All Categories

Wilmar Castro Soteldo, the minister for production and trade, claimed yesterday that the economy had overcome the problems of last year. The minister is leading a team to a conference in Colombia, which opens today. The conference is designed to rebuild business links between Colomas, and is the first since January last year when the general strike, and then the imposition of harsh exchange controls, crippled Venezuela's business sector.

Colombian businesses claim that the traditionally poor political relations between the two countries meant that Colombian exporters were penalised when foreign exchange was being allocated to pay for imports. Significantly, the controversial head of the exchange control system, Edgar Hernández Behrens, is part of Castro's delegation. The conference is but the start of a considerable effort to rebuild commercial relations between the two countries. In March there will be a two-day gathering for Colombian businessmen on the Venezuelan island of Margarita.

Castro hopes that the two countries will manage to do US$3bn-worth of trade this year. Castro is also trying to soothe Colombian businessmen over allegations that the government of President Hugo Chávez is picking on Colombian businesses. Castro claims that the stinging tax bills imposed on Cativen, a Colombian owned retailer in Venezuela, had nothing to do with trying to put pressure on Colombia to be less pressing in demanding repayment for its exporters. He said that Cativen had simply skipped on some taxes.

The country's ambassador to the UN, Milos Alcalay, resigned yesterday, claiming that the government of President Hugo Chávez , was repressive and undermining Venezuelan democracy. Separately, two lawyers are appealing to the supreme court to overrule the decision by the Consejo Nacional Electoral to hold a second scrutiny of dodgy signatures.

The opposition made a great deal of Alcalay's departure. The ambassador was a career diplomat of 30 years standing. In his resignation letter, Alcalay spoke of the polarisation of the country which had not only affected Venezuelans' lives but also the international image of the country. Government supporters claim that Alcalay had supported the attempted coup against Chávez in April 2002.

The decision by two lawyers to ask the supreme court to rule that the CNE's decision on the dodgy signatures is unconstitutional takes up an invitation offered by the vice president, José Rangel. The two lawyers, Guillermo Morena and Octavio Tovar, argue firstly that the law does not provide for petitions to be subjected to a second review. Secondly they argue that the CNE's decision breaches article 21 of the constitution which guarantees non-discrimination: essentially they are arguing that the CNE is discriminating against people who have similar handwriting.

As the United Nations Human Rights Commission in Geneva prepares to vote on a US-backed resolution condemning Cuba for human-rights abuses, Mexico insists that it is not being pressured by its neighbours to approve the document.

According to press reports in Mexico and the US yesterday, the White House said that Mexico's President Vicente Fox and US President George Bush agreed to vote against Cuba. Scott McClellan, the White House press secretary, is quoted as saying that the two Presidents "agreed on the importance of passing a Cuba resolution at that meeting and working together to improve the human-rights situation".

However, Agustí­n Gutiérrez, Fox's spokesman, said the Mexican government has not finished evaluating the resolution and stressed that a decision has not been reached. Gutiérrez rejected claims that Fox promised Bush to support the document during a phone conversation the two had yesterday. The spokesman confirmed that Bush called Fox, but said that Mexico did not decide to back the resolution during the seven minute conversation.

Gutiérrez said Mexico wants to promote human rights in Cuba, but he highlighted that Mexico will arrive at its decision independently. Gutiérrez indicated that Fox and Bush discussed Cuba's membership of the UN Human Rights Commission, which expires in 2007. They also discussed the International Court of Justice ruling issued on 31 March, which ordered the US to revisit the cases of 51 Mexican citizens currently on death row in nine states.

Nor is Mexico being swayed by Cuba, Gutiérrez said. In evaluating the UN document, Mexico is not taking into account talks with Cuba regarding businessman Carlos Ahumada. Ahumada, who faces fraud charges in Mexico, is currently imprisoned in Cuba. Mexico is seeking his extradition.

The US-backed resolution was brought before the UN Commission by Honduras. The document condemns Cuba for its crackdown on dissidents; in addition, it calls for an international human rights monitor to visit the island. Last year's resolution, supported by Mexico, did not openly condemn Cuba's human-rights record but did, however, call on Cuba to permit a UN human rights official to enter the country.

The vote will be held in Geneva on 15 April. Speaking from Brazil, foreign minister Luis Ernesto Derbez said that as an act of courtesy, Mexico will notify Cuba of its decision before the vote takes place.

Bolivia's business leaders and unions have rejected the government's plans to hold a referendum on the proposed export of Bolivian gas on 18 July. In particular, they have rejected the question in the referendum referring to the possible extension of state control over the oil and gas sector, which they fear will damage Bolivia's attraction for international investors.

The confederation of private businesspeople (CEPB) said it was concerned that such proposals would simply be rubberstamped by voters inspired by nationalist sentiment, but who lack the knowledge to make a decision that could have far-reaching effects on the Bolivian economy.

Businesspeople in the gas-rich regions of Santa Cruz and Tarija also oppose the referendum because they believe it is more likely to mean that no progress is made on actually exploiting the country's gas reserves.

Bolivia's main union, the indigenous-dominated Central Obrera Boliviana (COB) also opposes the referendum on the grounds that it does not go far enough with the process of fully nationalising the oil and gas sector and ensuring that all of the gas produced goes to power a domestic industrial revolution rather than going to the export market. COB executive secretary Jaime Solares said he was extremely disappointed in the contents of the referendum and was suspending his planned meeting with the President Carlos Mesa as a result. The Bolivian government has already explained that compensating foreign investors for their stakes in the oil and gas sector would virtually bankrupt the country.

One unlikely defender of the referendum has, however, emerged. The indigenous activist and leader of the opposition Movimiento al Socialismo (MAS), Evo Morales, has backed the referendum and dismissed criticism of its contents. He said it was positive that Bolivians were finally being given the opportunity to decide the destiny of their own natural resources and he dismissed suggestions that ordinary Bolivians were 'too ignorant' to understand the issues involved.

Development: The government moved ahead with its bold bid to streamline the armed forces on 28 June. A total of 6,700 troops accepted voluntary retirement- the first stage of a downsizing of the army by 42%.

Significance: With this step Guatemala becomes the second Central American country to take a concrete step towards the agreed `reasonable balance' of armed forces in the subregion. Guatemala's army was by far the largest in Central America, with some 27,000 troops. Berger intends to trim it further, to 15,500; a figure more in line with its neighbours. El Salvador, the smallest country, has 16,000; Nicaragua 14,500; Honduras 12,000; and Costa Rica has no army. The Programa de Modernización del Ejército de Guatemala also envisages shutting down all but five military bases.

More than 96% of the 6,700 retirees have already received a severance package, averaging US$3,260. The government has set aside more than US$50m for the payments, which Berger says should be viewed as an investment that will soon translate into fiscal savings as the defence budget is reduced.

Many of the rank-and-file soldiers leaving the force will be offered the opportunity to apply for training in the national civil police academy. Berger has promised a thorough shake-up of the Policí­a Nacional Civil (PNC) after a number of senior police officers were arrested recently for their involvement in violent gangs.

Significance: The export tax currently stands at 25% but, under the new sliding scale of taxation, it could rise as high as 37.5% according to the international price of crude oil. Under the government's scheme, oil would at present be taxed at 36%, after the cost of crude oil reached a record high of US$43.75 per barrel on 3 August. Put another way, if oil hits US$44 per barrel, the government's take will rise from US$11 to US$16 on every barrel Argentina exports.

The government has taken the measure after local fuel companies last week raised their prices in response to the international price for crude oil hitting US$40 per barrel. They were able to do so after an agreement with the government fixing the cost of oil for the domestic market at US$28.50 per barrel expired in May. The government is, however, determined that the cost of oil for the domestic market will not exceed a price range of between US$25-US$29 per barrel regardless of what happens outside Argentina; by raising taxes on exports, it hopes that producers will concentrate on supplying the domestic market and keep prices down accordingly.

The fuel companies are livid, saying that the higher the taxes are, the less chance there is of much-needed foreign and domestic investment reaching the industry. They have also not ruled out a further rise in domestic prices irrespective of the new taxes. There has also been a degree of dissent within the government, with economy minister Roberto Lavagna apparently unhappy at the scheme to be outlined later today.

Development: The government formally sent it budget for 2005 to congress on 8 September. The government expects to spend M$1.74bn (US$151.6bn) in 2005 according to information supplied to deputies, who will have to approve the budget by the end of this year.

Significance: As President Vicente Fox said on 7 September, the 2005 budget is tight. Indeed, spending will be 4.5% down on what was budgeted for this year. At a time when oil revenues are buoyant and presidential and congressional elections are looming (they are due in 2006), the government's abstemiousness looks almost wilful. Whether congress will be able to restrain itself from backing some pet projects, and thus increasing spending, is doubtful.

The budget assumptions are that the economy will grow by 3.8% in 2005. This is an unambitious and disappointing target, given that the economy looks on course for 4%-plus growth this year. The other targets are: inflation of 3% in 2005; a current account deficit of 2.1% of GDP (US$14.2bn) and an average oil export price of US$23 a barrel. The assumption for average oil export volume is 1.9m bpd.

Overall, the budget calls for a 6.3% cut in regular government spending; a 3.6% cut in welfare and other social spending and a 42% cut in the catch-all category of 'other federal' spending.

As President Fox said, the fiscal-deficit target for 2005 will be 0.1% of GDP. In 2004 the government's target is a deficit of 0.3% of GDP, though congress allowed a budget with a deficit of 0.5% of GDP.

Debt servicing payments in 2005 are scheduled to rise by almost 5% in 2005 to M$227.6bn (US$19.79bn), reflecting the switch in government borrowing from foreign to domestic capital markets. Ironically the government may have been better advised to maintain its low-cost dollar debts rather than switch back into higher interest rate pesos.

Development: Gustavo Ponce Melendez, the former chief financial office for Mexico City, said on 11 October that he wanted to face Carlos Ahumada, the dodgy businessman who has made allegations of corruption against him.

Significance: Both men are now in custody. The federal government is still trying to extract video tapes shot in Cuba of Ahumada apparently explaining his relations with the government of Mexico City. Ahumada is an Argentine-born construction magnate who became closely entwined with successive governments (of the leftwing Partido de la Revolución Democrática) in Mexico City.

A video of him apparently handing over cash to the mayor of Mexico City's former private secretary was broadcast in March. This forced Ahumada to flee to Cuba.

The mayor of Mexico City, Andrés Manuel López Obrador, believes that the federal government used this video, plus an earlier one of Ponce gambling in Las Vegas, to smear him and his administration: Lopez Obrador heads the opinion polls for the presidential elections in 2006.
Ponce's lawyer, Juan Enrique Soto Fernández, claims that there is no substance behind the allegation that Ponce extorted M$30m pesos from Ahumada, as Ahumada alleges. The lawyer says a face-to face confrontation would show that there was nothing to Ahumada's allegation.

Development: President Alvaro Uribe announced on 12 November that the worst winter to strike Colombia since 1996 has now affected 240,000 people, or 40,000 families.

Significance: The crisis caused by the unusually severe winter and the resultant flooding has worsened recently. According to Uribe, 116 municipalities in 24 of Colombia's 32 departments are now affected. Twenty people have so far died.

The government has issued a state of emergency in seven northern departments, having been urged to do so by the Red Cross. The only consolation is that, according to local weather reports, the rains afflicting the north will ease in the coming days.

Development: Luis Ramí­rez Corzo, the director of the state-owned oil company, Petróleos Mexicanos (Pemex), suggested on 16 December that foreign oil companies should be allowed to bid for oil exploration contracts.

Significance: The idea nibbles away at Pemex's monopoly. Ramí­rez Corzo's suggestion will outrage nationalists in congress, who do not believe the government and technocrats (such as Ramí­rez Corzo) when they say that Pemex does not have the financial and technological capabilities to develop the potentially vast offshore oil and gas fields in the Mexican portion of the Gulf of Mexico.

Ramí­rez Corzo said on 16 December that he wants to invite foreign oil companies to bid for multiple-service contracts (CSMs) to develop the onshore Chicontepec project which holds both gas and light crude. Ramí­rez Corzo said that Pemex expects to offer four concessions to develop the field in 2005: three of them will be gas only but one, significantly, will be for oil and gas.

Previously CSMs have only been allowed in dry gas (ie gas only) projects. Ramí­rez Corzo stressed that Pemex would own any oil the foreign companies found and would pay the companies who found it a fixed rate for it.

The comparatively small onshore contracts will be a test case for the much larger and more lucrative offshore projects. If Pemex gets the go-ahead from congress for Chicontepec it will mean that foreign oil companies will be allowed into the Mexican portion of the Gulf of Mexico.

Development: On 29 January the commander-in-chief of the army, General Javier Carrión, reacted angrily to an article published in 'The Washington Times' two days earlier, which cited unnamed US officials who claimed that rogue elements in the army were selling SAM-7 surface-to-air missiles on the black market. 

Significance: The paper said that Nicaraguan police, acting on intelligence provided by the US, recently conducted a sting operation in Managua thwarting black marketeers trying to sell the missiles. The US began pressing for Nicaragua to destroy its arsenal of SAMs in 2003 because it did not trust the army to keep the missiles from finding their way into the hands of terrorists who could use them to shoot down commercial airliners. President Enrique Bolaños ordered the destruction of half of Nicaragua's 2,100 SAMs in 2004. The US wants all of them destroyed. 

The Washington Times also cited Roger Pardo-Maurer, the deputy-assistant defense secretary for the Western Hemisphere: “If this is what it appears to be, it calls into question not only the professionalism and integrity of the Nicaraguan armed forces, but it really calls into question their sanity. Playing with shoulder-fired missiles is one of the most dangerous things out there and is at the top of concerns by the Department of Defense. We're taking a very hard eye to look into this situation," he said.

Carrión responded on 29 January: “It is being said that we are betraying the president, that we are keeping secret stashes of weapons when we have handed in our inventory of weapons. It hurts our professional pride very much." The ministry of defence issued a statement on 28 January saying that the SAM arsenals had been “checked in situ by specialists from three US agencies." Carrión insists that there are no rogue elements in the Nicaraguan army. He has also made it clear on several occasions that he does not agree with the destruction of all of Nicaragua's SAMs. He says that the US should provide Nicaragua with compensation for their destruction, which he claims are a necessary deterrent to the large Honduran air force. Carrión will shortly be replaced by General Omar Hallesleven.

Development: On 2 March the leader of the opposition Alianza por Chile, Joaquí­n Laví­n, attacked President Ricardo Lagos over his professed ignorance of a scandal at the ministry of public works.

Significance: Laví­n's attack echoed the president's own barbed comments a few days previously, in which he wondered aloud how a number of current opposition senators who worked in the Pinochet administration could not have known about the regime's abuse of human rights. The spat is indicative of a gradual rising of the political temperature in this, election, year.

Referring to two senators from the right-wing Unión Demócrata Independiente (UDI), the president said "it is difficult to imagine or understand" that they did not know about the Pinochet regime's abuses. Laví­n's attack echoed the president's words: "it is difficult to imagine that when he [Lagos] was minister he did not know about the corruption that went on during the MOP-gate scandal". The MOP-gate scandal, currently under investigation by Gloria Ana Chevesich, involves the alleged misappropriation of state funds supposedly for use at the Universidad de Chile business school, the ministry of public works (MOP) and the economics institute, but instead diverted to Lagos's electoral campaign in 1999.

Development: The Institute of International Finance, a bankers forum, forecast on 6 April that growth in Latin America would be around 3.9% in 2005.

Significance: In 2004, the IIF reckoned that growth was 5.9%, a bit above the forecast made by the UN's Economic Commission for Latin America and the Caribbean (Eclac) which put growth in Latin America at 5.5% in 2004. For 2005, the IIF forecasts growth of 3.9% falling to 3.8% in 2006 as the commodities boom tails off.

The IIF reckons that foreign direct investment in 2004 was US$43bn, US$13bn more than in 2003. The IIF is still bothered about the high level of public sector debt in several economies, it said.

BRAZIL: The consumer prices index (Ipca) reached 0.87% in April, according to the official statistics agency, the Ibge. The Ipca is used by the central bank to measure Brazil's inflation. The figure is higher than the 0.80% forecasted by the market, and shows inflation at its highest level since July last year. The accumulated inflation for the year so far is 2.68%. The central bank's target for 2005 is 5.1%.

CHILE: Chile climbed from 26th to 19th place in the annual world competitiveness ranking list released by the Swiss business school IMD.

COLOMBIA: The Banco de la República, Colombia's central bank, announced that inflation may stand below 5% by year-end. According to the monetary authority the rate may close 2005 within a range of 4.5%-5.5%.

ECUADOR: Ecuador's producer price index in March rose 10.8% from February, according to the central bank. The March data showed a 16.3% increase in the PPI over the same month last year.

EL SALVADOR: GDP grew by 1.5% in the first quarter of 2005, less than the 1.8% recorded in the same period of 2004.

MEXICO: Vehicle exports rose 15.4% in April.

VENEZUELA: Venezuela announced that it will buy US$150m of Argentine domestic bonds.

Development: On 16 June the senate approved the eighth and final debate of the government's pension reform.

Significance: The pension reform is the centrepiece of President Alvaro Uribe's economic policy, but the government has had enormous difficulty passing the measure. The pension reform was thrown out by congress last year and was only introduced this year after it had been watered down.

After a lengthy debate which was hampered by divisions within the pro-government bloc, the senate approved the bill with only relatively minor modifications. The treasury minister, Alberto Carrasquilla, persuaded the minister for social protection, Diego Palacio, to accept the government's most controversial proposal, namely the scrapping of Mesada 14, a bonus pension pay-out on top of the 13 pensioners currently receive per year, albeit only for future pensioners.

The pension reform now goes to a conciliation committee, where the senate's version of the bill will require the backing of members of the lower house. Should it be passed, the reform is expected to save the government US$11bn over the next 45 years and cover a gaping hole in public finances.

Development: On 20 July President Leonel Fernández announced he would continue to be leader of the Partido de la Liberación Dominicana (PLD) as long as the election commission resolves problems in the electoral process.

Significance: Fernández made the decision after a four-hour meeting with members of the PLD to discuss irregularities in the first round of elections on 3 July. Cristina Lizardo, head of the election commission, said that the results from 25 provinces will be ratified and that those responsible for the irregularities will be held responsible. Fernández, as the only candidate for the presidency of the PLD, will be officially nominated on the second round of voting this Sunday (23 July).

Development: On 22 August negotiations between the government, foreign oil companies and protesters from two oil-producing provinces in the Amazon failed to reach any agreement. The talks will continue today (23 August).

Significance: The protesters from Orellana and Sucumbí­os have conditioned the continuance of talks on the lifting of the state of emergency in place in the region. Representatives of the Amazonian provinces, meeting the government in Quito, are adamant that the strikes have just been suspended, not lifted, and that if the government fails to agree to their requests, industrial action will resume. The talks were teetering on the brink yesterday, as those present in the capital accused the government of heavy-handedness in its use of the military to force the remaining protesters away from the oil wells.

The protesters are demanding that the government and international oil companies invest more substantially in the region's infrastructure. They also want to kick out Occidental, the US oil company that transferred some of its shares in an oil well to EnCana, a Canadian oil company, without telling the Ecuadorean state. The talks in Quito have yet even to address the issue of Occidental's contract.

The tripartite talks started three hours late, and although they took place behind closed doors, plenty of delegates were prepared to discuss their content. Representatives from the oil companies claimed that they had "fully satisfied the demands" of the provinces. Máximo Abad, mayor of Nueva Loja and one of the strike leaders, said that the oil companies' response was too vague.

Meanwhile production at Petroecuador rose to 70,000 bpd on 22 August, still significantly down on its daily average of 201,000 but well up on 19 August's nadir of zero. Iván Rodrí­guez, the energy minister, and Magdalena Barreiro, the economy minister, travelled to Venezuela on 22 August to shore up President Chávez 's offer of an oil loan to allow Ecuador to comply with its oil export obligations.

Development: The World Bank and the IMF announced on 24 and 25 September that Bolivia's external debt will be forgiven.

Significance: The debt relief is part of a 38-country initiative designed to provide financial assistance to the world's most indebted countries. Announced in Washington, the programme will "achieve a substantial poverty reduction" the World Bank and the IMF said. At present, Bolivia owes US$293.2m to the IMF, and US$1.71bn to the World Bank.

While the announcements were met with international praise, their impact on Bolivia will not be so far reaching. The country has already received a 58% reduction in its foreign debt through the Heavily Indebted Poor Countries (HIPC) initiative. Since 1998, Bolivia has benefited from this joint IMF-World Bank programme, reducing its yearly debt-service payments by US$120m.

Similarly, the 24 and 25 September statements do not extend relief to Bolivia's debt with the Inter-American Development Bank (IDB), the country's largest external creditor. Instead, this institution will continue to participate in the HIPC initiative, which has allowed Bolivia to reduce its debt with the IDB by US$585m.

Such debt-relief initiatives have helped support Bolivia's economy. Despite protracted civil unrest, economic growth has been bolstered recently by high international gas prices. The economy grew 4% in the first half of 2005, and is predicted to increase between 4 and 4.5% by the end of the year.

Development: On 28 October Hazelyn Francis, the president of the senate, was raped and robbed at her home in Marble Hill, Antigua.

Significance: The attack on the senate president has intensified the debate on crime in the country. According to local radio reports in the week prior to the attack on Francis, an 81-year old woman was attacked in the same area. The police commissioner recently denied permission for the holding of an anti-crime march because the police lacked the manpower to secure the event.

The attack on Francis followed a warning by the president of the Antigua & Barbuda Cruise Ship Association, Nathan Dundas, that the harassment of visitors by pickpockets and vagrants could damage the islands' tourist industry.

Another question raised by the attack is the issue of security for members of government; Francis's home had been broken into once before. Francis is president of the 17-seat senate, whose members are appointed by the prime minister for the life of parliament.

Development: The latest opinion poll, published on 1 December, showed the 11 December presidential elections going to a second round.

Significance: The telephone poll, coupled with stinging comments about complacency, prompted the campaign team of the front runner, Michelle Bachelet, to crank up its efforts. The complacency comments came from Soledad Alvear, whom Bachelet beat for the presidential nomination.

The Ipsos poll showed Bachelet at 38.5% compared with 48.5% in September. She is still well ahead of Sebastián Piñera, who is on 22%, 1.4% up on September and the other rightwinger, Joaquí­n Laví­n, who is steady on 16%.

Any chance of Bachelet losing in the second round is remote: the extreme left candidate, Tomás Hirsch, is running at 7.6% up from 3% in September. These votes would almost certainly revert to Bachelet in a second round. Ipsos reckons that Bachelet would defeat Piñera by 47% to 39.5%.