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Significance: The sentence is the toughest to be handed down to Montesinos since he went on trial at the security court in the Lima naval base of Callao where he has been in prison since June 2001. In all, Montesinos faces nearly 80 charges ranging from corruption to drug trafficking and complicity in murder. He has so far been convicted on four minor corruption counts. He continues to claim that he is innocent of the charges of trafficking arms to the Farc guerrillas in Colombia or the authorising of death squads, which would both carry 20-year prison sentences. Prison terms are not cumulative in Peru.

Judge Maria Zavala ruled that Montesinos was guilty of corruption, bribery and illegal criminal association. His sentence includes US$14.4m of civil reparations. The owners of Channel 2 (Frecuencia Latina), Samuel and Mendel Winter were also sentenced to two years in prison.

Montesinos made monthly payments of US$500,000 to Channel 2. Investigators showed that Montesinos also channelled US$3.5m to the Winters in payments disguised as the inflated the purchase price for shares in the company.

Development: Another opinion poll, published on 3 August, showed that President Hugo Chávez has a comfortable six point lead in the recall referendum.

Significance: The poll, which was commissioned by the opposition, showed that the Chavistas were running at around 50% and the opposition at 44%. There were 6% 'don't knows' among the 1,200 people questioned directly by the pollsters. The poll was conducted between 14 and 24 July.
The poll found that 83% of those questioned expected to vote. This is good news for the opposition which needs at least 3.7m votes to force Chávez to be recalled.

CHILE: The central bank on 7 September raised interest rates from 1.75% to 2.0% - the first increase since 2000.

COLOMBIA: The Interamerican Development Bank expects remittances to Colombia to rise by around 66% this year from the last to US$4.46bn.

EL SALVADOR: The consumer price index rose 0.22% in August from the previous month, giving cumulative inflation of 4.52% for the first eight months of the year.

GUATEMALA: The consumer price index rose 0.29% in August from the previous month, giving cumulative inflation of 5.65% for the first eight months of the year.

MEXICO: International reserves reached US$58.253bn in the week ending 3 September, a rise of US$630m from the previous week.

VENEZUELA: Moody's Investors Services on 7 September raised Venezuela's foreign-currency rating from Caa1 to B2.

VENEZUELA: The central bank forecasts that the country's oil export income will top US$30bn this year.

Development: Patricio Acosta, a founding member of President Lucio Gutiérrez's Partido Sociedad Patriotica (SP), announced his decision to quit the party on 11 October.

Significance: Since Acosta was removed as social welfare minister in May following the refusal of the US to grant him a visa, allegedly on the grounds that he was under investigation for corruption, he had become an increasingly marginalised figure within the party. Nevertheless, with under a week to go until the municipal elections, he has timed his departure to inflict as much damage as possible on the SP.

Acosta, a retired army colonel who helped Gutiérrez lead the 2000 coup that toppled President Jamil Mahuad, said that the government was poorly advised and had reneged on its original promise to overhaul Ecuador's corrupt political system. He also predicted that the elections on 17 October would be disastrous for the party and that they would fail to win the 5% needed to remain on the electoral register. Acosta claimed this was entirely the party's own fault as they removed him from the SP's electoral strategy committee in their internal elections in February.

Meanwhile, the body of another political candidate was found on the highway between El Empalme and Quevado on 10 October. The candidate, José del Pino Veintimilla, was the fourth to be killed from the Prian party in a month. A candidate from the tiny Movimiento Popular Democrático party, Raúl Tello, who is running for the mayoralty of Puyo, claimed that he was the victim of an assassination attempt on the night of 11 October.

Development: The Global Committee of Argentine Bondholders (GCAB) announced on 12 November that it will fight Argentina's debt offer in the US courts.

Significance: This is the first time the GCAB, which holds some 35% of the total defaulted commercial debt, has gone to the US courts to protest against the offer. Argentina proposes to repay only 25% what it borrowed. The CGAB has not yet resorted to bringing a case of its own, but is rather attaching itself as 'amicus curiae' to the proceedings being brought by a German investment fund.

The fund, Urban, is arguing before a New York judge, Thomas Griesa, that Argentina's offer, finalised on 1 November, 'was unilateral and insufficient'. Legal proceedings brought against Argentina have so far made little judicial impact, but they have led to investors boycotting the offer as happened when the province of Mendoza restructured its debt last month.

It now seems inevitable that the GCAB will launch a case of its own, and probably soon; creditors have from 29 November to 17 January to accept the offer. Argentina is currently in the process of marketing its offer to bondholders worldwide, so it will not welcome the bad publicity.

Development: Three Irishmen are on the run after a Colombian court sentenced them to 17 years in jail on 16 December for training the Fuerzas Armadas Revolucionarias de Colombia (Farc) in the use of explosives.

Significance: According to Colombia's attorney general, Luis Camilo Osorio, the three men - Niall Connolly, James Monagham and Martin McCaulley - have fled the country. They are officially out on bail after they were convicted in April on lesser charges of false documentation and sentenced to four years in jail. The government appealed over their acquittal on the central charge of training the Farc in illicit activities.

The April prosecution fell short because of a shortage of evidence to suggest the three Irishmen, all of whom had links with the Irish Republican Army (IRA), had given training to the rebels. They admitted to visiting Farc camps in the south of the country but insisted they had only done so to learn about the group's now-defunct peace process with the government.

There was little fresh evidence presented at the appeal hearing, with prosecutors falling back on forensic evidence and testimony from Farc deserters that they had seen the Irishmen training the rebels. The attorney general's office welcomed the verdict, saying: 'Even though this evidence in itself did not constitute full proof_it leads to the certainty of guilt.'

Development: Roberto Barbery, the minister for participación popular, and the prefect of Santa Cruz, Carlos Hugo Molina, resigned on 27 January, on the eve of Santa Cruz's declaration of autonomy.

Significance: Barbery said that he had to go because he was the minister responsible for boosting local democracy and he had to take responsibility for the situation in Santa Cruz. The prefect resigned because he said that he felt he was a hindrance to negotiations between the government and the secessionists in Santa Cruz. Significantly, both Barbery and Molina are Cruceños.

The resignations came as the government made three major concessions to the secessionist Comité pro Santa Cruz. First, it agreed to chop another two cents off the price of diesel, bringing the price back to US$0.43 a litre; secondly the government agreed that prefects should be directly elected; and thirdly that the Cruceños could hold their referendum about autonomy before the constituent assembly.

The big question for today is how the rally and then the proclamation of an interim government for the department of Santa Cruz goes. The Comité pro Santa Cruz wants the event to be peaceful and large: it is hoping for 300,000 people to turn up to the rally.

On 27 January, 5,000 people opposed to the Comité, which they described as "fascist", demonstrated against the autonomists. The anti-secessionists were led by peasant, Indian, teachers and human-rights organisations. The main anti-autonomy organisation in Santa Cruz is the Coordinadora de Pueblos Etnicos de Santa Cruz (CPESC). It claims that the Comité does not represent anything like all the people in Santa Cruz.

The Comité claims to speak for 400 organisations: its critics say that it is dominated by agribusiness interests. The CPESC and its allies pointed out that the Comité's decision to take over the land reform agency, INRA, in the city of Santa Cruz would slow the process of resettling landless peasants on unworked parts of big estates.

The department of Santa Cruz is the biggest and richest of Bolivia's nine departments. Its successful agribusinesses have been drawing migrants from other parts of the country. This is highlighting the racial divisions in the department: the incomers tend to be Indians from the highlands while established Cruceño families are proud of their European origins.

The local opponents of the Comité claim that it is backed by the energy companies which do not want the federal government to reform the hydrocarbons law. The Comité rejects the accusation that it is financed by the energy companies as twaddle.

Neo-Conservatives in the US, who are now in the ascendant in US foreign policy making, welcome the break up of Bolivia. Mark Falcoff wrote an influential article in the American Enterprise Institute's 'Latin American Outlook' in June 2004 in which he argued that the partitioning of Bolivia would be a good thing. Santa Cruz would become a gas and agribusiness economy, while the highlands would be coca-dependent.

It is not clear whether the Comité is advocating secession: the Comité said that it will organise a referendum on what degree of autonomy Santa Cruz should have. The very fact that the Comité is doing this without reference to the federal government shows that it wants to be pretty autonomous. The Comité has pre-empted the federal government, which had wanted to call a constituent assembly in May to reform the constitution and decide on what degree of autonomy the departments should have.

Development: President Néstor Kirchner told congress on 1 March that the successful resolution of the debt-swap deal meant that the government was free to concentrate on its problems with owners of utilities.

Significance: The Argentine government has dismissed as unjustified a number of suits filed against it by owners of utilities in the World Bank's ICSID [International Center for Settlement of Investment Disputes] over its 2002 freeze of utility rates after “pesification". Utility firms continue to demand that the government increase the rates. "The government will fight tooth and nail for the rights of the Argentine people," Kirchner told congress.

Official figures for the debt-swap will be released on 3 March but provisional figures show that there was a 97% acceptance rate within Argentina and 65% abroad. Kirchner told congress that the debt-swap operation had been a complete success: "For the first time in Argentina's history, a debt restructuring has culminated in a drastic reduction of the country's debt," he said. However, Italian bondholders could still provide the government with a headache: the Italian bondholder group Task Force Argentina, which steadfastly opposed the debt-swap deal arguing that Argentina could afford to make a much better offer, announced yesterday that just 28% of Italian bondholders had accepted the deal. The TFA said that over the next few days it would outline its strategy - some form of legal action - for forcing the Argentine government to come up with a better deal.

Development: Roger Noriega, the US assistant secretary of State for western hemisphere affairs, told US congressmen on 6 April that China was not a problem for the US in Latin America.

Significance: Noriega was testifying to the House of Representatives' western hemisphere subcommittee. He said that China's growing role in Latin America, especially in acquiring raw materials, did not threaten the US, though the US would closely watch developments.

Noriega said that China's growing involvement in Latin America would not create instability in the region. He pointed out that one element of China's involvement in Latin America was to increase Taiwan's isolation: 12 of the 25 countries which recognise Taiwan are Latin American or Caribbean.

Noriega pointed out that China's investment in Latin America came to US$4.62bn at the end of 2003, way below the US's US$300bn invested in the region. In 2004, Chinese investment in Latin America and the Caribbean accounted for 46% of China's total foreign investment, according to preliminary Chinese trade ministry figures.

Noriega's calmness about Chinese involvement in Latin America contrasted with worries expressed by the chairman of the subcommittee, Dan Burton. He and other congressmen are particularly concerned at China's interest in Venezuelan oil.

Development: A congressional commission gave the go-ahead on 11 May for congress to vote on a constitutional amendment overruling a supreme court decision which imposed party-alliance uniformity at national and regional levels. 

Significance: According to the commission, the supreme court verdict “ignores each region's peculiarities forcing alliances that do not defend the interests of the electorate". The supreme court ruled that parties should reflect their national alliances at regional levels as a way to make the Brazilian party system more coherent. It is a consensus among parties, however, that the supreme court ruling removes party autonomy to make political alliances at local level. 

Although supporting the amendment, the ruling Partido dos Trabalhadores (PT) wants it to be approved “within a wider political reform". According to Odair Cunha, a congressman from the PT, political reform is necessary to strengthen parties, so “electors can vote for [political] programmes, not on personalities". 

Meanwhile congress has decided to hold a referendum prohibiting the trade of weapons and ammunition in Brazil. The referendum is scheduled for 2 October. Critics say that the government is wasting resources to pay for the referendum when it is known fact that the legal trade of weapons corresponds to less than 5% of the firearms' market. In another development, the president of the lower chamber of congress, Severino Cavalcanti, said he wants to go on national TV to “explain the paralysis of congress to the population". According to Cavalcanti, responsibility has fallen on him when in reality the government is to blame for the excessive number of presidential decrees it sends to congress.

Development: The US Secretary of State, Condoleezza Rice, said on 16 June the US was worried about the violence along the Mexican border. The drug-related violence is spreading: on 16 June the head of police at Mexico City's main airport was gunned down.

Significance: Rice was speaking to reporters after a press conference covering the issues involved in her trip to the Middle East and Europe which starts today, 17 June. Rice said that the US had raised the issue of violence with the Mexican government at the highest level. She added: “We are getting cooperation but it is a very serious matter_ we're very concerned about it and we're raising it at all levels with the Mexican government."

On 15 June, President Fox's spokesman, Rubén Aguilar, said that Mexico needed US help in controlling the border and, in particular, in curbing the supply of guns from the US to the drug gangs. 

Most of the drug-related violence has been along the border. At least 600 people have been killed so far this year by drug gangs in the border states, and the traditional drug trafficking state of Sinaloa. The Mexican government launched a major operation, México Seguro, on 10 June deploying federal police and soldiers to improve security in three particularly violent states, Baja California and Sinaloa in the west and Tamaulipas in the east.

The violence, however, is spreading south. Pedro Madrigal, the chief of police at Mexico City's Benito Juárez airport, was shot and later died after being attacked on his way to work.

Development: The central bank's monetary committee (Copom) unanimously decided to maintain the basic interest rate (Selic) at 19.75% annually at its latest meeting on 20 July. 

Significance: This is the second consecutive month the Copom has kept the Selic at the 19.75% level, following the end of a nine-month raising cycle in June. The committee's decision did not surprise economic analysts even though inflation has been dwindling in the last few weeks. Last month the consumer prices index (Ipca), which serves as the benchmark for the government's official inflation rate, registered deflation of 0.2%. The meeting's minutes will be published next week. 

Analysts are divided over when the Copom will start to cut the Selic. Some forecast that due to the fall in economic activity and the favourable inflation indexes registered in the last few weeks the committee will announce an interest-rate cut in August. Most, however, believe the Copom will continue to follow its austerity line and postpone cuts until September or even October. The central bank are pursuing a 5.1% inflation target this year. Since January inflation has increased by 3.16%, or 61% of the bank's target. Annually, Brazilians pay R$41.5bn (US$17bn) in interest to banks, more than double the R$21.6bn the federal government invested in the first half of the year.

Development: President Vicente Fox issued a decree on 22 August that legalised used cars brought in from the US and Canada.

Significance: The move is hugely unpopular with the motor industry and rightwingers. Tatiana Clouthier, an independent federal deputy and the daughter of Manuel Clouthier, one of the most distinguished former leaders of Fox's Partido Acción Nacional, said that the decision was another sign of Fox's unscrupulous populism: “What the decree means is that it now does not matter if you break the law," she said.

The move is, however, hugely popular with people who buy cars in the US and drive them to Mexico. These cars are known as autos chocolates (chocolate cars). The prohibition on importing used cars from the US and Canada was due to end, anyway, in 2008. 

Several PAN deputies said that they would try to get the decree overturned by congress because of the damage the smuggled cars would do to domestic business, the environment and the country's roads. The Asociación Mexicana de Distribuidores de Automotores (AMDA) claimed that Mexico would become a dumping ground for worn out US cars. The US decommissions 14m cars each year, mostly for environmental and safety reasons. The AMDA reckons that there are already 2.5m chocolate cars in the country and that the decree will mean that another 800,000 will arrive each year.

BRAZIL: The Broad Consumer Price Index at midmonth registered a 0.16% price increase in September, marking a slowdown from the 0.28% rise of August according to statistics department Ibge.

COSTA RICA: The trade deficit rose by 28% year-on-year to US$1.668bn over the period January to August, according to central bank figures.

MEXICO: The trade deficit widened to US$721m in August.

MEXICO: The central bank cut interest rates by 25 basis points on 23 September to 9.25%, the second straight month it has cut rates.

MEXICO: The unemployment rate stood at 3.65% of the working population in August according to the national statistics agency.

MEXICO: Mexican exports to Japan rose 130% year-on-year in first half 2005 while imports increased 23%, according to Economy Minister Fernando Canales.

PERU: The budget deficit stood at NS358m (US$108.2m) in August, up from a deficit of NS289m in August 2004, according to the central bank.

PERU: Exports stood at US$1.43bn in August, up 24.7% year-on-year, according to the national exports promotion agency Prompex.

Development: The Partido Acción Nacional called on 27 October for the introduction of chemical castration for child molesters in the northern state of Chihuahua.

Significance: The suggestion came from a PAN member of the state congress, Victoria Chavira. Ciudad Juárez, where hundreds of mostly young women have been murdered lies on the border between Chihuahua and the US. The Chihuahua government has a major problem with crime levels: the supreme court recently ruled that Chihuahua's policy of imposing life sentences with no prospect of remission was unconstitutional.

Chavira proposed that criminals should have weekly injections, either of female contraceptives or the drugs used to treat prostate cancer, to reduce their testosterone levels. She said that the treatment should be voluntary and could be used as a basis for allowing convicts out on parole.

Chavira stressed that her plan would not be used against rapists but only against child molesters. She said that chemical castration had been successfully used in Sweden. She said that there was cross-party consensus to introduce the policy in Chihuahua.

Development: The Partido Verde Ecologista de México broke off negotiations with the Partido Acción Nacional about an electoral alliance on 1 December.

Significance: The move is good news for Roberto Madrazo, the Partido Revolucionario Institucional candidate for the presidency, who is lagging badly in the opinion polls. He needs to give his campaign some momentum and an alliance with the PVEM may do that. The PVEM is riding high in the opinion polls, largely thanks to heavy media spending by Bernardo de la Garza, its telegenic presidential candidate.

The PVEM's vote to halt negotiations with the PAN was unanimous. The party said that it would start talks with other parties. It did not mention the PRI by name. Few political commentators believe that the PVEM will choose the front-runner, Andrés Manuel López Obrador from the Partido de la Revolución Democrática, over the PRI. The PRD has already clinched alliances with the Partido del Trabajo and Convergencia.

Separately, the PAN claimed that it had turned away dirty donations to support its election campaign. The party said that it was being particularly careful about investigating large individual donations. Mexican election law on campaign financing has been tightened in recent elections and both the PRI and the PAN fell foul of it in 2000.

Development: On 12 January Citgo, the US division of the Venezuelan state-owned oil company Pdvsa, expanded its programme to provide subsidised home-heating oil for the US poor to the state of Maine.

Significance: The move appears intended to underline the social concerns of the Venezuelan government and emphasis the callousness of the current US administration. Venezuela, where per capita income is about 1/10th that of the US, will donate 8 million gallons of heating oil at a 40% discount to Maine, the third north-eastern US state to receive what Venezuela calls "humanitarian aid".

Donations by Citgo now total an estimated US$38m to Maine, Massachusetts and New York. Rhode Island may also sign up for cheap oil today (13 January). Venezuela has also agreed to provide 120,000 gallons of heating oil to homeless shelters in Maine, along with 900,000 gallons of heating oil at a 40% discount to four Native American tribes.

Maine Governor John Baldacci signed the agreement with Citgo at the home of the Lyons, a retired couple who have raised five children of their own and has eight foster children. The Venezuelan ambassador to the US, Bernardo Alvarez, denied that politics lay behind the policy. "Some have tried to read politics into these outreach programs", he said. Last week, the Chicago Transit Authority rejected an offer from Citgo to provide discounted diesel for its fleet of public buses, although in the wake of a public outcry it may now attempt to reach a deal.

Development: On 16 February the president of the supreme electoral court (TSE), Oscar Fonseca, guaranteed that the elections on 5 February had been fair and transparent.

Significance: Fonseca's claim comes despite the fact the TSE is investigating 309 counts of alleged irregularities. The TSE also refused to allow Transparency International to monitor the manual recount. On 15 February, the TSE announced it was almost halfway through the recount. Constitutionally, the court has up to 30 days to complete the count.

Speaking at a conference for the foreign press, Fonseca said that all the votes were under the control of the TSE. However, the court has received over 300 claims of electoral fraud, ranging from abandoned voting slips to requests from political parties to exclude certain ballot boxes. Fonseca said there were abnormalities in all elections, and it is only the closeness of this election that has given the irregularities greater importance.

In the official results, given with 88.44% of the vote counted on 7 February, former President Oscar Arí­as (1986-1990), from the Partido Liberación Nacional (PLN) maintained a 0.23% advantage (or 3,250 votes) over economist Ottón Solí­s, from the Partido Acción Ciudadana. The PLN is now claiming the lead has stretched to 15,000 votes, though it is not yet declaring victory.

Development: On 22 March the supreme court decided to maintain the so-called verticalização rule for the October general elections.

Significance: In practice the maintenance of the rule will polarise the presidential race between President Lula da Silva, running for the Partido dos Trabalhadores (PT), and Geraldo Alckmin, who will run for the opposition Partido da Social Democracia Brasileira (PSDB). The 1988 rule makes it mandatory for Brazilian parties to conform, at the local level, to the same alliances made at the federal level. In this sense, party coalitions needed to be vertical, hence the name verticalização.

The rule is highly controversial. Most political analysts believe it fragments the Brazilian party system, making it easier for voters to distinguish parties and their policies. For politicians, however, the rule is a constraint to their horse-trading. That is why Lula was pushing for a change in the rule, so he could be free to forge an alliance with the pivotal Partido do Movimento Democrático Brasileiro (PMDB) in the presidential race without having to give up PT candidates in the local elections. The PT and the PMDB are fierce adversaries at the local level.

In January congress voted to scrap the rule already for the October vote. Yet the powerful Brazilian Attorneys' Order considered that the decision contravened the constitution, which stipulates that any change to electoral rules must be approved at least one year before the date of the election. The controversy turned into a dispute between the legislative and the judiciary when the electoral court overturned the decision of congress earlier this month and the matter had to go all the way to the supreme court.

According to analysts, only small independent parties with no real chances of winning will be able to launch candidates against Lula and Alckmin. Verticalização makes it impossible for the PMDB to either launch its own presidential candidate, as some wanted, or to forge an alliance with Lula, as desired by the party's government-allied bloc, and instead will have to concentrate on forging local alliances to elect as many governors and congressmen as possible. The opposition Partido da Frente Liberal will also have to ditch its plans to launch an independent candidate and will most likely support Alckmin so to receive the PSDB's support in local elections. Lula, on the other hand, will most likely have to run all alone or with the support of parties embroiled in corruption allegations.

Development: The federal government's expenses in the first quarter of 2006 increased by 14.5% in relation to the same period last year, according to data released on 26 April by the treasury.

Significance: The data confirms concerns that the government has opened public coffers ahead of the general elections in October. According to the treasury, expenses in the period between January and March reached R$88.8bn (US$41.3bn), an increase of R$11.3bn (US$5.25bn) in comparison with the first three months of 2005. Most of the new expenses related to social security services and the payment of personnel. More concerning, the impact of the new minimum-wage, which started to be paid this month, has not yet been felt on public accounts.

As expected, the increase in public expenses led to a fall in the primary budget surplus (the government's savings to bankroll interest-rate payments incurred by its debt). In the first quarter of the year the government managed to save R$20.9bn (US$9.7bn), or 4.39% of GDP, just above the 4.25% target. In the same period last year, however, the government had managed to save 6.32% of GDP.

According to critics, the government is spending too much and has only managed to exceed its budget surplus target because it increased the tax burden. Some economic analysts are expressing doubts that the government will be able to achieve the annual target, not least because President Lula da Silva seems keen to spend more to boost his re-election bid. The treasury team tried to soothe market concerns, announcing that the finance ministry is going to present a contingency plan cutting the government's administrative expenses to make up for an increase in public investment.