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On 28 September the senate voted to remove from office Antonio Boggiano, the second supreme court justice impeached since President Néstor Kirchner took office in May 2003 (three others resigned to avoid facing impeachment). With the addition of a sixth justice who resigned invoking old age this purge has allowed the most comprehensive shakeup of any supreme court under an elected government.

Though many agree that the replacements appointed by Kirchner and ratified by the senate are honest people with a good professional background and not politically tainted, at least one prominent left-of-centre politician, Elisa Carrió, has described the new court as formed by justices 'of poor quality and, above all, [those that are] agents of the government.'

The Kirchner purge was meant to cleanse the court of what had come to be known as the 'automatic majority' engineered by President Carlos Menem when he enlarged the court from five to nine members.

The senate found against Boggiano, by more than the requisite two-thirds majority, on six of the fourteen charges filed against him. Boggiano, who says he feels 'betrayed' and 'ideologically persecuted' [by leftwing elements in the government], has said he will appeal - first seeking reconsideration by the senate then, if necessary, filing a queja (complaint) with the supreme court and, if that fails, turning to the Inter-American Court of Human Rights. The consensus is that he is unlikely to be heeded, as in matters such as this the ultimate authority is the legislature.

BOLIVIA | Higher prices & taxes for gas. Vice-President-elect Alvaro Garcí­a Linera travelled last week to Argentina to open discussions on the raising of the price Argentina pays for its imports of Bolivian gas. He said the aim was to 'work towards a regional market price which will fundamentally benefit the country [Bolivia].' Prompted by a severe energy crisis, Argentina resumed importing gas from Bolivia in early 2004, after a four-year suspension. At the time, President Carlos Mesa agreed to what he called a 'solidarity price' of US$0.98 per million btu, substantially lower than the US$1.60 which Brazil was paying. A year later Mesa was able to negotiate a progressive increase which would roughly align both prices. During the recent electoral campaign all candidates agreed that prices should rise to the levels prevailing in developed countries, of more than US$10/m btu.

Garcí­a Linera has separately announced that oil & gas companies that have recovered their investments will see the government tax take rise from the current 50% to 70-80%, 'which is the average in Latin American countries with state oil companies'.

ECUADOR | Big cooking-gas scam uncovered. The government has uncovered a huge scam involving the sale of subsidised 15-kilo canisters of cooking gas in three northern provinces bordering on Colombia: Carchi in the Andean highlands and Sucumbí­os and Orellana in the Amazonian lowlands. In all three the actual supply of canisters is far greater than what can be justified in terms of domestic use. In Carchi the ratio is almost two to one. The subsidised canisters are going to two illegal markets: domestic industries, which should be taking the bigger, unsubsidised canisters; and into Colombia, where each canister can fetch up to US$7, versus the subsidised US$1.60 paid in Ecuador. The authorities have decided to cut back supplies of domestic canisters and ensure that enough industrial-size ones are available and have ordered a police crackdown on smuggling.

Diplomatic tension between the US and Venezuela rose to new heights last week following the heckling of US ambassador William Brownfield, and the later pelting of his car with vegetables, in what the State Department described as a 'government-sponsored' incident and a breach of the Vienna Convention. The US has issued a warning against any repetition; Venezuela has riposted with a counter-warning.

On 7 April ambassador Brownfield went to a playing field located on the western side of Caracas to deliver a donation of baseball bats and gloves to a local junior team affiliated with the Orioles. He ran into a crowd which surrounded him shouting, 'Out! Out!', while in effect preventing him from leaving until officers of the Venezuelan national guard cleared a path for him. One of the demonstrators identified himself as a municipal official and told Brownfield he should leave because he lacked authorisation to enter the establishment. The ambassador's convoy was later pelted with vegetables and pounded by demonstrators, some of whom pursued him as he retreated. Embassy officials complained that there was no attempt by police to prevent this.

It was the third instance in as many weeks of Brownfield running into public hostility. Previous episodes had included heckling, the burning of a US flag and smoking-tyre barricades, but none had come as close to threatening his physical integrity as the 7 April eggs, tomatoes, lettuces and onions that hit his car.

That same day US Undersecretary of State Nicholas Burns summoned Venezuelan ambassador Bernardo Alvarez to tell him that his country had violated the Vienna Convention, which obliges the host country to ensure the safety (and freedom from hindrance) of foreign diplomats, and to warn that there would be 'severe diplomatic consequences between our countries if there is another incident'.

State Department spokesman Sean Mc Cormack later said that the incident clearly was condoned by the local government and had been the latest in a series of government-sponsored attempt to intimidate US diplomats in Venezuela.

On 8 April Venezuela's acting foreign minister, Alcides Rondón, denied any government involvement in the episode and said the government 'repudiates all acts exceeding the bounds of respect and consideration towards any citizen, national or foreign'. He went on, however, to suggest that Brownfield had been imprudent not to give advance warning that he was going to an area where a hostile reception was likely, so that the police could take the necessary precautions. Rondón even hinted that there could have been an attempt, on someone's part, to create an incident by inviting Brownfield to the event at an inopportune moment. The embassy insists that advance warning was given.

Rondón said that one of the severe consequences threatened by the US could be to restrict the movements of ambassador Alvarez. Were that to happen, he said, Venezuela would respond with 'reciprocity'.

There could have been another US-Venezuelan spat that same week but it was averted in time. On 6 April a Costa Rican legislator warned that Washington might launch an attack on Venezuela from Costa Rican waters. As a storm began to brew he said this had only been 'personal speculation'.

CHILE: Teachers agree deal. Members of the teachers' federation Colegio de Profesores approved on 20 October a deal proposed by the education ministry offering them better labour conditions and salaries. Jorge Pavez, the president of the federation, who had accused the government of prevaricating and threatened strike action, said he was satisfied the proposal was "a step forward". He said the agreement, which will cost the government Ch$400bn (US$759m) per year, will be formalised with the education ministry in early November. One of the main bones of contention was over a monthly bonus for teachers with degrees. 

Thousands of high school students demonstrated on 17 October over education reform. The police made 114 arrests in various incidents across the country.

Inflation in January was 1.1%. Such a bland announcement would not normally excite much of a reaction but it did, and the reason it did was that the government of President Néstor Kirchner had decided to intervene in the ostensibly autonomous national statistics agency, Indec, days before the figure's release. It replaced the Indec official responsible for calculating the consumer price index with an official loyal to Guillermo Moreno, the trade secretary. The media and the opposition immediately took Kirchner to task, accusing him of manipulating figures ahead of October's presidential elections.

The Indec row began when Graciela Bevacqua was removed as the CPI director and replaced with Beatriz Paglieri, whose expertise is foreign trade rather than statistics. Employees working in the CPI department demonstrated outside the Indec's offices on 5 February to protest. They released a statement accusing the government of adopting a "totalitarian attitude", orchestrating "an institutional coup" and "tampering with the consumer price index". "It is the first time in the history of the Indec that an alarming thing like this has happened," it went on. They also threatened to release their own figures if they suspected government interference. Pretty incendiary stuff, although governments have tried to dress up the Indec's figures ever since it was created in 1968, during the military government of Juan Carlos Onganí­a.

A sign of the relative seriousness of a dispute in Argentina can be measured by whether the belligerent interior minister, Aní­bal Fernández, gets wheeled out. Fernández duly appeared to release a barrage of criticism, reminiscent of Kirchner's attacks on the IMF. He denounced the protesters as "a gang of outlaws" and a "mafia" and accused the "squalid opposition" of political point scoring ahead of the elections.

Although Indec is controlled by the economy ministry it has its own independent budget and executives are normally appointed after an internal review to protect the agency's independence. Despite Fernández defending the replacement of Bevacqua as the constitutional right of the president, it looks like a bad misjudgement coming so soon after the Isabelita case caused a rumpus in the Peronist movement. The government appeared to concede as much on 7 February when it revealed that Paglieri had only been appointed for 180 days, when a replacement would be elected through an internal review. This, however, merely prompted the question why Paglieri was not appointed in this manner.

The fact that the government felt it had to make the cack-handed intervention in the Indec when it is in a politically strong position ahead of October's elections, and the opposition remains divided, shows how insecure Kirchner is. During a visit to the province of Tucumán on 7 February, a defensive Kirchner announced a number of public works projects. "Some will see this as electioneering but if we stopped doing anything in the year of elections_ what would happen to Argentina?" he asked rhetorically. He also criticised the press for misinforming the public about the Indec affair and defended the credibility of the figures. He argued that while the CPI figure was good, he was worried by the 2.6% increase in the cost of the basic basket of goods for a family of four to Arg$425.25 (US$137) in January on December.

The figures and the "real" figures
Seven police officers surrounded the CPI office on the third floor of the Indec's building to protect those compiling the index on 5 February because, according to Fernández, they had been threatened. January's inflation figure was eventually released two and a half hours late after Indec employees had gone home. The 1.1% inflation figure was well below the estimates of private sector economists, who predicted that real inflation for the month was closer to 1.8%. The January figure is normally high due to the holiday season: it came below the 1.5% result in January 2005 and 1.3% in January 2006.

More credence might now be lent to claims by consumer associations that the 9.8% inflation registered in 2006 dipped a bit too conveniently beneath the government's target of less than 10%. Other figures released by Indec are also being questioned now: tourism, for instance, increased by only 3.7% in January despite a 16.7% increase in January last year. The dismissal of Bevacqua on 29 January, seemingly over a dispute with Moreno over the way a 22% increase in the cost of medical insurance should be reflected in the CPI, not only raises question marks about the credibility of the Indec's data but it also erodes confidence within the financial community, where there is a suspicion that the government is trying to mask the full impact of its price controls and could be tempted to tamper with unemployment or poverty figures.

The suspicion that the government is tampering with the inflation figures could undermine the attractiveness of Argentine inflation-linked debt as lower inflation figures mean lower payments to holders of this debt. Just as importantly, trade unions might now demand bigger wage rises just as the annual round of wage bargaining is getting under way. The Confederación General del Trabajo (CGT) has already issued a statement expressing its concern at the "politicisation" of the Indec and the "manipulation of information". Salaries increased on average by 18.9% in 2006, almost twice that of inflation.

Opposition response
The opposition wasted no time in going on the attack, calling for the economy minister, Felisa Miceli, to appear before congress. Kirchner's former economy minister, Roberto Lavagna, who is now an opposition presidential candidate, accused the government of "very heavy-handed manipulation" (conveniently forgetting his own brushes with the Indec in the past). The head of Propuesta Republicana (Pro), Mauricio Macri, said, "The indices that the government is releasing are unrealistic because the people see how the cost of key products is increasing day by day".

The government, meanwhile, is trying to divert attention from the debacle by making a gesture to the main farming organisations, with which it has been at loggerheads since it announced a six-month ban on beef exports in March 2006. They staged a nine-day strike in December to protest against price controls and objected more recently to an export tax on soybeans to subsidise food products.

The agriculture minister, Miguel Campos, who had a fractious relationship with the farming organisations, was replaced this week by Javier de Urquiza, a sheep farmer from Patagonia and a former delegate for the Confederaciones Rurales Argentinas (CRA). Urquiza is a popular appointment especially because, as a pingüino, he should have the president's ear.  

Menem
Former president Carlos Menem will not run on one of the many tickets for the Partido Justicialista (PJ) in this October's presidential elections. Instead, Menem will stand for Lealtad y Dignidad, the name of a former faction within the PJ. Menem registered “Loyalty and Dignity" in La Rioja, the province he represents as a Senator.

The most recent spat between Brazil's government-controlled energy company, Petrobras, and its Bolivian state-owned equivalent, YPFB, was finally resolved last week. Petrobras agreed to sell two refineries it owned in Bolivia to YPFB for considerably less than it valued them. The reason for this, according to the Brazilian press, was the direct interference of Brazil's President, Lula da Silva, in favour of the Bolivian government. Yet, despite Lula's goodwill, it is becoming increasingly apparent that his Bolivian counterpart, Evo Morales, is more intent on deepening his government's relations with Venezuela than with Brazil. 

Bolivia is at the centre of the geopolitical strategy of both Lula and Venezuela's President Hugo Chávez . While Lula wants to keep a grip on Bolivia because of Brazil's dependency on its gas, Chávez arguably sees Bolivia as a platform for spreading his political ambitions throughout South America. Indeed, Chávez is said to be the driving force behind Morales's decree of "nationalising" Bolivia's gas and oil fields last year. Bolivia had opened up its energy sectors to foreign companies in the 1990s and Petrobras was one of the main investors in the country. Chávez 's backing was thus crucial for Morales to stand up to the eventual pressure from foreign companies against the decree. 

The Brazilian government was caught by "surprise" by Morales's decision. Yet Lula was adamant that Bolivia had the "sovereign right" to control its natural resources. Bilateral relations, however, started to turn sour because of continuous anti-Brazilian declarations emanating from La Paz during the negotiations that followed the "nationalisation" announcement. Lula did all he could to avoid a direct confrontation with Morales, though, fearing that a standoff with Brazil could give ammunition to the separatist movements in the east of Bolivia that would cause more instability in the country. 

Another factor influencing Brazil's foreign policy is the fact that Bolivia supplies 26m cubic metres of gas to Brazil per day, half of the country's total gas consumption. Any drastic action from the Brazilians, therefore, could lead to the disruption of gas supplies and to power cuts in Brazil. This explains why Petrobras agreed to renegotiate its contracts to operate in Bolivia and to pay more for the gas it imports from the country's fields. 

At the same time, this association also makes Bolivia dependant on Brazil, which is by far the country's biggest customer for its gas. Brazil imported US$1.26bn worth of Bolivian gas last year. The Bolivian government, however, wants to ease its dependency on Brazil. This is the reason behind Morales's decree transferring Petrobras's right to sell crude and white gasoline from the two refineries it owned in Bolivia. This, in effect, cornered Petrobras into selling the two installations for less than it valued them [WR-07-18]. In the end Lula ordered Petrobras to sell the pair for a combined price of US$122m, well short of the US$200m Petrobras wanted. 

Unsurprisingly, Petrobras vowed to "review" its future investments in Bolivia. This could incur a high risk for YPFB, as the company is dependant on foreign capital and expertise - particularly Brazilian - to operate. This is where Venezuela comes in: days after purchasing the two refineries from Petrobras, the Bolivian government announced that YPFB would enter into "an association" with Venezuela's state-owned energy company, Pdvsa, to "start immediately" projects of gas and oil drilling and refining. This brings Chávez one step closer to his dream of setting up a united South American energy company. 

• Brazil seeks new sources of energy
  The Brazilian government is seeking new sources of energy and new suppliers to compensate for a possible disruption of supply from Bolivia. According to the Brazilian press, the government wants to resume work on the Angra 3 nuclear reactor. The go ahead depends only on formal approval by the national energy policy committee. Petrobras also announced it has agreed on terms to import liquefied gas from Nigeria and had leased two ships from Norway to transport the product as from the second half of the year.
  

MEXICO | Industrial output. Industrial output was up by just 0.1% in June compared with June 2006. Manufacturing again was disappointing, falling by 0.3% because of a weak performance by the textile and motor industries. The central bank is forecasting 3% year-on-year growth for the second quarter after 2.6% year-on-year growth in the first quarter. The finance ministry is more bearish expecting 2.8% growth in the second quarter. 

MEXICO | Maize. The government is continuing with its price controls on maize and tortilla prices until at least the end of the year. The controls were imposed at the end of January after a run-up in tortilla prices. In 2008 the US Department of Agriculture is forecasting that Mexico will be the world's second biggest importer of maize. The USDA currently believes that Mexico is the world's third biggest maize importer behind Japan and South Korea. In 2005/06 Mexico imported 7m t of maize. The US says that by 2010, Mexico will be importing 10m t and only South Korea will be importing more. Mexican maize growers point out that Mexico is still the world's biggest producer of white maize, which is for human consumption; the bulk of the imported maize is yellow, which is used to feed animals.

MEXICO | Carbon bonds. The state oil company, Petróleos Mexicanos agreed to sell 200,000 carbon bonds to the Norwegian state oil company, Statoil on 14 August. The deal commits Pemex to cutting its emission of greenhouse gases by 200,000t. The money Statoil is paying will be used to pay for projects to cut greenhouse gases at three refineries: Salina Cruz (Oaxaca); Tula (Hidalgo) and Cadareyta (Nuevo León). Pemex had previously sold 164,000 carbon bonds to Statoil.

MEXICO | Inflation. Inflation in July was 0.42%, substantially higher than June's 0.12% rate. The July figure brought the 12 month rate to 4.14%. In the first seven months of the year consumer prices have risen by 1.01%. The central bank's target for 2007 is 3% inflation

The government's income transfer programme, Bolsa Famí­lia, has resulted in a significant reduction in membership of the landless movement, according to a report by the influential newspaper Folha de São Paulo published last week. Specialists claimed that the slow progress of land reform and the identification of social movements with the administration of President Lula da Silva have also contributed to the fall reported in the number of members of landless movements in Brazil.

According to Folha, the number of families participating in land incursions organised by landless movements fell from 65,552 in 2003 to 44,364 in 2006. This represents a fall of 32.3%. In the same period, the number of families living in provisional settlements on farms fell from 59,082 to 10,259 - a fall of 82.6%. The only figure that remained stable was that of land incursions on private farms, which fell only slightly from 391 in 2003 to 384 in 2006. The report was based on data from the ministry of social development and the Catholic pastoral commission for land issues.

gnificantly, the reduction in the number of people taking part in the landless movement has been followed by a fall in the number of landless organisations, from 28 in 2003 to 17 in 2006. For specialists interviewed by Folha, the government's cash handouts through its Bolsa Famí­lia programme were the main reason behind the fall in membership and number of landless movements during the period. They argued that the programme allowed people to feel that it is possible to live outside the provisional settlements which are managed by landless organisations.

Last year the Bolsa Famí­lia reached 10.9m Brazilian families. In 2003 only 3.6m families received the benefit, which pays up to R$95 (US$51) monthly per family, to keep their children in school. This amount seems low, but considering that in Brazil the minimum wage stands at R$350 (US$189) monthly - and that half of the population survives on the minimum wage - the benefit is a lifeline for many Brazilians.

The government's cash handouts are criticised by many commentators. Criticisms range from claims that the programme is an extension of the traditional clientelistic tactics used by populist politicians to the fact that children go to school just to be seen to be present but learn little because the programme was not followed up by an improvement in education standards.

With regards to the land issue, Plinio Arruda, a former member of Lula's Partido dos Trabalhadores (PT), complains that the Bolsa Famí­lia results in landless people becoming increasingly dependent on the government, instead of fighting for land reform. This, he says, is "the most perverse effect of the Bolsa Famí­lia".

Gilmar Mauro, who belongs to the leadership of Brazil's largest landless movement, the Movimento dos Sem Terra (MST), denied that it was suffering because of the Bolsa Famí­lia. He said that the programme provides people with "accommodation at first but is not a solution for anyone".

Mauro described the programme as "unsustainable", claiming that "in the future, people will either ask for more money or for jobs". If the government does not tackle the land issue, he said, the fight for land reform will resume with more force.

Prejudice

• A study by the Fundação Sistema Estadual de Análise de Dados (Seade) - published the same day as the Black Pride celebration in Brazil on 20 November - revealed that the unemployment rate among blacks is higher than among non-blacks: 18.1% to 13.2%. Also, black people earn 44% less on average than non-blacks. The disparity is even greater in management positions, where black people earn 78% less than non-blacks on average. Another study, by the Universidade do Rio de Janeiro, revealed that between 1999 and 2005 the murder rate among white Brazilian men fell from 36 per 100,000 to 34 per 100,000, while the murder rate among the black Brazilian male population increased from 52 per 100,000 to 61 per 100,000.

On 6 March, several hundred thousand people in cities across Colombia, as well as abroad, took to the streets to participate in a rally denouncing paramilitary violence. The march against the Autodefensas Unidas de Colombia (AUC) did not attract quite the attendance of an earlier demonstration against the Fuerzas Armadas Revolucionarias de Colombia (Farc) on 4 February, but this was partly to do with the timing. Some clearly felt that taking part would appear unpatriotic and inappropriate against the backdrop of rising tensions with Ecuador and Venezuela.

As a result of the diplomatic crisis, the march, which took place in Bogotá, Medellí­n, Cali, Cartagena, Barranquilla and nearly all the other departmental capitals, did not get the press coverage afforded the anti-Farc demonstration. Neither did it have the support of the government, with some officials accusing the organisers of being Farc sympathisers. While some of those present carried banners supporting Venezuela's President Hugo Chávez and Ecuador's President Rafael Correa and condemning President Alvaro Uribe, the majority denounced all forms of violence.

The march was organised by Iván Cepeda, the leader of the Movimiento de Ví­ctimas de Crí­menes de Estado (Movice), who hailed it as a "complete success". Cepeda's father, senator Manuel Cepeda, was assassinated in 1994. He represented the Unión Patriótica (UP), a party formed in May 1985 by demobilised Farc guerrillas as part of the peace negotiations with the Betancur administration. Members of the UP were targeted by paramilitaries and military agents: an estimated 2,500 were killed and the party leadership decimated. The Farc often uses the annihilation of the UP to justify its armed struggle, arguing that it showed the government's intolerance of parties with different ideologies. The government agreed moral and economic reparations for UP victims in 2004.

Followers of the UP were among left-wing groups present at the march. They criticised the peace process with the AUC. Some of those worst affected by the crimes of paramilitarism - peasants in rural areas - did not have the wherewithal to get to the cities to take part in the march.

PDA's delicate balancing act

The protest march and the unfolding diplomatic crisis provided the main opposition Polo Democrático Alternativo (PDA) with a real test. Both events coincided with a defining meeting of the party leadership - which has been split over the PDA's official line on the Farc - between 29 February-2 March. Some PDA members took part in the rally. On the issue of the bombing of the Farc camp in Ecuador, the party leadership put out a nuanced statement that both criticised the government's Democratic Security Policy (DSP) and its violation of territorial integrity and international law, while at the same time demanding that "insurgent groups and paramilitaries respect the territorial autonomy of border states."

The PDA backed Uribe in the face of "irrespectful" criticism by Venezuela's President Hugo Chávez in an affair involving Ecuador and Colombia but it later described Uribe's decision to appeal to the International Criminal Court (ICC) against Chávez for sponsoring and financing terrorist groups as "inappropriate and provocative [...] especially considering that nearly 30% of congressmen who supported the president in the last electoral campaign are being investigated for links to paramilitary groups."

President Rafael Correa says he will not bring Ecuador into the Venezuelan-inspired Alternativa Bolivariana para las Américas (Alba) “for the time being". Speaking on his weekly radio and television broadcast on 14 June, Correa said that he would wait to see whether Alba “consolidates its objectives a bit more". A day earlier the foreign ministry had revealed that Ecuador would not be joining Venezuela, Cuba, Bolivia, Nicaragua and Dominica in Alba but did not offer any explanation.

In 2007 Correa conditioned Ecuador's entry into Alba on Venezuela's rejoining the Andean Community (CAN), something which President Hugo Chávez has mooted from time to time but without taking any concrete action. Correa's decision to wait and see reflects his concern about the political baggage associated with belonging to Alba, which he does not appear to view as the best vehicle to achieve greater integration. Only days later, during a visit to Quito by Paraguay's president-elect Fernando Lugo, Correa expressed his commitment to working with other “progressive governments" to deepen Latin American integration.

Brazil's top public security agencies came under renewed pressure last week, following the revelation that 52 agents of the Brazilian Intelligence Agency (Abin) participated in a federal police investigation illegally. According to the local press, President Lula da Silva has decided not to restore the agency's suspended director-general, Paulo Lacerda, who had authorised Abin agents to participate in the investigation without a court order. The federal police face problems of their own: the force's second-in-command, Romero Menezes, was arrested accused of leaking confidential information and corruption. 

The latest problems in the Abin and the federal police lent weight to claims by opposition politicians that rogue elements had taken control of Brazil's most important security institutions during Lula's watch. According to local reports, Lacerda authorised Abin agents to participate in the federal police operation that led to the arrest of banker Daniel Dantas in July [WR-08-28, 33]. Dantas was subsequently released on an order issued by the supreme court's president, Gilmar Mendes. Later, it surfaced that Mendes's conversations had been tapped. Current affairs magazine Veja claimed that the tapping had been carried out by the Abin, leading Lula to order Lacerda to step down temporarily while the federal police investigated the claim [WR-08-35].

The scandal fuelled a parliamentary investigation into illegal phone-tapping, a fear shared by many Brazilian politicians, including Lula himself. But in his testimony to a parliamentary committee, Lacerda denied that the Abin was behind the tapping of Mendes. Significantly, Lacerda declared that “as the Abin does not have the legal mandate to eavesdrop on conversations, it abolished this type of conduct." He went on to say that the agency “does not have any tapping equipment, so it cannot eavesdrop on anyone."

But this was not what the federal police said. Its report on the Abin concluded that the Abin had at least five pieces of equipment that made it capable of eavesdropping on conversations from long distances. The defence minister, Nelson Jobim, said that the agency had more than five such devices.

Federal police and the government's reaction
The federal police was undermined, however, by the arrest of its second-in-command, Romero Menezes. Telephone tapping (this time authorised by the courts) seemed to suggest that Menezes was trying to favour his brother's business by using his position to put pressure on authorities in the Amazonian state of Amapá. According to the local press, Menezes is also suspected of being behind leaks in the federal police investigation into the businesses of Eike Batista, one of Brazil's most prominent businessmen. Menezes was released after a judge declared there was not enough evidence to keep him in jail, but by then the federal police's image had already been damaged.

In light of all these scandals, the government decided to propose a new law punishing the media that divulges transcripts of tapping when they relate to a case that is under legal secrecy. The project makes no distinction with regard to the legality of the tapping - whether it was authorised by the courts or not. According to the newspaper Folha de São Paulo, the project was proposed by Lula himself, after Veja published the transcript of a conversation between Mendes and an opposition senator. The article confirmed that Mendes's office had been bugged and that illegal eavesdropping on Brazilian authorities was not a fabrication of the press.

• Collor
  The public prosecutor general, Antonio Fernando de Souza, sent a report to the supreme court defending the condemnation of former president Fernando Collor de Mello for corruption. Collor, recently elected senator, could face up to 25 years in jail 16 years after he was impeached for corruption. But despite the best efforts of some Brazilian authorities to tackle corruption, the practice remains widespread in Brazil. According to the corruption perception index of the NGO Transparency International, Brazil lies in 80th place with a rating of 3.5, the same as registered last year. Any rate under five indicates a “serious corruption problem" in the public sector.
  

A split among government-allied parties in congress - ahead of the election for the presidencies of the lower chamber and the senate next month - may undermine the government's stability in the last two years of the Lula administration. President Lula da Silva had brokered an agreement in which his Partido dos Trabalhadores (PT) would win support to gain the presidency of the senate in exchange for the backing of the Partido do Movimento Democrático Brasileiro (PMDB) in the lower chamber. But, Lula's efforts foundered on the growing ambition of his allies, particularly the PMDB, as his presidency nears its end and politicians move their attention to the next general elections in 2010.

The presidents of the lower chamber and the senate control the legislative agenda of congress and, as such, are crucial for the government's stability. Currently, the presidency of the lower chamber is exercised by PT deputy Arlindo Chinaglia, while the presidency of the senate is held by Senator Garibaldi Alves of the (nominally) allied PMDB.

The arrangement follows congress' tradition, in which the largest party in each house presides and other leadership positions, such as the presidency of committees, are split according to representation. But, in order to give the PT an edge in the 2010 elections, Lula brokered an agreement with the PMDB to gain control of the senate.

Control of the senate has become vital to the PT ahead of 2010, when it will not have a popular presidential candidate like Lula, who is constitutionally barred from running for a third consecutive term. The PT is only the fourth biggest party in the senate and in order to have any of its plans approved needs support from either the PMDB or from opposition parties. In the lower chamber the PT is the largest party and, together with its many smaller allies, can command a majority without the opposition and, significantly, without the PMDB's full backing.

Under Lula's arrangements, the PT agreed to support the PMDB's national president, Deputy Michel Temer, for the presidency of the lower chamber in exchange for the PMDB's support for the candidacy of Senator Tião Viana, of the PT, for the presidency of the senate.

All seemed fine until the PMDB performed better than expected in the municipal elections last October, which led it to become the “desired bride" in a political alliance for 2010. In Lula's absence, the vast majority of PMDB politicians could be said to have sympathy for José Serra, the governor of São Paulo, who is the likely presidential candidate for the opposition Partido da Social Democracia Brasileira (PSDB) in 2010. The PMDB leadership seemed to be willing still to grant support for Lula until the end of his administration, in exchange for more positions in his government.

Dispute in the senate
The PMDB eventually opted, however, not to back the PT for the presidency of the senate. Aware that Viana lacked the support of the opposition, which has the second largest representation after the PMDB, the PMDB decided to put forward the candidacy of Senator José Sarney for the presidency of the senate. Lula may now have no other option but to snub his own party to back Sarney, in order to have an ally in the post.

• Coalition dissent

Several smaller parties in the governing coalition expressed their uneasiness at the rift between the PMDB and the PT by launching the candidacy of communist Aldo Rebelo for the presidency of the lower chamber. Meanwhile the Partido Progressista, an unprincipled party in the governing coalition, decided to try its luck again and launch the candidacy of Ciro Nogueira for the post. In 2005 a split among the PT allowed the election of the infamous Severino Cavalcanti to the presidency of the lower chamber.

The rather eclectic debate over whether the Archbishop of Durango, Héctor González Martí­nez, actually knew where one of Mexico's most wanted gangsters was hiding took on a chilling new meaning on 21 April when a note was found on the bodies of two army lieutenants killed in Guanacevi, Durango.

The note was an unsubtle warning to Archbishop González. His offence was to blurt out on 17 April that everyone knew where Joaquí­n 'El Chapo' Guzmán was hiding.   Guzmán is the leader of a faction of the Sinaloa gang. Guzmán hugely embarrassed the administration of President Vicente Fox when he escaped, without much difficulty and just before he was to be extradited to the US, from a supposedly high security jail in 2001.

The message attached to the bodies read: “Neither priests nor governors can get 'El Chapo'".

The soldiers were killed very close to Guanacevi, the municipality in northern Durango identified by González Martí­nez as “El Chapo's" hideout. The officers were attached to the 71st Infantry battalion, but had apparently been on an intelligence-gathering mission.

What is odd about González Martí­nez's statement, which was made to the local press and picked up by the Mexico City press is that there was an attempt to conceal it from Durangenses. The Mexico City newspapers, which are flown to Durango, did not get further than the airport while the local press dropped any coverage of González Martí­nez's statement. The only newspaper which carried it in Durango was El Norte, which is printed in Monterrey and trucked to Durango.

It is far from clear who tried to stifle the Archbishop's claim. The most obvious suspect is the (Partido Revolucionario Institucional controlled) state government: in his statement the archbishop said: “everyone, apart from the authorities, knows where Guzmán is." The other suspect is the Guzmán organisation itself. A third possibility is that the state government and the Guzmán organisation are in league with each other.

The message clearly got through to González Martí­nez, who said on 19 April that he had no special information and was just repeating hearsay. The killings on 21 April suggest that in fact both the army and the gangsters thought that he was very close to the truth.  

Academics and commentators specialising in Mexican gangs believe that González Martí­nez had good information. González Martí­nez has been archbishop for six years, but was born, did his first parish, and headed a seminary in Durango. The state is proverbially lawless, covering tracts of the Sierra Madre. González Martí­nez, however, knows it well.

González Martí­nez himself, as an appointee of the previous pope, comes from the conservative wing of the Roman Catholic church. His archiepiscopal predecessor, Bartolomé Carrasco, was a liberation theologian. Even though González Martí­nez has not been hugely popular with his diocesan priests, he is respected.

More importantly, González Martí­nez's comments about Guzmán point to a break with the Roman Catholic church's equivocation over the role that gangsters play. Some Mexican bishops have been grovellingly grateful for the money the gangsters shower on the church. Others have even praised the benefits of living in areas which are controlled by gangsters.

It is worth noting that there is a substantial reward for information leading to Guzmán's arrest. The Department of Justice has a US$5m price on Guzmán's head while Mexico's federal Procuradurí­a General de la República is offering M$30m (US$2.7m).

Pace of killings up
Beyond Durango, there are clear signs that the gangsters are starting to increase the pace of killing again and are becoming more audacious as the congressional mid-term elections draw closer. The elections are on 5 July. In the week to 17 April, the national death toll from gang killings popped over the 100 body mark. At 122, the death toll is back up at the high levels reached in November last year.

One of the most telling incidents came on 18 April when six policemen and two prison officers were killed in the western state of Nayarit when gangsters ambushed a convoy that was moving a prominent gangster, Jerónimo Gámez Garcí­a, from Tepic airport to a prison in the state. Although the attack failed to spring Gámez, it did demonstrate what reliable intelligence the gangs have.

Gámez Garcí­a is a cousin of the Beltrán Leyva brothers, who control the anti-Guzmán faction of the Sinaloa gang. Gámez was arrested in January 2009 and was responsible for buying cocaine for the gang from the Cartel del Norte in Colombia.

To be fair, the government did claim a success on 19 April when it arrested 44 senior figures in La Familia, the gang which is powerful in Michoacán. The gangsters were arrested at a christening, hosted by Rafael Cedeño Hernández, whom the police believe may be number two in the gang to Nazario Moreno González.

On 22 April Isaac Manuel Godoy Castro was detained by the army. He is one of the key figures in the Arellano Félix gang which is battling with both factions of the Sinaloa gang for control of the drug trade in Tijuana. Godoy is close to Fernando Sánchez Arellano, the alleged leader of the gang.

• Mexican army “on streets until 2013"

The government announced on 20 April that the army would still be on the streets in 2013. The statement came from Monte Alejandro Rubido Garcí­a, the newly appointed secretary of the Consejo Nacional de Seguridad. Hitherto the government has been vague about when the army, which has been deployed against criminal gangs since President Felipe Calderón took office in December 2006, might return to barracks and hand over to the police.
      Rubido's announcement highlights the slow progress on purging and retraining the police. He said that the army would only be withdrawn when the government was sure that the police could cope. He noted that there are only currently 24,000 federal police officers (who have been vetted and properly trained), out of a total national police strength of 420,000.
      Already this year, over 2,000 people have been killed by gang members. This is twice as many as were killed in the same period of 2008. This year, the date at which the 1000th person was killed by gangsters was 20 February. In 2008 the 1,000 death mark was only passed on 22 April.
      Despite the deployment of 8,000 federal troops and police in Chihuahua, 843 people have been killed in the state in the first 110 days of 2009.

• EPR

The mediating committee between the government and the Ejercito Popular Revolucionario (EPR), which blew up a lot of pipelines in 2007, gave up on 21 April after a year's fruitless work. The committee had some harsh words for the government which it accused of paying only lip service to the concept of finding a peaceful solution to the EPR issue. The EPR wanted to know what has happened to two of its activists which it claims the government has disappeared.

President Alan Garcí­a has spent much of the last week defending proposals he made during his state-of the-nation speech to congress on 28 July, Peru's Independence Day. Perhaps the most controversial, given the origin of the constitutional crisis in Honduras, was his call for a popular referendum related to electoral term limits - specifically the introduction of mid-term elections to renew half of congress. The most interesting proposal, however, was his call for “popular decentralisation" which, while he would strenuously deny it, bears some resemblance to the structures put in place by President Hugo Chávez in Venezuela.

“I have two big objectives this year: defending the rule of democracy and saving Peru from the global crisis by strengthening social programmes," Garcí­a said. He argued that mid-term elections to renew half of congress would “reduce tension that gathers during the five-year term". He said the reform could be approved by means of a referendum, with the collection of 1.5m signatures. Congress has actually been debating the issue for several months but it has made no headway.

Garcí­a said that the overwhelmingly negative public image of congress should improve if voters had the opportunity to effect a change halfway through the congressional term. This rather misses the point. The negative image of congress is less to do with the personnel than with the perceived corruption, inefficiency and, ultimately, powerlessness of congress. The public would prefer to have the option of replacing the president halfway through his term by means of a recall referendum, something for which the opposition Partido Nacionalista Peruano (PNP) has long been pushing, but Garcí­a unsurprisingly did not suggest this.

During his speech Garcí­a also called for voting to be voluntary (it is obligatory in Peru) and for a second round for regional elections to define the 25 regional presidents and councils. He said that if regional presidents required an absolute majority it would confer greater legitimacy on the victor. The opposition argued that the extra election would simply be an unnecessary drain on public finances.

Garcí­a took a tough line on official corruption, an oft-cited cause of public discontent. He called for a work camp in the jungle for those convicted of corruption. The opposition accused him of populism, arguing that he failed to announce any preventative measures, meaning that government corruption would continue to go unpunished and rendering his draconian proposal meaningless.

Popular decentralisation
Perhaps the most intriguing of Garcí­a's proposals was that related to deepening the regional decentralisation process. Garcí­a said the best way to avoid social protests - a recurring feature of his term in government - is for the state to spend money on infrastructure and public works projects. He said this could best be achieved by forming what he called “executive nuclei", made up of four people, including a president and a treasurer, from local communities across Peru.

He said that these “executive nuclei" would be formed from groups of campesinos and social organisations requiring funding for a specific local project. They would be accredited by the regional government and national ministries, which would approve the funding for the projects. He said that the objective for 2009 was to channel 5% of the remaining investment budget for the regions, some NS$1bn (US$334,000), to these accredited local groups. He maintained that there were some 30,000 small, low-tech projects being demanded by local communities, which would cost an average of just NS$300,000 (US$100,000) to complete.

Garcí­a said that his proposal would cut through the layers of bureaucracy which was preventing government funds from reaching the poorest and neediest. Some NS$26.6bn (US$8.9bn) was set aside this year for funds for the regions but only 26% of this had been invested by the end of July because of red tape.

One of the most enduring criticisms of his government is that it failed to transfer the benefits of years of stellar growth to the poor. Garcí­a claimed that his proposal would ensure that public spending went directly to the needy for small public works projects. This week he swore in the first 100 “executive nuclei" operating in Lima, which will receive NS$25m (US$8.3m). He said that the proposal should reduce corruption, as money would go to local communities managing specific projects.

Garcí­a is laying himself open to the charge that he is seeking to create an alternative form of decentralisation because his ruling Partido Aprista Peruano (PAP) only controls two of the 25 regional governments and just 250 of the 1,900 municipalities.

It is interesting to note that in March this year, President Chávez claimed to be reinterpreting the meaning of “decentralisation" in order to transfer power to the people and not states or municipalities through national funding for local community councils to carry out social projects [WR-09-11]. This is precisely what Garcí­a is proposing. He also argues that the new nuclei will involve millions of Peruvians who are currently only passive spectators.

Chávez was attempting to justify the need to transfer the administration of Venezuela's ports and airports from state governments, controlled by the opposition, to the national government. Garcí­a is trying to undercut the power of the regional governments more subtly. Although he argues that regional governments will provide the new nuclei with accreditation, government ministries are also empowered to do so.

On 10 November Manlio Fabio Beltrones, the leader of the Partido Revolucionario Institucional (PRI) in the senate, published a punchy opinion piece in Mexico City's main daily newspaper, Reforma. What Beltrones said is probably less important than the fact that he made such a splash in saying it.

Beltrones, a former governor of Sonora, is a strong candidate for the PRI presidential nomination in 2012. Most political commentators had expected Beltrones to stay in the background and allow the party's other two main candidates, Enrique Peña Nieto, the governor of the country's most important state, the Estado de México, and Beatriz Paredes, the PRI party president, to make the running. In the Reforma article Beltrones made some strong statements. This pre-emptive strike suggests that he feels that he has to show that his hat is in the ring for 2012.

Beltrones argued that in the nine years since the Partido Acción Nacional defeated the PRI for the presidency, Mexico has drifted. Beltrones accused recent governments of complacency over the public finances and of sending a budget to congress which was contradictory and unworkable. Beltrones argued that congress has sorted out the budget and also taken a long term view on the public finances because, unlike the government, it has a clear view of what needs to be done.

According to Beltrones, fighting poverty is Mexico's key economic challenge. He noted that 50m (of the country's population of 108m) still live in poverty. The only way to reduce poverty is to create jobs, so he argued that no government can even think of cutting taxes until the tax system had been overhauled in order to close loopholes “so that everyone pays taxes". Beltrones's statement is a clear sign that he understands that the economic model in which governments milk the state oil monopoly, Petróleos Mexicanos, but, effectively, ignore other taxes, is no longer workable, given the collapse in oil production.

MEXICO | Poverty. A new report on 3 March claimed that the recession which started in 2008 has plunged 8m people into poverty. Rising poverty levels are likely to complicate the government's efforts to restore law and order, especially in states bordering the US. The gloomy prognosis comes not from a left-of-centre NGO but from the Centro de Investigación en Economia y Negocios at one of the country's main business schools, the Tecnólogico de Monterrey (Tec).  
The report noted that the number of people living in poverty in Mexico in 2006 was 44.7m, according to official statistics from the Consejo Nacional de Evaluación de la Polí­tica de Desarrollo Social. The Tec reckons that this year the number of people living in poverty will be about 53m. The government's problem is that even if the economy grows by 4% in 2010, poverty levels are unlikely to fall significantly.
Alarmingly, the Tec reckons that 49.3% of the population is now below the poverty line. This is only a marginal improvement on the 53% poverty rate in 2000, when President Vicente Fox became the first president from outside the traditional Partido Revolucionario Institucional (PRI) to take office.

MEXICO | Business confidence. Only 36% of Mexican bosses are “strongly confident" of meeting their growth targets this year, according to a survey by PricewaterhouseCoopers (PwC), a consultancy. The most confident chief executives come from the metal-bashing, food and motor industry.

The UN's Office for Drugs and Crime (Unodc) argued that the decision by President Felipe Calderón to take on the drug gangs was responsible for the upsurge in violence in Mexico but that this was a necessary step, as it had been in Colombia, to defeating the gangs which were threatening the state. Jorge Castañeda, foreign minister during the first part of President Vicente Fox's administration (2000 to 2006), has a slightly different take: he argued that the government could not beat the gangs without a Plan Colombia.

Castañeda's comment, in front of the US ambassador, at a high-level conference (also attended by Mexico's top lawman, Arturo Chávez Chávez ) illustrates the fissures in Mexican policymaking. Castañeda all but said that the US needs to provide Mexico with far more than the US$300m a year it is providing under the Iniciativa Mérida. Only a sum much closer to the US$8bn it provided to Colombia under the counter-narcotics initiative Plan Colombia and a commitment of US personnel will bring Mexico victory, Castañeda argued.

Several key figures in the current government, notably the interior minister, Fernando Gómez Mont, are adamantly opposed to allowing the US a greater role in Mexico.

The Unodc, which made its comments in its 2010 World Drugs Report, did not comment on the politics of Mexico's security policies, but did argue that US consumption of cocaine appeared to be falling.

Enrique Peña Nieto, the governor of the Estado de México, the biggest and most powerful state in the country, and the front-runner for the Partido Revolucionario Institucional (PRI) presidential nomination for 2012, now has a major problem. On 10 October the state committee of the left-wing Partido de la Revolución Democrática (PRD) voted to talk to the ruling right-wing Partido Acción Nacional (PAN) about an electoral alliance in the gubernatorial elections in the Estado de México.

If the alliance coalesces and wins the governorship of the Estado in the 2011 elections, it will destroy Peña Nieto's hopes of becoming president in 2012. That is why some of his rivals in the PRI are far from unhappy that Peña Nieto's  plans for a triumphant and unchallenged progression from governor to PRI candidate to president are coming unstuck.

Manlio Fabio Beltrones, the leader of the PRI in the senate (and now also president of the senate) and Peña Nieto's most likely rival from the PRI, argued on a visit to New York this week that political alliances were a good thing for Mexican politics. Beltrones was, however, also careful to support the so-called Ley Peña which sets out the terms for such alliances in the Estado. The drafters of the Ley Peña hoped to make alliances all but impossible in the Estado since contracting parties could no longer back one candidate for governor while simultaneously running their own separate slates of party candidates for the state congress and municipalities.

The Ley Peña has been passed by the state congress and ratified by a majority of the state's municipalities and therefore now forms part of the state's constitution. The PAN and the PRD may still try to overturn this law in the courts while simultaneously exploring the possibility of an alliance in the Estado. Exactly what form this alliance might take is far from clear. The Ley Peña demands that alliances run on a joint manifesto, though what this means in practice is far from clear.

What happens in the Estado is important for two reasons. If Peña Nieto fails to get his candidate elected as his successor he will lose control of the abundant financial resources available in the Estado for his campaign to win the PRI nomination and then the presidency. The second issue is psychological: if Peña Nieto fails to impose himself in his home state which he knows well and is popular, how can he hope to win the rest of Mexico which, even his admirers admit, he barely knows.

The PRD state committee agreed (by 193 votes to 88) to start talks with all the other parties in the Estado about running a single campaign in the 2011 elections. The minority was largely composed of supporters of Andrés Manuel López Obrador, a radical Perredista who is now more closely involved with the Partido del Trabajo. López Obrador opposes the grand PAN-PRD alliance. He says that his Diálogo para la Reconstrucción de México will run in the 2011 elections in the Estado, despite the PRD vote.
 
Besides being Mexico's most populous and important state, the Estado is also a PRI bastion. The PRI has controlled it for the past 80 years: in most recent elections the state has been split three ways, though the PRI has always been the biggest party thanks to its tactical alliances with smaller parties such as the Partido Nueva Alianza or the Partido Verde Ecologista de México.