journey.” It also criticises the US border security policies, designed to combat drug-trafficking and prevent the spread of violence, as exacerbating the ordeal of migrants by leaving them exposed to the mistreatment of organised crime.

The report concludes that the widespread fear, fanned by those seeking to tighten border security further, is unwarranted: “While a few notorious incidents get attention, the US side of the border actually suffers less violent crime than the US average… even as Mexican border states and municipalities exhibit some of the world’s highest homicide and violent-crime rates,” it argues.

• Mexico City campaign gets underway
  
  

Candidates for the mayoralty of Mexico City began their official campaigns at the weekend ahead of the 1 July elections to succeed Marcelo Ebrard. Former Mexico City prosecutor Miguel Ángel Mancera is running for the coalition led by the Partido de la Revolución Democratica (PRD), and heads the polls. He is followed by a former governor and congresswoman, Beatriz Paredes Rangel of the Partido Revolucionario Institucional (PRI), and the anti-kidnapping activist Isabel Miranda de Wallace, of the Partido Acción Nacional (PAN). Mancera polled 41% support in the latest survey by Buendía y Laredo this week for El Universal. Paredes followed on 29% and Miranda on 14%. The Distrito Federal is the PRD’s stronghold. It has controlled it for 15 straight years.

Development: Fernando Cavendish and Carlos Pacheco, the owner and director respectively of Brazil’s construction giant Delta Construções, stepped aside from the company on 25 April. The same day, the federal police, acting in conjunction with the federal public ministry in the state of Goiâs, arrested and threw in jail a former company director, Claudio Abreu, and issued detention orders against several other company members, civil servants and politicians in the states of Anápolis, Goiâs, São Paulo and the federal capital district of Brasília.

Significance: Delta Construções, which has 100% of its contracts with the public sector (federal, state and municipal), looks as though it could sink under the weight of the corruption and bribery allegations seeping out of the scandal involving an imprisoned businessman, Carlos Augusto Ramos (‘Carlinhos Cachoeira’, or 'Charlie Waterfall'), who is the subject of a new parliamentary commission of enquiry (CPI) into his political links. The federal police claims to have evidence that Delta was deeply enmeshed in graft through Cachoeira’s illegal gambling mafia, the proceeds of which may have been used for political bribery.  Ominously for the ruling coalition, the Rio-headquartered Delta has close links both to the ruling Partido dos Trabalhadores (PT) and its main government partner, Partido do Movimento Democrático Brasileiro (PMDB), which runs Rio de Janeiro via Governor Sérgio Cabral, a very close personal friend of the 49-year old Cavendish.

Key points:

• ‘Carlinhos Cachoeira’ was arrested by federal police on 29 February on charges of running an illegal gambling/gaming hall mafia, money laundering, smuggling and active and passive corruption.

• Fernando Cavendish is one of Brazil’s best known and most powerful businessmen; Delta Construções is the biggest recipient of public works contracts/funds under the US$350bn national infrastructure scheme known as the Growth Acceleration Program (PAC).  Under the PT, the company’s business with the federal government has increased an incredible 1,653%, according to calculations by the opposition weekly Veja.

• Currently, the company has an estimated 195 public works contracts in 23 states, plus the federal district. It employs 30,000 people in total (25,000 directly and 5,000 indirectly). Most of its contracts are big infrastructure projects in Rio, in preparation for the 2014 World Cup and the 2016 Olympic Games. This is not the first time that Delta has been tainted by graft allegations, though never before has it been the subject of such intense official scrutiny. According to a local NGO, Contas Abertas, which independently monitors federal government expenditure, Delta has been awarded PAC contracts worth R$4.3bn (US$2.28bn) in the past two years, of which R$3.0bn (US$1.6bn) has been disbursed to date. Contas Abertas estimates that the firm has already received R$151.6m (US$80.6m) from the union to date in 2012.

• Delta last week abandoned the consortium working on the refurbishment of the famous Maracanã football stadium in Rio. The remaining stakeholders, Odebrecht Infrastructure (49%) and Andrade Gutierrez (21%), will likely assume Delta’s remaining 30% share and the works should not be affected. Local press reports suggested that Delta was forced to withdraw due to debts it racked up from involvement in part of the illegal gambling mafia run by ‘Carlinhos’.

• Depending on the outcome of an internal company audit and an official investigation by the federal comptroller general (CGU) into Delta’s activities in nine states (the state governments in Rio and Goiâs have also mounted their own investigations), the firm may be obliged to step aside from some of the other PAC works schemes, which include the construction of the TransCarioca rapid transit bus line and the Comerj petrochemical complex, both in Rio. Due for completion ahead of the 2014 World Cup, TransCarioca will link Barra da Tijuca with Galeao international airport, while Comperj is being built for the state oil firm Petrobras. With Brazil already under intense pressure to get the works for the World Cup and the 2016 summer Olympics delivered on time, this is the last thing it needs. And after the Rousseff government spent its first year mired in corruption scandals, neither it nor Brazil need the negative attention and lousy PR.

• Carlos Alberto Verdini, an engineer, takes over from Cavendish. Edyano Bittencourt replaces Carlos Pacheco. Verdini said yesterday that he would personally submit documentation to the CPI. The company later issued a statement saying it would honour all its contracts.  However, the future for Delta is clearly in the balance.

Pointer: The former president and honorary PT president, Lula da Silva (2002-2010), spent four hours in talks with his successor, Dilma Rousseff, yesterday as part of efforts to formulate a united PT position ahead of the CPI. The PT governor of the federal district, Agnelo Queiroz, may be implicated with ‘Carlinhos’. Another worry is the relationship between ‘Carlinhos’, Delta and the former director of the national department for infrastructure and transport, Luiz Antônio Pagot. Pagot was forced out in July last year amid bribery allegations. In a press interview last week (20 April), Pagot said he was forced out to protect ‘Carlinhos’ and Cavendish.

Spain is at the head of the line, but the queue of countries complaining about this week’s decision by President Cristina Fernández to re-nationalise Yacimientos Petrolíferos Fiscales (YPF), the local subsidiary of Spain’s Repsol, is growing by the hour. As Fernández continues to make policy U-turns (see our sister publication the Brazil and Southern Cone report, RBS-12-04), confidence in the country is crumbling faster than a house of cards on a windy day; with it also vanishes the government’s ability to return to international credit markets, from which it has been barred since the 2001 default.

The rumours about the takeover had been brewing since late 2011; the recent escalation in official Spanish warnings to Argentina not to move in that direction testified to Madrid’s increasing worries that Buenos Aires would act soon. Spain’s minister of industry, José Manuel Soria, said last week that the Spanish government defends the interests of Spanish companies both “inside and outside” Spain and “if in any part of the world there are gestures of hostility against those interests, the government interprets them as gestures of hostility towards Spain and the government...and these will have consequences”.

Uncertainty over the company’s future also prompted José Manuel Barroso, the president of the European Commission, to phone Fernández. Antonio Brufau, Repsol’s CEO, spent five days in the Argentine capital trying to meet the president, but he was only received by Minister of Planning Julio de Vido.

Responses

Following the announcement of the takeover [RBS-12-04], international responses were loud and negative. Mexico’s President Felipe Calderón said the decision was “very regrettable”, and showed “little responsibility and little rationality” because this would effectively shut the door to foreign investors. “No-one in full control of their faculties invests in a country that expropriates investments...that is the worst incentive for an investor,” he said. During an event with Spanish businessmen on 18 April, and just hours before Spanish Prime Minister Mariano Rajoy started an official visit to Colombia, President Juan Manuel Santos said “when investors come, I say ‘welcome, you are our partners and if you do well, we do well too...we want you to feel that we have stable rules... that we don’t expropriate here’”.

Barroso ordered the immediate cancellation of a scheduled bilateral EU-Argentina meeting in Buenos Aires; the French government called for “European solidarity with Spain” and Foreign Minister Alain Juppé called on Argentina to “respect international law”. The British foreign secretary, William Hague, said the move is contrary to “all the commitments” made by Buenos Aires at the G20.

The European response clearly indicates that Southern Common Market (Mercosur)-European Union (EU) Free Trade Agreement (FTA) talks, which have been creeping along slowly for six years, could once again be stopped in their tracks. A rumour that has circulated in British political circles since PM Rajoy visited his British peer, David Cameron, in February is also gaining strength. According to these reports, Spain, which is a G20 observer member, would seek the support of full-members to suspend Argentina from this forum. If the Argentine move on YPF has in fact jeopardised EU-Mercosur FTA talks, Madrid may even be able to persuade Brazil to refrain from opposing the move openly, even if it does not back it outright.