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According to labour minister Carlos Tomada, figures to be released this month will show that the level of unemployment fell by one or two percentage points in May, from 17.8% in October. Tomada said, 'There is a series of data showing that unemployment is no longer on the rise and that companies are increasingly willing to keep existing positions and take on new staff.' 

The statistics institute Indec is also expected to announce over the next few days that 1.7m fewer Argentines were poor and indigent in May than in October 2002. A record high of 20m Argentines (57.5% of the population) were below the poverty line last year, while 27.5% of the population were beneath the level of destitution. 

There are important caveats to bear in mind regarding both sets of data, however. Unemployment figures tend to fall over the October-May period, and, as they only take into account people actively seeking employment, they do not give a true indication of the number of people out of work. Therefore, while the Indec figure for May is expected to come in at just above 15%, the real figure is thought to be somewhere around 20%-21%. 

A genuine recovery in employment figures can only be expected when consumer spending recovers. The present increase in jobs comes as a result of domestic industries recovering their competitiveness against imported goods as a result of the devaluation of the peso, but this trend is not expected to last. 

The government announced last week that it was raising the minimum monthly wage, from Arg$200 (US$71) to Arg$250, and the minimum pension from Arg$200 per month to Arg$220. 

Although the increases came as something of a surprise, the fact that a basic food basket cost Arg$228 per month at the end of June underscores the extent to which such a move was necessary. According to labour minister Tomada, the decision 'may be seen as a starting point for recovering the purchasing power of wages.' The minimum wage will continue to rise by Arg$10 a month until December.

TWO-PRONGED OPPOSITION MEETS LULA'S FALLBACK POSITION 

As early as late April our readers knew that the government of President Lula da Silva was willing to make some concessions in order to secure passage of the most opposed of its two major reform proposals - the one drastically reducing the privileges of public-sector pensioners (WR-03-17). 

That this knowledge was available makes nonsense of the 'dismay' now being professed by many 'market-shapers' at the news that, indeed, the government is considering some changes in order to secure consensus beyond the confines of congress. 

In late April the most cited candidate for the chop was a provision for taxing the higher pensions. Now it appears to be the one capping public-sector pensions at 70% of the last salary earned. 

Two-pronged opposition. The shift is largely due to tactical brilliance (deliberate or accidental) by the unions. The major union confederations, Central Unica dos Trabalhadores (CUT) and Força Sindical (FS), decided to eschew strike action and instead seek to negotiate amendments with the government. On the other side, a large segment of the public employees' union last week launched an 'indefinite' strike action seeking the withdrawal of the planned reform in toto. 

Observance of the strike was patchy throughout last week; overall, between 30% and 40% of government employees stayed at home or downed tools. Initially, Lula dismissed the whole thing, saying that he would start worrying if the congressmen who must vote on the reform 'downed tools'. 

One group of public employees spent much of the week threatening to join the strike: the 17,000-member association of judges -the group with most to lose from the capping of public-sector pensions, as they were up among those taking the US$6,071 a month maximum. 

It is this group that is being credited with producing the compromise formula, based on keeping pensions at 100% of the last salary. In any case, there were already CUT and FS negotiators hard at work. 

Actually, the negotiation is not over. In May, Lula took the precaution of getting all state governors to endorse his draft pension reform. Now he is saying that any changes must be approved by all the governors, which makes for a complex further round of bargaining. 

Lula has said he expects this reform and the parallel one on taxation to be passed by September.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		12.07.02	04.07.03	11.07.03
Argentina	peso	3.67	2.81	2.78
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.19	7.69	7.70
Brazil	real	2.81	2.84	2.89
Chile	peso	698.00	701.00	707.00
Colombia	peso	2,506.50	2,815.31	2,855.86
Costa Rica	colón	361.15	399.33	400.02
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	17.89	32.94	35.21
Ecuador	dollar	1.00	1.00	1.00
El Salvador	colón	8.75	8.75	8.75
Grenada	EC dollar	2.70	2.70	2.70
Guatemala	quetzal	7.89	7.93	7.92
Guyana	dollar	180.50	180.50	180.50
Haiti	gourde	27.20	--	--
Honduras	lempira	16.55	17.54	17.56
Jamaica	dollar	48.25	--	--
Mexico	nuevo peso	9.80	10.48	10.50
Nicaragua	córdoba oro	--	15.28	15.28
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,400.00	6,175.00	6,050.00
Peru	nuevo sol	3.55	3.48	3.48
Suriname	guilder	2,178.50	--	--
Trinidad & Tobago	dollar	6.08	--	--
Uruguay	nuevo peso	25.00	27.50	27.75
Venezuela	bolí­var	1,311.25	1,600.00	1,600.00
Sources: EFE; Bank of America

Perhaps encouraged by justice minister Márcio Thomaz Bastos's warning about using 'utmost severity' against any breaches of the law by the MST or landowners, a judge unexpectedly ordered the arrest of a top MST leader, taking advantage of the fact that he was in his court testifying on an old case. 

José Rainha, leader of the MST camp at the Pontal do Parapanema (southwestern corner of São Paulo state), was arrested after he had testified at a court in Teodoro Sampião about an MST 'occupation' of a bank in 2001. No information was given about the charges against him. 

The Pontal encampment, which the MST says now holds 3,600 peasant families, is considered the site where violence is most likely to break out, as local landowners have mustered groups of gunmen to repel any attempt at a land 'invasion'. 

The tension there has been rising by the week, with television newscasts broadcasting intimidatory statements by hooded gunmen -such as the proposal to use cropdusters to spray the MST camp with gasoline, then set fire to it. 

This is not Rainha's first time behind bars. In May 2000 he was acquitted of complicity in the murder of a fazendeiro and a police officer during an MST occupation of a farm.

Brazil's planning minister, Guido Mantega, said last week that in the next fortnight the government will announce plans to boost various industries (not just the motor industry). Development and trade minister Luiz Fernando Furlán had already outlined what the government is planning to do for the motor industry: it will offer credit of R$2.5bn to pay for an upgrading of the goods vehicle fleet and is looking at cutting taxes on cheap cars. 

The motor industry is feeling the effects of the slowdown, induced by the government's acquiescence in the central bank's high interest-rate policy. Domestic car sales have been feeble and factories have been shutting down. Analysts reckon that there are about 150,000 unsold cars on forecourts and in factory car parks. This is equivalent to two months' sales. Around 35% of the carworkers are now on unpaid leave as the industry halts production in an effort to clear the inventory. 

Brazil's umbrella industrialists' association, Confederação Nacional da Indústria (CNI) last week lowered its forecast for GDP growth this year to 1.5%. It said that the economy was stalling. At the beginning of the year the CNI had forecast, conservatively, growth of 2% for GDP and 1.8% for industry. Now it is forecasting that industry will grow by just 1% this year. 

Inflation in Brazil, as measured by the IPCA index, fell by 0.15% in June, the biggest decline since 1998. This was at the top end of market expectations (the range of guesses was +0.61% to -0.15%) and kindled hopes of a substantial cut in the benchmark interest rate at the Copom monetary policy meeting of the central bank on 22-23 July. The rate is currently 26%. 

The main reasons for the fall in inflation in June were cheaper food, thanks to the bumper harvest, lower fuel prices, and weak consumer demand, which prompted retailers to cut prices to boost volume. So feeble are car sales that 35% of the industry's workforce is now on annual leave. The biggest influence was the 5% fall in fuel prices.

The IMF last week completed the third review under the standby arrangement for Uruguay, and approved the request for waivers of applicability, until 22 July 2003, of performance criteria for end-June. Upon completion of the review, a disbursement of US$204m became immediately available. 

The current standby arrangement was initially approved on 25 March 2002 in an amount of US$823m for a 24-month period. It was increased by US$1.6bn on 25 June, and then by US$521m on 8 August. 

In commenting on the executive board decision, First Deputy Managing Director Anne Krueger said, 'Uruguay's performance under the standby arrangement has been favourable, and commendable progress has been achieved in containing the crisis and stabilising the economy. The authorities' firm implementation of sound macroeconomic policies and the successful recent debt exchange have contributed to a notable improvement in economic and financial indicators. There are encouraging signs that the economy has bottomed out, bank deposits have continued to increase in recent months, and risk spreads have declined markedly.' 

She warned, though, 'While the debt exchange has addressed the near-term financing needs and improved the medium-term debt profile, important tasks nevertheless still lie ahead. The authorities remain firmly committed to make further strong progress on the implementation of policies in the fiscal, banking, and structural areas, that will be critical to ensuring a return to growth and sustainable debt dynamics. 

'Fully restoring stability and confidence in the banking system is a key element of the programme. 

'For 2003, the authorities are committed to attaining a primary surplus of 3 percent of GDP. To this end, they are exercising continued expenditure restraint, while taking steps to improve the social safety net and to strengthen tax collections. The continued commitment to a floating exchange rate régime is welcome.'

MOVE CRITICISED BY PROSECUTOR & UN MISSION 

The killing of Margarita de Rosales, a leader of the opposition Unidad Nacional de la Esperanza (UNE) in San Miguel Pochuta, 60 kilometres northwest of Guatemala city, was seen by many as the final straw, coming as it did on top of a string of lynchings and attacks on journalists and prosecutors. The government responded to the uproar by ordering 400 army troops to reinforce the police in a high-profile display of 'security presence'. 

Under the orders of a police commissioner, the soldiers will accompany the police in joint patrols of areas considered crime hot spots. This move, which has been tried before to no lasting effect, has been criticised by both the human rights prosecutor -a state official- and Minugua, the UN verification mission in Guatemala. 

One problem is that at least one component of the recent wave of violence -the attacks and acts of intimidation against journalists and law officers- is considered by many to be the handiwork of 'clandestine security groups' rooted in sectors of the military (WR-03-24). So little progress has been made in clarifying these events that the government has agreed to invite the UN and the OAS to form a special commission of inquiry, due to start work in September. 

As if to drive home this point, within hours of the announcement that the troops were being sent in, another UNE leader, youth wing coordinator Ismael Doní­s, was shot in his store in San Miguel Petapa, 30 kilometres west of the capital. 

Criminals & vigilantes. To be sure, the current wave of violence also has other components: common crime and extreme vigilantism. Over the past week six people were murdered, their bodies later incinerated in two cars, in what looked like a settling of accounts between gangs. In separate incidents, four suspected criminals were lynched. 

Critics of the government's response say that enhanced military-police patrolling is unlikely to have any impact on events such as these: the first type calls for better detection of gang activity, while the latter tend to be spontaneous mob reactions, not necessarily in the areas singled out for patrolling.

INDEPENDENT JUSTICES STAGE THEIR OWN MANOEUVRE 

The endgame is about to begin in retired General Efraí­n Rí­os Montt's third bid to run for the presidency, and observers are suddenly a little less sure that the government's manoeuvre of 'stacking' the constitutional court will deliver as planned (WR-03-26). 

The injunction filed by Rí­os Montt must be heard by the five titular members of the court, plus two alternates to be picked by lot. Much as expected, the selection of the two alternates was made in a closed session, and two pro-government justices received the call. 

At this, five independent-minded justices (two titulars, three alternates) wrote to court president Guillermo Ruiz, recusing themselves on the grounds that the selection process had rendered the proceedings suspect to 'various sectors of the community'. 

Again unsurprisingly, Ruiz rejected the recusations and confirmed the selection of the two alternatives. As composed, the panel is seen as having a pro-Rí­os Montt majority. 

However, former constitutional court president Concha Mazariegos believes that the highly publicised recusations will have a 'non-judicial' effect: 'They will oblige the magistrates linked to the FRG to act according to law.' 

The court has no set deadline to come up with a ruling.

Panama has signed a debt-for-nature swap with the US under which it will protect endangered wildlife in the 130,000-hectare Chagres river basin, the main basin of the Panama canal, in exchange for a reduction in its debt payments to the US. 

It is the sixth such swap under the Tropical Forest Conservation Act, drawn up in 1998. Peru, Belize and El Salvador have also signed similar agreements. 

Panama's debt payments will be reduced by US$10m over the next 14 years, the US Treasury said. The government will feed the money into a development fund, which will cover the cost of more park rangers and the implementation of conservation programmes. 

The park is renowned for being the home of some 560 bird species including the harpy eagle, the largest eagle in the world and Panama's national bird. The US will provide a further US$5.6m for the fund, and The Nature Conservancy (TNC), US$1.2m. 

The deal was signed by economy and finance minister Norberto Delgado, and the US ambassador to Panama, Linda Watt, who had earlier presented a second batch of heavy all-terrain vehicles for deployment in the Darién border region with Colombia, taking the total provided so far to 14. Panama's President Mireya Moscoso recently paid a visit to Washington where she agreed with US counterpart George Bush Jr to establish a framework for a free-trade agreement.

The government of Costa Rica has announced a US$75m spending cut in order to trim the fiscal deficit, given the slow pace at which its planned tax reforms are moving in congress. 

The government has calculated that this year's deficit will reach US$600m, or 4% of GDP -one percentage point more than the target set in the monetary plan. 

Finance minister Alberto Dent says the cut has been made necessary by the fact that the fiscal contingency law, a temporary scheme which came into effect as congress dealt with the tax reform, has only generated an extra US$100m of revenues.

EX-DIPLOMAT SEES ARMY AS PART OF THE PROBLEM 

Haiti represents 'the gravest threat ever presented to the Dominican state and nation'. The assertion came last week from the Dominican armed forces minister, General José Miguel Soto Jiménez. 

Addressing a seminar on 'The frontier: a priority in the national agenda for the 21st century', which had been organised by the military, Soto said that the threat was not military ('that would be absurd') but took the shape of social and economic pressures. Nonetheless, he said, ignoring it would be 'a stupidity that would cost us dearly.' 

Alluding to the constant inflow of migrants from Haiti, Soto blamed the Dominican 'oligarchy' for encouraging Haitians to cross the porous border in search of jobs in agriculture and other sectors, which Dominicans 'no longer want to do' -at least not at the rates the Haitians are paid. 

General Soto said it is the role of the armed forces to control the influx of Haitian migrants across the border, in what he described as the 'modernisation' of the concept of security. Border control policies, he added, should be kept free of racial and cultural prejudice. 

Military traffickers. Another speaker at the seminar, historian and former ambassador to the US Bernardo Vega, agreed that illegal immigration from Haiti is a major issue -but added that the military were very much part of the problem, as direct participants in the trafficking of Haitians. 'Pressures from the US,' he said, 'have kept our military from profiting from drug trafficking, but nothing has prevented the trafficking of illegal Haitians from continuing to be a traditional business of our army.' 

In the past this was handled within the confines of the state, with the state-owned sugar council, CEA, turning to the military to provide low-cost Haitian labour. After the privatisation of the CEA, said Vega, the new private owners of the sugar estates have continued the practice. 

Vega sees this as a vicious circle. First, the abundance of cheap Haitian labour dissuades the sugar industry from modernising its production methods. Second, the sugar industry is a first stop: off-season, the Haitians seek jobs in other sectors, where their presence as and alternative keeps Dominican wages depressed. Once they've worked elsewhere, says Vega, they have no wish to return to cane-cutting - which makes it necessary to bring in a new batch every year. 

By Vega's reckoning, at present one out of every 16 people living in the Dominican Republic hails from Haiti.

At first, placing the police and the military on full alert to cope with an expected anti-IMF 'social explosion' (WR-03-24) looked like overkill. Indeed, it had seemed to descend into farce in early July, when the police ended up arresting donkeys used by a few hundred protesters rallied by Catholic priest Rogelio Cruz. 

All levity has since been dispelled, as protests have grown and become occasionally violent as police broke them up. On 8 July one such clash claimed the life of a Chinese shopkeeper, hit by a stray bullet in the Capotillo district of Santo Domingo. Dozens were reportedly injured in confrontations the following day. 

The police responded by arresting Ví­ctor Gerónimo, coordinator of the Colectivo de Organizaciones Populares (an umbrella body of organisations that have been campaigning against price increases and power blackouts). 

Faced with the prospect of his detention becoming a motive for the escalation of protests, Gerónimo was released after a day -'because we have not yet been able to find a weighty enough legal argument to prosecute him,' as police spokesman Ramón Francisco Rodrí­guez put it. The government then again raised fuel prices, and the Colectivo announced an escalation of the protests.

The Dominican Republic's central bank has approved the sale of 'a significant part' of Baninter's financial assets to Scotiabank, of Canada, which will also purchase 25 of Baninter's branch offices for US$25m. A massive US$2.2bn fraud was exposed at Baninter, the country's second-largest bank, in May (WR-03-19). Scotiabank will offer Baninter clients who have maintained their deposits the option of opening new accounts. The central bank is also considering offers from other banks for the sale of an additional 105 branches. The 'financial hole' created by the government's decision to cover all deposits at Baninter represents 11% of GDP and 66% of the national budget. The government has turned to the IMF for a US$1bn loan deal to mitigate the effects of the fallout on the economy. Inflation has run riot: accumulated inflation for January-May is 10.93%, already eclipsing the 10.5% for the whole of 2002. The Dominican peso has also fallen sharply against the US dollar, reaching a rate of RD$35.

George Gleadall, president of the Barbados International Business Association (BIBA), has described as 'scare tactics' some actions of industrialised nations who want to clamp down on companies using low tax jurisdictions like Barbados. He added, however, that 'there shouldn't be too much of an impact on Barbados.' 

The latest move in this respect has been the introduction of new legislation in Washington to deter US companies from setting up their head offices in the Caribbean in an attempt to cut the level of corporate taxes they pay at home. The bill has not yet been approved. 

Gleadall said that anti-terrorism financing legislation introduced since the September 2001 attacks on the US has also impacted on the international business sector. 

That legislation, he noted, 'has impacted less on Barbados than it has on other jurisdictions who had a very lax regulatory system. Our regulatory system here is fairly well controlled and that is what Barbados prides itself on.'

The IMF last week published the results of the June 'Article IV consultation' with Trinidad and Tobago: a survey of the country's economic policies at its request. 

The Fund's executive directors, noting that Trinidad & Tobago has enjoyed an extended period of positive growth, low inflation and a steady decline in unemployment, commended the authorities for their prudent management of the economy in recent years despite the global and regional slowdown, but noted that challenges remain, including the strengthening of the non-energy fiscal and external balances and the improvement of the performance of public enterprises. 

The IMF viewed the effective use of prospective higher energy revenues as key to Trinidad & Tobago's future development and growth. It noted that the authorities' plan to achieve developed country status by 2020 through establishing a highly educated work force, and strengthening infrastructure, is a commendable objective, and would require tailoring its spending in line with the country's absorptive capacity. 

The Fund encouraged the authorities to invest part of the higher oil revenues abroad through the revenue stabilization fund (RSF) to generate income for future generations. Directors supported higher spending on health, education and infrastructure, warning that attention should be paid to efficiency in spending. 

Looking ahead, they encouraged the authorities to give priority to developing a well articulated medium-term macroeconomic framework underpinned by a three-year rolling budget. 

They suggested that the aim of the fiscal policy should be to strengthen efforts to reduce the non-energy fiscal deficit, and curtail tax exemptions. Directors welcomed the plan to create a unified revenue authority. They also welcomed the system of pre-announced repo rates as a market benchmark. They said a deepening of capital markets through additional debt instruments would render repo rates more effective.

Inflation in the region
Country	Source	April	May	June	Last 12m	Jan-Dec 2002
Argentina	Indec	0.10	-0.40	-0.10	10.20	41.00
Bolivia	INE	0.32	0.02	0.20	3.23	2.45
Brazil	FGV	0.41	-0.67	-0.70	26.94	26.41
Chile	INE	-0.10	-0.40	0.00	3.60	2.80
Colombia	Dane	1.05	0.49	-0.05	7.21	6.99
Costa Rica	DGEC	0.96	0.52	0.67	10.21	9.68
Ecuador	Inec	0.97	0.17	-0.21	7.61	9.36
El Salvador	Min.Ec.	0.00	-0.10	-0.10	1.60	2.80
Guatemala	BCG	0.45	0.25	0.22	5.24	6.33
Honduras	BCH	0.50	0.10	0.30	8.00	8.10
Mexico	Bco.Mx.	0.17	-0.32	0.08	4.27	5.70
Paraguay	BCP	1.20	-1.20	-1.50	15.70	14.60
Peru	INE	-0.05	-0.05	-0.47	2.17	1.52
Uruguay	DGEC	0.95	0.37	0.16	24.64	25.94
Venezuela	BCV	1.70	2.30	1.40	34.20	31.20
US	DOL	0.20	0.20	--	2.10	1.60
Previous: WR-03-26

The stockmarket in figures
Market	Index	04.07.03	11.07.03	Variation (%)
Buenos Aires	Merval	727.28	710.50	-2.31
São Paulo	Bovespa	13273.65	13320.58	0.35
Santiago	IPSA	1257.53	1256.70	-0.07
Bogotá	IGBC	2100.98	2250.67	7.12
San José	BCT	12301.93	12193.80	-0.88
Quito & Guayaquil	Interinvest	75.17	75.17	0.00
Mexico	BMV	7142.85	7083.82	-0.83
Lima	ISVBL	1843.51	1840.41	-0.17
Caracas	BC	14220.60	14699.24	3.37
Source: Daily market reports.

Carlos Fayt has been elected to head Argentina's supreme court until November despite reports that President Néstor Kirchner is keen on removing him from the body. 

Fayt was the unanimous choice to lead the court following the resignation of the previous interim head, Eduardo Moliné O'Connor, on 3 July. Moliné, who quit his positions as both vice-president and temporary leader of the court in order to prepare his defence against imminent impeachment proceedings, himself was a replacement for the supreme court's last officially elected head, Julio Nazareno. Nazareno quit at the end of June shortly before his impeachment trial was to begin. 

According to sources within the judiciary, the 85-year-old Fayt has been chosen because he is the senior member of the court. He has been a supreme court justice since the restoration of elected rule in 1983, he does not owe his appointment to former President Carlos Menem. 

Although this means that Fayt does not belong to the pro-Menem 'automatic majority' bloc that Kirchner is currently targeting, he is nonetheless a controversial figure. 

Rumours about his impeachment have circulated since Kirchner came to power, due to accusations of conflict of interest over the issue of bank deposits. 

It appears unlikely, however, that the president will move against Fayt before an official election for the leadership of the supreme court can be held in November. Moliné, who has remained on the court's bench, has vowed to fight his impeachment rather than stepping down as Nazareno did. And after Moliné there are three other members of the 'automatic majority' (Adolfo Vázquez, Guillermo López and Antonio Boggiano), who Kirchner appears to want to remove one by one. 

Kirchner has proposed that the criminal lawyer Raúl Eugenio Zaffaroni be appointed to fill the vacancy left by Nazareno's resignation. 

It is thought that the decision to put Zaffaroni forward was taken by Kirchner alone. Government sources had previously suggested that there would be a delay of three weeks or so before a possible replacement was named, but the president is said to have been keen to resolve the issue before departing for his tour of Europe. 

Zaffaroni, who once belonged to the centre-left opposition party Frepaso, could be on the supreme court within a month or so, after having received approval from the senate and undergone a rigorous screening process.

In record time the government of President Alvaro Uribe has reached an agreement with the paramilitary Autodefensas Unidas de Colombia (AUC) and a couple of allied organisations, to begin a demobilisation process meant to dismantle these groups completely by the end of 2005. The venture is fraught with difficulties -not the least of which is 'selling' both at home and abroad the concessions -which include 'alternatives to prison'- made to secure this deal.

The process envisaged differs in several aspects from the one tried out by the Pastrana administration with the Farc guerrillas. There will be a concentration area where the paramilitary will congregate under firm security guarantees. The paracos, however, will not have the run of this area: from the very beginning there will be a strong 'security presence'.
Both in Bogotá and Washington what is being touted as the main benefit of the agreement is that it 'withdraws one big threat from the field'. Indeed, peace commissioner Luis Carlos Restrepo argues that the disbanding of the paramilitary organisations will meet one of the guerrillas' demands, and may thus facilitate the initiation of a new peace process with them.

Another aspect has been buried in doublespeak. Restrepo has emphasised repeatedly that the agreement does not include a grant of impunity for 'atrocious crimes' (a legal term which technically includes murder). Those accused of such crimes will be tried and convicted -but the government will seek 'alternatives to prison' when it comes to sentencing.

These alternatives will involve 'actions of social reparation'. Exactly what this means has not been spelt
out. 'Atrocious crimes' have been a speciality of the AUC and other paramilitary groups. In Colombia's gruesome league tables they figure as the principal authors of massacres -events involving the killing of several people at once.

A major issue that has been skirted is that of the US extradition requests hanging over top AUC leaders Carlos Castaño and Salvatore Mancuso. According to Restrepo, this was not even touched upon when the demobilisation agreement was reached, because it was about 'particular affairs of some leaders'. However, he said, 'we will handle [this matter] with the greatest care and prudence [at] the appropriate time.'

Included in the deal are the AUC, the Bloque Central Bolí­var and the Alianza Oriente. Still aloof is the Bloque Metro, which operates in and around Medellí­n.

The Partido Revolucionario Institucional (PRI) received some more good news at the weekend. In the two close-fought gubernatorial elections, in Sonora in the northwest, and Campeche in the southeast, its candidates won, according to the official returns. 

The big surprise was the closeness of the race in Campeche, a state in the southeastern heartland of the PRI president, Roberto Madrazo. Here the PRI candidate Jorge Carlos Hurtado squeaked home, 3,998 votes ahead of Juan Carlos del Rí­o, from the ruling Partido Acción Nacional (PAN), in an election in which just over 250,000 people voted. 

In Sonora, the PRI candidate Eduardo Bours came home just under 8,000 votes ahead of the panista Ramón Corral. The margin of victory was just over 1%. At the beginning of the year, opinion polls had put Bours well ahead of Corral. The PRI has also taken control of the state assembly, winning 16 of the 21 districts in first-past-the-post elections. 

The results mean that the PRI won four of the six gubernatorial elections on 6 July. It took Sonora and Nuevo León from the PAN and held Colima and Campeche. Its only defeat, to the PAN, was in San Luis Potosí­. The PAN also held Querétaro.