One of big issues in the forthcoming Mexican presidential election will be the next government’s strategy for the state oil monopoly, Petróleos Mexicanos (Pemex). The two male presidential candidates, Enrique Peña Nieto, the de facto Partido Revolucionario Institucional (PRI) candidate and Andrés Manuel López Obrador, the leftwing candidate, have both made suggestions.

Peña Nieto has been talking about opening up Pemex to the private sector for the past three months, though it is far from clear what exactly he envisages. López Obrador advocates a much more statist strategy: increasing Pemex’s downstream activities, particularly in refining, to combat two problems Mexico faces. These are first the dwindling surplus on the oil trade account and second the rising cost of petrol, diesel and other refiner products in Mexico.

In November, Peña Nieto indicated that his idea of opening up Pemex went further than the Petrobras model of listing the state-owned company on the stock market. Indeed both Petrobras, the state-owned Brazilian energy company,  and the Colombian state oil company, Ecopetrol, were only listed on local and then international stock markets after they had been stripped of their monopolies and forced to compete, at least in some business areas, with international energy companies.

It is not clear whether Peña Nieto actually means what he says about major Pemex reform. Like all campaigning politicians he adjusts his message to his audience. When he met 850 leaders of the powerful, PRI-supporting and financing, oil workers’ union on 13 January 2012, he made no mention of shaking up Pemex.

It is worth noting, however, that one of Peña Nieto’s political mentors, Carlos Salinas de Gortari started his presidential administration in 1988 by taking on the oil workers. There may have been an element of political revenge in this because the oil workers’ leader had endorsed (and probably financed) his main rival, but the image of that leader, Joaquín Hernández, being marched off to prison, played well with the neo-liberals who were then in the economic ascendant internationally.

If pragmatism is Peña Nieto’s key political characteristic, (which seems likely from his record in managing the Estado de México, the country’s richest and most important state), he may push for changes that the PRI has previously vetoed. One obvious example of this is the PRI’s veto, exercised by its de facto majority in the lower house of congress, on allowing private companies to build or manage oil pipelines in Mexico. Private companies can, however, move oil in tankers by road. Mexico’s oil and gas pipeline system is elderly and sprawling: a rationalisation would appease environmentalists.

Theoretically such a green move would appease Peña Nieto’s only remaining political ally for the forthcoming elections, the Partido Verde Ecologista de México (PVEM). However, despite the party’s name, it is much less of an environmental lobby group than a vehicle to push the business activities of the González Martínez family which still largely controls and bankrolls the PVEM.  The González Martínez family’s primary business is manufacturing generic pharmaceuticals.

The PRI has also opposed allowing the private sector to build and operate new refineries in Mexico, where the arguments are more delicately balanced.  Mexico’s growing appetite for importing (high-priced) fuels while exporting (cheaper) crude oil makes the business case for new refineries apparently convincing. Mexico is now importing half of the refined products it uses and pays for these imports with exports of lower-price crude oil.

Mexico’s trade surplus in oil products is now down to about US$1bn a month. Previously, when oil prices were strong (over US$90 a barrel) the country ran a surplus in its oil trade of around US$2bn a month. If the economy continues to grow at around 4%, Mexico’s appetite for fuels will probably grow faster and cut the trade surplus even further. The conventional view is that some time in the next presidency (2012 to 2018) Mexico will, for the first time in over a century, become a net importer of hydrocarbons.

Mexico’s surplus in oil products is continuing to shrink: in 2011 oil exports (mostly crude) were worth US$56.4bn while its oil imports (mostly fuel and refined products) came to US$42.7bn. Non-oil exports were up by 14.1%, year-on-year, in 2011 and non-oil imports were up by 13.6%. The surplus on the oil trade more or less exactly matches the deficit on non-oil trade.

Even if the next government opens up the potentially rich deep waters of the Gulf of Mexico to exploration by foreign companies (because Pemex has neither the financial muscle nor the technology to do so), the lag between discovery and production is still likely to mean that for a period at least, Mexico will become a net importer.

The left-winger, López Obrador argues that the next government should do something about the declining trade surplus in oil products by building five new oil refineries in Mexico and using them to refine more of Mexico’s crude oil, thus cutting the need for expensive imports. He added, less demonstrably, that such a strategy would also lower fuel prices in Mexico. The main problem with this new refinery strategy is that it is narrowly focused and takes account only of what is happening in Mexico.

For North America as whole, there is no need for new refineries. Indeed there is a strong argument that this region has an overcapacity in refining and that this overcapacity is capping the returns refiners make. Pemex already loses money on its own refining businesses and several other large North American refiners do the same on theirs.

Even at the top of the refining cycle, the margins in the refining business are pitiful, usually less than US$1 a barrel. By contrast the margins on the crude business are thumping. It costs Pemex about US$7 to produce each barrel of crude oil which the company now sells for over US$100 a barrel.

Pemex’s long-term strategy has been to maximise crude production and to limit its involvement in the losers’ game of refining. As new refineries cost about US$10bn each to build, the upfront cost of López Obrador’s plan would be huge and the cash returns derisory.

Arguably López Obrador would be better advised either to gear up to buy surplus  refineries elsewhere in the Southern US for considerably less than the cost of building the new refineries in Mexico or better still, to use the money to develop new deepwater oilfields.

The issue of fuel prices in Mexico is becoming pressing because the cost of fuel subsidies is so large and the high price of oil in international markets is pushing up the retail price in Mexico. In 2011 the government spent M$160bn (US$12.5bn) on subsidising fuel. Cutting these subsidies which encourage car use (and thus atmospheric pollution) would probably produce major changes, and ructions, in the country.

Pemex does not publish information on how much it costs to produce petrol. By law, Mexico’s petrol prices are pegged to the price of unleaded gasoline on the Gulf Coast of the US. This price prevails whether or not the petrol is produced domestically (ie in Mexico) or imported. On 30 January, the Gulf Coast reference price was US$3.29 a gallon or US$0.86 a litre. Adjusted by the official exchange rate, this gave a theoretical price for Magna, one of the most popular of Pemex’s petrol brands, in Mexico of M$11.18 a litre. As the retail price for Magna, apart from along the US border, is M$9.82 a litre, the government is subsidising petrol to the tune of M$1.36 a litre. Perhaps the actual subsidy is even higher because it may cost Pemex more than M$11.18 a litre to produce Magna: imports, by definition, are pegged to the Gulf Coast price.

Venezuela’s President Hugo Chávez will undergo emergency surgery in Cuba. Speculation had mounted for days about the state of Chávez’s health before he admitted publicly on 21 February that a “two-centimetre lesion” had been discovered during a “routine check-up” in Cuba at the weekend in the same (unspecified) place where he had a malignant tumour removed less than a year ago. He did not say when he would go to Cuba for treatment, but it is likely to be this weekend and to involve radiotherapy. He admitted that he would be forced to slow down his rhythm in the months ahead but he pointedly refrained from announcing a temporary replacement and remains intent on standing for re-election on 7 October. The uncertainty should play into the hands of his opponent Henrique Capriles Radonski, who won a sweeping victory in primary elections on 12 February.

Chávez spoke out on state television, after visiting a tractor factory in his native state of Barinas, to quash what he called malicious rumours that he had metastasis in the liver and that he would be unfit to contest October’s elections. The Venezuelan journalist Nelson Bocaranda, who has demonstrated since Chávez underwent four rounds of chemotherapy between July and September 2011, that he has very reliable sources, broke the news in his runrun column and on Twitter that Chávez had been flown to Cuba for an emergency check-up on Saturday 18 February.

Bocaranda claimed that Chávez has been taking steroids to disguise his illness, and that rather than resting, as his doctors, family and even mentor Fidel Castro are urging, has made a superhuman effort to gear up for re-election and attack Capriles. Perhaps too great an effort. Hours before he was flown to Cuba he had unleashed a torrent of abuse on his opponent, who he has never once mentioned by name, depicting him as “inferior, mediocre, a liar and a pig”. He said Capriles represented “the rancid Venezuelan oligarchy” and was lying about being progressive.

Capriles said he was not surprised by the insults. He compared Chávez to an old and tiring pugilist slugging around, while he was nimble and dexterous. The analogy, which was designed to contrast the past with the future, gained poignancy and prescience after Chávez’s relapse. If Capriles was offended by his opponent’s personal attack it was probably more over the accusation of being “a liar” than the extended porcine metaphor. Chávez has been very economical with the truth about his illness and members of his government are either being misinformed or simply lying - neither of which reflect well on his government. How else can the vehement denial of the rumours about a downturn in Chávez’s health by the communications minister, Andrés Izarra, on 20 February, a day before Chávez demonstrated that the rumours were in fact true, be explained?

Capriles wished Chávez “a successful operation, swift recovery and long life” on his Twitter account, but the opposition Mesa de la Unidad Democrática (MUD) is demanding “transparency” from the government, as well as “reliable” medical reports on Chávez’s condition. “Telling the truth is a democratic duty to the Venezuelan people, especially over such an important matter,” it argued.

Chávez will gain a degree of support for his stoicism in the face of his illness, but it will be tempered by the perception that his government has not been straight with supporters and the very real fear that even if he recovers and wins in October, another six years, with all the associated rigours of office, is surely beyond him. He has no chosen successor (he has pointedly refrained from delegating power for now) and, despite his claims to the contrary, he is far more popular than his project and Capriles would be a clear favourite against any alternative candidate.

Diosdado Cabello, elevated to head of the national assembly and vice-president of the ruling Partido Socialista Unido de Venezuela (PSUV) in recent months, insists that nothing has changed and that Chávez “is and will continue to be” the party’s candidate in October. Cabello, paradoxically, claimed that Chávez had kept him well informed about his illness but that he was surprised by his latest announcement. Izarra had accused the opposition of fighting “a dirty war” by spreading false rumours, although these were proven to be true and the communications minister’s own denial false.

Alba’s support for Syria

One of the things Henrique Capriles has promised in the event of winning election in October is to discontinue the “club of friends” set up by President Chávez. One of these special friends is Syria. The Alba integration bloc, led by Venezuela, recently issued a statement, condemning “the violence armed rebel groups supported by foreign powers have unleashed against the Syrian people” and “a systematic policy of interference and destabilisation”. It expressed full support for Syria’s President Bashar al-Assad. This is in line with the conclusions of an Alba delegation which visited Damascus four months ago. Since then the violence has intensified and more than 6,000 people are thought to have been killed.

Last week the UN Secretary General Ban Ki-moon accused Assad and his government of “almost certain” crimes against humanity and called for him to step aside to allow a democratic transition. The UN General Assembly voted 137-12 to condemn the violence in Syria and endorse an Arab League plan that calls for Assad to resign. Alba members Bolivia, Cuba, Ecuador, Nicaragua and Venezuela lined up with Syria itself, Belarus, China, Iran, North Korea, Russia and Zimbabwe in refusing to condemn the violence.

The very name Alba is supposed to symbolise a new dawn of people’s democracy. And yet, an organisation which enshrines greater democratic participation at the heart of its founding statutes is pledging unqualified support for Assad, not an enlightened social reformer embodying democratic ideals but a scion of a 40-year-old regime brutally repressing his people. How can Alba be oblivious to this incongruity? Chávez is well know for forging close ties with pariahs such as Alexander Lukashenko, the Belarusian president, but how can it possibly avail Alba to throw its weight behind Assad now? Part of the answer is a visceral anti-Americanism and suspicion of US intentions. Part of it is survival instincts. The five main Alba heads of state are always highly critical of external interference in sovereign nations because they claim that (often foreign-backed) conspiracies seeking to destabilise them abound (see page 3); they thrive on polarisation. Other Alba members are clearly uncomfortable with the bloc’s Syria policy. Antigua & Barbuda and Haiti voted to condemn Syria in the UN; St Vincent and the Grenadines abstained.

The UN might yet sanction Venezuela. Reuters claimed last week that Venezuela had sent US$50m worth of diesel fuel to Syria, in violation of international sanctions.

•  Replacement

When President Chávez underwent chemotherapy last year he did not delegate power to his Vice-President Elías Jaua, or any surrogate. Even though he could be sidelined for weeks at a time undergoing radiotherapy, it appears that he does not intend to announce a temporary replacement now either. Indeed, Jaua has indignantly lashed out at the opposition for even suggesting the need for such a replacement and insisted that Chávez would continue to wield power throughout his treatment.

Foreign press coverage of Ecuador this week was dominated by the judicial ruling coming down hard on the national daily El Universo. The widespread debate over press freedom in Ecuador is fully justified but what is really significant is President Rafael Correa’s attempt to discredit a potentially large protest march against his government, led by the umbrella indigenous organisation Conaie. During his weekend media broadcast, Correa claimed that “radical” indigenous movements were preparing to team up with “leaders of the extreme right”, backed by bankers and “the corrupt media”, enraged by the ruling against El Universo, to destabilise his government. What exactly is the march all about to cause him such concern?

President Correa habitually lumps all dissenting voices together, however poles apart they might be, as conspiring against Ecuador’s interests by threatening to destabilise his government. It is a tried and tested tactic when he really needs to discredit opponents and divert attention from the actual causes of their protest. In this case, Correa is keen to undermine a two-week protest march to Quito (from 8 March to 22 March) being planned by Conaie, and left-wing dissidents that broke away from his citizens’ revolution.

“They are trying to destabilise the government, it is their last chance, once this is over nobody will stop us in next year’s elections with or without me,” Correa said. In a reference to indigenous protests in Bolivia, he added “They want to do the same as they did to (President) Evo Morales: they failed there and they will fail here too.” Correa called for a big mobilisation in Quito on 8 March for “Women’s Day”, and is likely to call supporters onto the streets in a counter-march to coincide with the arrival of Conaie et al on 22 March.

Gustavo Larrea, a prominent former minister and a founder of Correa’s Alianza País (AP), said the “plurinational march for life, democracy and the defence of natural resources” had no intention whatsoever of destabilising the government. He said it simply sought to protest against government policies and to demand respect for freedom of opinion. Larrea is the leader of Participación, which is part of a movement set up a few months ago called Coordinadora por la Unidad de las Izquierdas, which is seeking to unite all of Ecuador’s historically fractured left-wing groups. It includes Pachakutik, Conaie’s political arm and the Movimiento Popular Democrático (MPD), an estranged ally of Correa’s.

Conaie released a statement emphatically denying that it would ever receive financial backing from “Guayaquil fascists”, a reference to Correa’s claim that the march was intent on securing the support of bankers and right-wingers, as well as the media. The president of Conaie, Humberto Cholango, said the march would demand approval of water laws, land to farm, and respect for the ancestral lands of indigenous peoples, on which it argued the government was preparing to award concessions to transnational oil and mining companies. Cholango announced the march as long ago as last September to demand that the indigenous should be consulted about such concessions.

Despite the professed commitment of Correa’s citizens’ revolution to consult the people, the indigenous request will fall on deaf ears. The government is at an advanced stage in negotiations with mining companies, and expects to sign accords within a matter of weeks, according to the non-renewable resources minister, Wilson Pástor. The Chinese company Ecuacorriente looks set to seal a deal to work on the Mirador copper mine, although the Canadian company, Kinross, is seeking to revise a tentative agreement reached last December to develop Ecuador’s largest gold mine, Fruta del Norte, because it is reluctant to pay about half its income, after production costs, in taxes and royalties. Pástor called its demands “unacceptable” last week.

The government, which is keen to lessen dependence on oil exports and boost social spending ahead of elections in 2013, claims that the two deals could bring US$2.8bn in investment over the next 30 months. Conaie is opposed to the proposed mining projects located in the southern provinces of Morona Santiago and Zamora.

• People in glass houses…

A jubilant President Correa said that the judicial ruling against the directors of El Universo showed that it was possible to win sentences against the clowns as well as the owners of the circus. The three directors of the paper were sentenced to three years in prison for criminal libel and a hefty US$40m fine in damages to Correa. The paper, which claimed that the ruling set “a very dangerous precedent for democratic life in Ecuador”, turned to international courts for the justice, they claimed, they were unable to get in their own country. Days later, on 21 February, the Inter-American Commission on Human Rights echoed the chorus of concern expressed by the press across the region, by calling on the Correa administration to suspend the sentence until a hearing between the two parties can be held in late March.

    This specific case and the wider issue of press freedom has been explored in detail in this publication in the recent past and does not require further recapitulation but one intriguing fresh angle to the case emerged this week. Panama’s President Ricardo Martinelli granted asylum to Carlos Pérez Barriga, one of the directors of El Universo, following a request based on “a reasonable fear” for his personal security. The move received accolades from organisations such as Ecuador’s association of editors (Aedep), but Correa described it as a ‘surprise’, pointing out certain incongruities given Martinelli’s own fraught relationship with the media in Panama. In particular, Correa highlighted Martinelli’s 2 January address to the nation in which the Panamanian president delivered a blistering attack on owners of media outlets that have proved critical of his government, accusing them of being empresaurios (business dinosaurs) and “thieves” for allegedly not paying taxes.

    Martinelli’s diatribe against the media which, bar the media group Epasa which controls the national dailies El Panamá-América and La Crítica, is largely critical of his government, prompted 15 ex-presidents of Panama’s Chamber of Commerce, Industry and Agriculture to demand a public apology. Singled out for criticism was the leading newspaper La Prensa, whose founder, Roberto Eisenmann Jr, has covered government corruption cases such as the one involving the national land authority (Anati) [WR-11-39]. Eisenmann’s Desarrollo Golf Coronado S.A, has since received a US$3m fine from the revenue department (DGI) following an audit.

    Martinelli’s efforts to present himself as a champion of press freedom also jar with more general concerns regarding freedom of expression in the country both at home and abroad. A Martinelli-backed bill proposing jail sentences of up to four years for those who “offend, insult, or vilify” the president or other government officials which, in January 2011, he was forced to retract, sparked outrage from local and international unions of journalists alike (see sidebar).

• Panama protests

The Panamanian authorities’ refusal to allow Rosie Simms, a Canadian journalist working for Canada’s ‘CBS’, to enter the country to cover the latest mining dispute [WR-12-07] was flagged up by the NGO Reporters without Borders (RWB) as confirmation of a “negative trend in Panama”. The RWB’s latest (2011-2012) ranking of press freedom by country saw Panama fall 32 places to 113^th with the murder of a radio station owner and the ejection in 2011 of two Spanish journalists accused of instigating environmental protests against mining reforms singled out as particular cause for concern.

The Peruvian government has been celebrating a major triumph in its fight against the remnants of the Sendero Luminoso (SL) guerrillas: the capture of Florindo Eleuterio Flores Hala (‘Camarada Artemio’), the leader of the smaller of the two factions. Details of his capture even are not entirely clear. Attention is now focusing on what will happen to Flores’s followers and the fate of the rival SL faction that operates in the Apurímac-Ene River Valley (Vrae).

On 12 February Defence Minister Alberto Otárola announced that ‘Artemio’ had been captured alive, though badly injured. President Ollanta Humala immediately flew to the Santa Lucía army base in the Upper Huallaga valley where ‘Artemio’ was being treated. After holding a brief meeting with the prisoner, he said he had urged him to call upon his followers to down arms, and announced that he had “ordered the specialised forces to direct all their efforts towards capturing the narco-senderista remnants acting in the Vrae under the command of ‘José’”.

‘Camarada José’(Víctor Quispe Palomino) leads a force estimated to be about 300 strong, more than three times the number attributed to the forces led by ‘Artemio’ at the time of his capture. It has also been, by far, the most aggressive of the two SL remnants and, since mid-2010, has been conducting probes into the rival faction’s territory (indeed, in July of that year there were reports of such a probe in the vicinity of where ‘Artemio’ was captured). Since then, there have been several reports of a northward expansion of the Vrae guerrillas.

On 13 February the government announced that a leading figure of the Vrae unit, Albino Toscano Taipe (‘Camarada Tucán’) had been captured. Three days later, SL fighters struck at an army patrol operating out of the Unión Mantaro base in Huanta, Ayacucho. After a brief exchange of gunfire, in which an army captain was killed, the attackers departed.

The precise circumstances leading up to the capture of ‘Artemio’ are unclear. There was a clash between security forces and guerrillas on 9 February, in which ‘Artemio’ was said to have been hit. Several versions were put out by officials. According to one, ‘Artemio’ had been shot by members of his own protection detail who wanted to collect the US$5m reward offered by the US for information leading to his capture. Another, put out by officials, was that the security forces were led to where ‘Artemio’ was hiding by two “moles” in his security detail. There have also been suggestions that ‘Artemio’ may have negotiated a disguised surrender to the authorities.

Equally confusing have been the successive reports about the extent of the injuries suffered by ‘Artemio’. Defence Minister Otárola said upon his capture that he had been gravely injured and might lose the use of an arm. Later, official reports spoke of unspecified injuries to his thorax and an arm (or hand). He was, however, well enough to converse with Humala and, later in Lima, with police Director Raúl Salazar.

One thing is certain: in the days immediately after ‘Artemio’ was captured, the security forces had good enough information to locate a significant cache of weapons nearby and another larger one in a hamlet close to Puerto Pisana. On the very day of his capture, they found two satellite phones and 18 notebooks which, according to off-the-record information from police sources, contained details of the drug traffickers who were paying ‘Artemio’ for protection and, most intriguing, the names of some high-ranking military and police officers, legislators, politicians and local authorities, as well leaders of the coca-growing associations and the local self-defence rondas.

Two strikes by state police forces, a violent one in Bahia and a lower-intensity one in Rio de Janeiro, ended within days as a result of the rapid response by the state and federal governments — the former seeking to meet some of the strikers’ demands, the latter making it clear that violence would be resisted and those resorting to it would be prosecuted. The two were called off before the beginning of Carnival, but there are indications that police dissatisfaction will surface again once the tourists have left.

The strike launched by the state police of Bahia on 31 January quickly began to look more like an uprising than industrial action. The ringleader, Marco Prisco (a former police officer who was dismissed from the force a decade ago for having led another strike), ordered roadblocks on the accesses to the state capital, Salvador, and the torching of vehicles. He was detected plotting with their counterparts in Rio to sabotage the carnivals in both cities, major tourist attractions scheduled to begin tomorrow (16 February). He also personally led the occupation of the state legislature by 245 officers.

Some may also have had a part in the sudden surge of murders that followed the withdrawal of a police presence from the streets. In the metropolitan area of Salvador, 157 people were killed in the first 12 days of the month, compared with 172 recorded in the whole of February last year. The director of the Bahia civil police’s homicide division, Arthur Gallas, said there was evidence that at least 38 of the killings were carried out by the vigilante groups known as ‘militias’, formed mainly by serving and retired police officers.

On 2 February a court in Bahia declared the strike illegal. The federal government despatched 2,600 soldiers to Bahia and announced that a further 4,000 were standing by to intervene if necessary. About 1,000 soldiers surrounded the state legislature. The occupation of the legislature was lifted on 9 February and Prisco was arrested, as were another 11 ringleaders. Bahia’s governor, Jacques Wagner, announced an immediate 6.5% salary increase, plus a series of additional benefits which, over the coming three years, would add up to the 30% pay increase the strikers had demanded. On 13 February the state military police announced the lifting of the strike, claiming victory for having made the government admit that their pay was too low.

On 10 February the military and civil police forces and the fire-fighters in Rio state announced the launch of an indefinite strike. The state government pre-empted this move by announcing the introduction of a bill bringing forward to February 2013 a 26% pay increase that had been scheduled for October that year — which was quickly approved by the state legislature. The police high command promptly ordered the arrest of 11 of the strike leaders and 50 officers who refused to work (17 of the detainees were handed over to the judiciary).

On 13 February the strike was called off, but the three unions involved announced that they would decide on further action after the end of Carnival. The Rio strikers — the lowest paid of all state public security forces in Brazil — had been demanding a monthly pay “floor” equivalent to US$1,882, more than twice last year’s level.

Federal and state officials had signalled early on that police strikes might also break out in five other states (Alagoas, Espírito Santo, Paraná, Pará and Rio Grande do Sul). Nothing had happened in any of these by the time the first two strikes had been called off, but on 11 February the military police and fire-fighters of the federal district of Brasília announced that they would be launching a peaceful movement in demand of pay increases. The Brasília military police are the best paid in Brazil, at a level three-and-a-half times higher than that of their counterparts in Rio. It is worth noting that the Bahia military police earn almost twice as much as their Rio counterparts, ranking 10th in the nationwide pay scale.

President Hugo Chávez claimed this week that it would not be “the end of the world” if he lost power in elections on 7 October, and that he would order his supporters, moderate and radical alike, to accept the result. A lot could still happen between now and then but the opposition Mesa de la Unidad Democrática (MUD) is looking like a more formidable rival day by day. Henrique Capriles Radonski is a strong bet to face Chávez after one of his two main contenders, Leopoldo López, withdrew from the MUD party primaries on 12 February and threw his weight behind Capriles. The MUD pre-candidates also signed up to a common plan of governance. This is carefully pitched – it promises substantial economic reforms, and some political, but reserves praise for the social policies of the Chávez administration and promises to preserve the existing constitution.

The decision by López to pull out of the MUD primary and back Capriles, the frontrunner, should prove decisive in the primary elections as he was running third in the polls. Young and charismatic, together they would add dynamism to the MUD ticket, holding more widespread appeal than the more polarising options Pablo Pérez or María Corina Machado, although the former retains the support of the traditional party machinery.

López said the legal uncertainty surrounding whether he would be able to stand against Chávez influenced his decision, but he seems to have calculated that he was unlikely to win the primary and that by backing Capriles he could be offered a key role in his government should Capriles win power in October. Capriles duly obliged, saying López could fill any position he chose in his government but would run his campaign for him for now.

A day earlier the main MUD pre-candidates signed up to a joint plan of governance, following a governability accord last September. The timing of the launch was deliberate, marking the 54^th anniversary of the fall of the military dictatorship of Marcos Pérez Jiménez on 23 January. The implication was that this plan could spell the end of the authoritarian government of Chávez.

The 175-page document was careful, however, to pay respect to the social achievements of Chávez, his strongest card going into the elections. Its criticism was that the social advances were accompanied by “clientelism” and “ideological exclusion”. The document promises to consolidate these social advances to combat poverty, without politicisation, and presumably not in the form of the myriad “missions”. It plans to finance this through more conventional means, releasing the state oil company Pdvsa from the fetters of sustaining government social programmes.

The plan of governance, which had been produced over the course of the last year with the input of politicians, technocrats, social organisations and the public, was designed to send out the message that opposition unity, conspicuous by its absence in the past, would go beyond winning the elections to governing, although different candidates would place an emphasis on the areas they have defined as priorities in internal debates. It addresses five main areas: democratic institutions; good governance; productive society; quality of life; and foreign policy. It calls for a return to a conventional market economy: development based on the creation of wealth; attracting investment; restoring the autonomy of the central bank; fixing a competitive exchange rate; revising the public finances; reasserting private property rights; and converting the State from expropriator to regulator. How far the MUD would go with re-privatising nationalised assets is unclear though.

Elsewhere it promises to reinsert Venezuela into the international community with a foreign policy based on “true trade interests and a historic commitment to democracy”. It promises more police officers to combat organised crime and violence and to reduce public insecurity, as well as prison reform, and the “depoliticising” of state institutions, such as the judiciary and the armed forces (see sidebar). Diego Arria, a rank outsider and the only pre-candidate to refuse to sign up to the plan of governance, insisted that repairing “institutional devastation” would require convening a constituent assembly, but the main candidates, keen not to give the impression that they intend to dismantle everything Chávez has put in place, maintained that reform could be accomplished through the existing (1999) constitution.

• Rangel Silva

The government decorated the defence minister, Chief General Henry Rangel Silva, this week for his efforts in fighting drug-trafficking. The interior minister, Tareck el Aissami, said Rangel had made an exceptional contribution to Venezuela’s efforts in this “battle” and deserved the “maximum distinction”. This is deliberately provocative. The US has publicly accused Rangel of complicity with the drug-trafficking activities of the Fuerzas Armadas Revolucionarias de Colombia (Farc). The Colombian government has stayed coy on the matter but the Colombian current affairs magazine Semana accused Rangel of consorting with the Farc and establishing a personal rapport with 'Timochenko', the Farc leader [WR-12-03].

• Human Rights Watch

The US-based NGO Human Rights Watch (HRW) released an annual report this week arguing that the judiciary was completely under the yoke in Venezuela. The director of HRW’s Americas arm, José Miguel Vivanco, expressed concern about the electoral process because of the politicisation of the judiciary, as well as the armed forces. HRW has a very poor relationship with the Chávez administration. Vivanco was expelled from Venezuela in 2008 after releasing a report in the country which claimed that not only had Chávez’s time in office constituted a “lost decade” but that he had also used the short-lived coup of 2002 as a pretext to consolidate his grip on power to the detriment of state institutions and human rights guarantees.

Development: On 11 January three people were killed in Yapacaní, on the western borders of the province of Santa Cruz.

Significance: Protests are everyday occurrences in Bolivia but they rarely produce fatalities. When they do, ministers are sacked and governments totter. The protests and deaths in Yapacaní are doubly dangerous for the central government led by President Evo Morales because they appear to be the result of a feud inside the ruling Movimiento al Socialismo (MAS) which the government may have allowed to fester.

Yapacaní is also in a politically sensitive geographical location, at the extreme west of the department of Santa Cruz, in the valley of the River Ichilo, bordering Morales’s political bastion of Chapare, which is the main coca producing zone in the country.

The three people were killed, reportedly, when about 4,000 protesters tried to prevent a MAS mayor, David Carvajal, returning to municipal office. Carvajal was recently reinstated after getting corruption allegations against him overturned by the courts. Carvajal, who comes from the same Chapare village as Morales, was being protected by 400 police officers, but it is not clear who was responsible for the deaths. The interior minister, Wilfredo Chávez, claimed that all the deaths occurred after the police had withdrawn from Yapacaní, early in the afternoon of 11 January.

Key points:

• A local MAS congressman, Franklin Garvizú, claimed that he had warned the central government, and specifically  Carlos Romero, the minister of the presidency, that trouble was brewing in Yapacaní between the radical wing of the MAS headed by Carvajal and a more moderate, business-friendly wing. Romero denied that he had been warned but said that he had asked Garvizú and Carvajal to come in and discuss the problems in Yapacaní.

• Carvajal, elected 18 months ago, was ejected from office in December, after corruption allegations were levelled him by members of the municipal council. He has now formally resigned because of the deaths.

• The president of the local council, Federico Ortiz, said that the dispute was internal to the MAS and to say that the (opposition) Movimiento sin Miedo was involved was wrong. The protests against Carvajal’s return were organised by the Comité Interinstitucional, which is largely composed of social activists.

• The three victims were Abel Rocha (27), Maicol Sosa (23) and Eliseo Rojas (22). Sosa was killed by a 9mm gunshot to the chest (so possibly by the police); Rocha was killed by a shotgun and Rojas was electrocuted when he tried to enter the municipal building, which was on fire.

• Local politicians and activists are already calling for the resignation of the interior minister and the commander of the Santa Cruz police, Colonel Lily Cortez. The police station in Yapacaní was burned down after the police withdrew on 11 January.

• The local media reported that dozens of people had also been injured. The interior minister, Wilfredo Chávez, claimed that at least 25 police officers were wounded in an ambush by the protesters as the police were making their way back to Santa Cruz, the departmental capital.

Development: On 5 January President Sebastián Piñera of Chile announced that the authorities have “reliable” evidence that a string of forest fires were started intentionally, adding that the government will invoke Chile’s anti-terrorism law to prosecute anyone found responsible.

Significance: Although Chile’s southern regions are especially prone to forest fires during the southern hemisphere summer, since late December several big fires have consumed large parts of the Maule, Biobío and Araucanía regions, destroying some 55,000 hectares (ha) of forest, causing material damages and deaths. The government, which was initially criticised for its lack of action and preparedness, appears to want to regain the initiative, not least with the suggestion that the fires were not accidental but rather a premeditated attack on the country, allegedly by separatist Mapuche groups. However, the only suspect to date is an Israeli national.

Key points:

• On 3 January, delivering an official statement about the latest fire, which started in Carahue, Araucanía, President Piñera confirmed that six brigadiers from the national forestry corporation (Conaf) had died in the blaze.

• Piñera stated, “We have reliable information that makes us presume that there is a criminal intent behind these fires”. Announcing that the government was invoking the country’s controversial anti-terrorism law to prosecute anyone found responsible, the president added, “We must combat not only the fires, but also those criminals that may be behind them”. Piñera also announced that the government would seek to invoke the state security law to prosecute those responsible for an attack on a Carabinero, and the subsequent burning of a public bus, in Santiago, on 4 January.

• Incidentally, on 4 January, the Coordinadora Arauco Malleco (CAN), a group that seeks Mapuche vindication, claimed responsibility for a series of attacks in which a helicopter and four vehicles from the Conaf where set alight on 30 December. In a short statement divulged by the local media, CAN justified the attack as part of its efforts to commemorate the “cowardly death” of Matías Catrileo, a Mapuche student shot dead by police during a protest on 3 January 2008.

• All this has led Interior Minister Rodrigo Hinzpeter, who had previously claimed that some of the fires may harbour “political or economic intentions”, to toy publically with the idea that the CAN or other Mapuche groups might be responsible for the fires. “Soon after [the CAN attack] there were a lot of fires. Things are starting to fall into place, but I will not speculate”, Hinzpeter said. He remarked that although forest fires are expected at this time of the year, what is going on isn’t “normal”. Hinzpeter said that “premeditated fires must be sanctioned as a terrorist act”.

• This could prove bad news for Rotem Singer, an Israeli tourist whom the Chilean authorities are currently questioning in connection to a fire in the Torres del Paine national park, which started on 27 December. According to witnesses, Singer, who was visiting the park, set fire to some paper waste and then failed to put it out completely. Although, the investigation is still at a preliminary stage, Singer’s detention has triggered international reactions.

• An international Jewish human rights organisation, the Simon Wisenthal Center, formally asked the Chilean government to reprimand two local congressmen who it said referred to the case using “anti-Semitic” terms. Fuad Chahin, a national deputy for the Partido Demócrata Cristiano (DC), wrote on Twitter: “I bet that the Israeli ‘tourist’ that started the fire in the Torres del Paine is one of those sent [overseas] by his state after killing Palestinian babies”. Meanwhile, a Partido por la Democracia (PPD) senator, Eugenio Tuma, stated, “It is not normal that the Israeli government sends a military contingent to do some sightseeing in Patagonia”. In a letter of complaint, the Simon Wiesenthal Center said it found these remarks to be “clearly directed towards Jews in general”, adding that this “anti-semitic rhetoric by Chahin and Tuma abuses an ecological catastrophe, turning it into a vehicle of hate”.

Pointer: Forest fires are rife in the Southern Cone this summer. Extremely hot and dry conditions mean that small fires spread quickly. Besides those in Chile, where the Conaf estimates that there have been some 159 fires since October, there are currently blazes in the national park in Caazapa, Paraguay and in the forests of Chubut, Argentina. Coincidentally, Chubut’s governor, Martín Buzzi, also told the press on 5 January that in his opinion the fires, which have already consumed some 1,500 ha since 3 January, were started “intentionally”.

Javier Diez Canseco describes himself as “an independent” congressman within the ruling Gana Perú coalition. He has been appointed by President Ollanta Humala to head up a congressional investigative omission into corruption. The commission will probe malfeasance allegations levied against the last government led by former president Alan García (2001-2006). Diez Canseco was the second most voted congressman of the Gana Perú coalition in the April 2011 general election and is a well-respected politician who helped cement Humala’s more moderate campaign stance in his second presidential bid. Since the election, however, Diez Canseco has not always toed the coalition line, criticising the government for not making the mining royalty reform more exacting and for failing to remove Vice-President Omar Chehade from the congressional investigative commission (amid allegations of influence peddling by Chehade). Chehade eventually stood down from the commission on 27 October. Diez Canseco has long been a human rights advocate and leads the Partido Socialista. His party colleague, Aída García Naranjo, is the minister for women. This interview was conducted in London, UK, on 14 October.

Latin American Newsletters (LAN): Could you give us some of your reflections on the current political juncture in Peru?

Javier Diez Canseco (JDC): We have a change of government and that means changing policy to construct an economy with growth and social inclusion. What we have experienced up to this point is exclusive growth.

We have a government that is not entirely a Gana Perú government, it is rather a coalition government driven forward by a rainbow cabinet; it includes all ideological currents from the Left to the Right. We as Gana Perú got 32% [of the vote] in the first round and to get through to the second, we had to make agreements and alliances. This meant pruning the manifesto, but keeping its core: redistribution, greater tax reform (in particular mining) and building a common front to fight against corruption. Without a doubt, that, in addition to the stability the government experienced at the beginning of its mandate, meant that a certain amount of those at the neo-liberal end of the spectrum got on board with our idea of distributive growth and social inclusion. These individuals are now involved in the economic management of the government. The government has balanced these appointments with those of left-wing, centrist and progressive ministers who make up the other part of the rainbow cabinet.

LAN: What do you think will be the biggest hurdles and challenges within the cabinet – what issues are going to become the most important battlegrounds?

JDC: Tax reform and the redistribution of new rents, in particular mining rents, will be a significant challenge.

1. Mineral, oil and gas rents. We need to harness these so that Peru can use its natural resources in a project of national industrialisation that enables it to generate employment. The main objective is to establish a system whereby ‘he that earns more pays more’ and the mining industry has an important role to play.

2. Financial capital also needs to be the sticking point of this reform. Financial capital has incredible rent profitability potential in a country where inflation is between 2% and 3% and credit costs between 25% and 30% for average Peruvians. Corporate credit is at 4% whilst consumption/retail credit has an annual interest rate of between 42% and 120%. This needs to be confronted, not just in order to boost domestic consumption and make the domestic market dynamic, but also in terms of small and medium businesses which cannot survive with such high rates because they need to be making huge profits to succeed.

3.The third potential source of tax to be tapped is from mid- to high-level service professionals who evade taxes by not submitting full income receipts – these include lawyers, private doctors, psychiatrists – who have high income levels but pay next to no taxes. The country needs to be a lot firmer in this area.

The country also needs to clamp down on illicit capital flows, especially drug-related money laundering. Money laundering is a serious problem. The previous government used an internal intelligence team within the Sunat [government tax body], which investigated a total of four cases in five years. This is a joke and it is an expression of limited political will to investigate corrupt practices properly, in spite of there being more than enough information in the public realm to open serious cases. I think, and I hope, that Humala takes a tough stance and if it comes to re-organising this in intelligence units, that he does so thoroughly in order to enable the recovery of these resources and the creation of a more formal economy.

Another major challenge is altering the relation between the state and the market. This is related to whether production should be focused on internal or external markets. Naturally, there will be tensions. The state is not going to be a socialist state, much less a centrally planned one, but the state needs to recover its planning function and to give the country’s construction a ‘North’, a purpose and perspective. The state needs to comply with its regulatory role, and strictly, which today it does not fulfil. The state needs to recover sovereignty over its natural resources so that it can not only receive rents but also promote their expenditure in ways that push Peru’s industrial and social development forward. We need a state that supports the growth of the internal market, regulates to generate a competitive financial sector, in particular the rates of credit, and it needs to fulfil a regulatory role in terms of agricultural property and the strengthening of strategic state owned companies such as PetroPerú.

LAN: How does counter-narcotics policy fit into the government’s strategy?

JDC: It is a top priority for the government. The first thing we have proposed is to contain [coca] growth; we have not even proposed reducing production yet. Differently to the previous government, which established 40% reduction targets, we have opted to contain the growth and focus our activities on the control of precursor chemicals, money laundering and to offer an alternative development path for those that grow it. This needs to be managed in an integrated way.

LAN: The situation in Bolivia is a case in point of how difficult it can be to maintain both a policy of sustainable development which respects indigenous rights and a development policy that has, as its base, the exploitation of extractive industries.

JDC: To me it seems natural that there are tensions because the nature of the relationship between mining and water or agriculture is one that is contradictory by nature. A balance needs to be struck between the benefits and the conditions for the community and the needs of the country. To me, what Evo [Morales, President of Bolivia] appears to have been lacking is a more careful management of this balance. Even so, roads and large infrastructure works are likely to impact on things that have an intangible value to some people.

I do not subscribe to the theory of the ‘Noble Savage’ and that all that is primitive is necessarily better than that which is modern. I am acutely aware that a world without mining simply is not possible. We need metals and minerals for the continued development of humankind. Therefore, working towards equilibrium is of utmost importance, which implies that better conditions need to be provided by the companies that enjoy incredible profitability. Antamina, linked to Glencore [International PLC, a Swiss-based mining and commodities trading company], last year had sales of US$3bn; its operating costs in Peru came to US$600m, so they had US$2.4bn operating profits before tax in Peru. It is impossible that a company with that level of profitability cannot give the country greater say in its operations. In reality, there are 10 companies that control 85% of mining production in Peru.

Development: On 10 October President Fernando Lugo of Paraguay decreed a 60-day state of exception for the northern departments of Concepción and San Pedro in order to deploy the military with the aim of defeating the Ejército del Pueblo Paraguayo (EPP) guerrilla group.

Significance: The declaration of the state of exception is an indication that President Lugo has given in to public and political pressure demanding the intervention of the military in the fight against the EPP. However, the stakes are now higher than in April 2010 because the government simply cannot afford not to deliver results over the coming two months; in an attempt to avoid the embarrassing mistakes of last year, when the military and police clashed in a confusing episode, Lugo created a joint task force led by the army.

Key points:

• Though the total size of the military deployment has not been disclosed by government sources, local reports speak of at least 50 military vehicles, including Urutu tanks, joint light tactical vehicles and troop transport trucks, leaving the main army base in Asunción yesterday.  President Lugo put Brigadier General Féliz Edgar Aldemir Pedrozo Moreno in charge of the joint police-military task force that will oversee the operation; General Aldo Pastore will represent the police on the task force.

• Lugo’s decree also coincided with a public denunciation by Lilian Samaniego, the president of the main opposition Asociación Nacional Republicana-Partido Colorado (ANR-PC), who claims to have received reports from military intelligence officers regarding an EPP plan to kidnap and murder her. Samaniego says reliable sources told her that the EPP has designed a three-step plan to disrupt political activities ahead of the 2013 vote –allegedly with the aim of preventing the election from taking place- which would include: 1) an attack on a police station ; 2) an attack on a military outpost; and 3) Samaniego’s kidnap and murder. According to the un-named sources, also cited by the local daily ABC Color, Samaniego is an easy target