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Development: Crowds both for and against the government gathered on the streets of Quito on 16 December; as President Gutiérrez rallied supporters from the presidential palace, an ex-president and opposition leader, León Febres Cordero, declared the president was taking Ecuador to the brink of chaos.

Significance: The present crisis, triggered by the government's purge of the supreme court, is likely to burn itself out, though it demonstrates, once again, the fragility of Gutiérrez's mandate. As a former army colonel, who is assiduous in topping up the army's pay packet, Gutiérrez will probably not suffer the same fate as Jamil Mahuad, the president he helped overthrow in January 2000. Crucially, despite their alliance with the opposition during the attempted impeachment of Gutiérrez, the indigenous groups are not joining anti-government demonstrators, and have instead asked the OAS to intervene to resolve the crisis.

A number of incidents have ratcheted up the pressure over the past few days. On 15 December gunmen attacked the offices of Blasco Peñaherrera Solah, the president of the federation of the Ecuadorean chamber of commerce. Peñaherrara is an outspoken critic of the Gutiérrez administration and was in the US talking to congressmen at the invitation of a rightwing thinktank, The Heritage Foundation. The government have said they will launch a full investigation into the attack, but pointed out it could well have been staged by Peñaherrera himself.

The courts, meanwhile, are in turmoil. On 16 December the honorary court of the college of lawyers denounced the 27 new judges (out of a total of 31) appointed by the leftist majority in congress. The college accused them of breaking the constitution and the judiciary's ethical code. Behind the condemnation stand the recently sacked judges, who on being forced out of their offices, vowed to set up a supreme court in exile. The new supreme court's response to this was predictable enough; the president of the court, Ramiro Román, floated the idea of postponing its holidays, due to start on 22 December, in order to start investigating allegations of corruption levelled at the deposed magistrates.

Also on 16 December the largest opposition party, the right of centre Partido Social Cristiano, led by Leon Febres Cordero, released photos supposedly showing an opposition legislator from the indigenous party Pachakutik, counting money he had received from the government to stop him voting for Gutiérrez's impeachment. Amid widespread allegations of bribery, on 10 November five opposition legislators withdrew their support for the impeachment bid against Gutiérrez, meaning the opposition lacked the 51 votes needed to force the political trial of the president. The photos, taken surreptitiously, show Felipe Tsenkush Chamik sitting in a car rifling through an envelope full of cash. Tsenkush claims the money was just his congressional salary.

On the streets of Quito President Gutiérrez presided over a 3,000 strong rally of supporters. The crowd marched through the historic centre of Quito and stood below the balcony of Carondelet, the presidential palace, to hear Gutiérrez vow to cleanse the courts of corruption or die trying. 'We're going to the referendum, aren't we?', he cried to his supporters, in reference to his plans to put a host of political and judicial reforms, such as the reduction of congress from 100 to 67, and presidential re-election to a public vote in early 2005. Meanwhile, Febres Cordero continued to rail against the president. 'With this provisional majority, brought about by dishing out money, the president has taken control of the supreme court, the constitutional court, the supreme electoral court in an unconstitutional way […] Gutiérrez has installed nepotism and rampant corruption in the institutions of state,' he said.

Political crises, however are not new phenomenon in Ecuador, a country which has gone through six presidents in eight years. Neither the opposition nor the government has succeeded in attracting the support of a majority of the population most of whom, according to local media reports, are more interested in Christmas shopping than the conflicts gripping the country's political class.

Development: President Vicente Fox said on 27 January that the US's "wild and sensationalist" comments on Mexico were unacceptable.

Significance: Fox's statement was backed up by a terse letter to the US ambassador to Mexico, Tony Garza, in which the foreign ministry said that Garza had overstepped diplomatic conventions in his letter of 26 January. Garza had implied that the government was losing the battle with organised crime.

Fox said that Mexico would not accept comments from another country about the political actions it was taking to deal with its problems. He said that what the State Department had said about Mexico and what Garza wrote in his letter were completely untrue.

Derbez even put in a telephone call to the new US Secretary of State, Condoleezza Rice, to express his unhappiness with what Garza had written. The US State Department tried to take some of the sting out of the row on 27 January, but the Mexicans are still sore.

Development: The Partido Liberal Constitucionalista (PLC) presented an amnesty bill to the national assembly on 1 March that would revoke all convictions for misuse of public funds and electoral crimes committed after 1990. The main beneficiary would be the PLC leader and former president Arnoldo Alemán, who is currently under house arrest serving a 20-year sentence for corruption charges to the tune of US$100m.

Significance: The PLC is desperate to get Alemán out. Presidential elections are drawing closer (they will be held in 2006) and the opposition Frente Sandinista de la Liberación Nacional (FSLN) is caught up in an internal leadership struggle between long-serving leader Daniel Ortega and the former mayor of Managua, Herty Lewites.

The PLC has made two previous attempts to get Alemán off the hook. Although neither was successful, the balance of power is different now. The FSLN, in part through a pact with the PLC, has become the dominant political force in Nicaragua.

The head of the PLC in the national assembly, Enrique Quiñónez, said that the amnesty bill was the only way to put an end to the "political blackmail" that the FSLN maintained over the PLC, President Enrique Bolaños and his government, because of its domination of the judiciary. The first vice-president of the assembly, Wilfredo Navarro made it clear that the amnesty bill would not only benefit Alemán. He said it would provide an amnesty for former officials and officials of the current government, thereby implying that Bolaños himself, who is still being investigated for corruption, could take advantage of it.

Freeing Alemán would still be a bitter pill for Bolaños to swallow particularly as he levelled the corruption charges against Alemán in the first place in 2002. Together the legislators from the PLC and Bolaños's small Azul y Blanco faction in the assembly would just muster the 50% + 1 of the 91 seats in congress required to approve the amnesty bill. Unsurprisingly, the Sandinista president of the assembly, René Núñez, said he was completely opposed to the bill which, he added, would not be supported by his party.

Development: Colombia's defence minister, Jorge Alberto Uribe, admitted that his government is uncomfortable with Venezuela's recent arms purchases in an interview with Reuters news agency on 6 April.

Significance: This is the first time the Colombian government has commented on Venezuela's recent arms purchases. The US has been deeply critical of Venezuela's decision to use bumper oil revenues to buy weapons from Russia, Spain and Brazil but Colombia had hitherto remained silent about the deals even though it is Venezuela's most obvious rival in the region.

This is largely because Colombia is keen to repair ties with Venezuela in the wake of the Granda affair, when Colombia paid for the so-called foreign minister of the Fuerzas Armadas Revolucionarias de Colombia (Farc), Rodrigo Granda, to be kidnapped in Caracas. On 4 April President Alvaro Uribe (no relation of Jorge Alberto) complimented the Venezuelan government for being increasingly cooperative with Colombia in its attempts to defeat the Farc at a time when the US is once again accusing Venezuela's president, Hugo Chávez , of offering tacit support to the guerrilla group.

However, Defence Minister Uribe's Reuters interview dispelled any suggestion that Colombia is not deeply concerned about Venezuela's arms build-up. "It is, I admit, not easy to see a strengthening of [Venezuela's] military force," Uribe said. However the defence minister did add that Colombia "fully respects the decision" and that his government is far more worried about solving its internal problems than by what goes on in Venezuela.

Jorge Alberto Uribe went on to dismiss the suggestion Colombia would respond in kind to Venezuela's purchases. "It hasn't even crossed our mind to become involved in an arms race," he told Reuters, "not only because we have to finish our internal conflict but also because we have to be realistic: Colombia does not have the economic means."

Development: On 12 May the former Chilean defence minister, Edmundo Pérez Yoma, said that 'worse was to come' in the already fractious relations between Chile and Peru.

Significance: Pérez was the defence minister at the time when Chile was accused of selling arms to Ecuador while it was at war with Peru. He said that as the Peruvian government was so unpopular it was looking for means of distracting its people. Indeed, the approval rating of President Alejandro Toledo has shot up to what, by his standards, is a healthy 14% as the standoff with Chile worsens.

Pérez also claimed that Peru was intending to take its concern over the maritime border between the two countries to international arbitration; something Chile considers was settled by a 1954 treaty. As well as the dispute over arms selling and maritime boundaries, ill-feeling has also been generated by the showing of an inflight video on a Chilean airline's flights to Lima which 'denigrated' Peru's image, and the arrest of two Chilean teenagers in Cusco for vandalising an Inca wall.

In fact, there is little substance to Peru's main complaint about the arms issue, but it shows how easily relations between the two countries can deteriorate. In September 1994 Chile authorised the sale to Ecuador of 9mm ammunition. Delivery was apparently delayed. In February 1995, when fighting had already broken out between Peru and Ecuador, the Peruvian military attaché in Santiago reported to his superiors that an arms-laden Chilean aircraft was scheduled to fly to Ecuador. The very next day Peruvian ambassador Alfonso Rivero asked the Chilean Foreign Minister José Miguel Insulza for confirmation. Insulza's deputy took all documentation of the deal to Rivero, and told him that the shipments had been halted. Chilean President Eduardo Frei later offered an explanation to his Peruvian counterpart, Alberto Fujimori, and the matter was laid to rest.

Development: On 16 June the interior minister, Carlos Vielmann, said that Guatemala was seeking a 'Plan Colombia' of its own from the US to help it confront drug-trafficking.

Significance: While the US is supportive of the government of President Oscar Berger, particularly for the manner in which it has scaled down the armed forces, it is critical of the government's failure to tackle organised crime. The US ambassador to Guatemala, John Hamilton, said on 26 May that combating organised crime was “the biggest challenge facing Guatemala in order to strengthen the democratic system". He said that drug gangs were on the increase especially in the northern department of Petén, where he claimed archaeologists had been driven out of areas such as the Sierra del Lacandón because of the increase in drug activity.

Vielmann said that the government wanted its own small version of Plan Colombia to assist it in its fight against drug-trafficking as it did not have the resources to deal with the problem alone. Vielmann said that US gifts of vehicles and equipment were insufficient. He said that the government wanted the US to commit agents to the ground to work with Guatemalan security teams to capture drug-traffickers.

Development: On 20 July the Permanent Commission, which represents congress while it is in recess, asked the chamber of deputies to examine the possibility of excluding the expenses of the first lady from the 2006 budget.

Significance: In 2003 the law was changed to extend personal expenses covering the presidency to the first lady, Marta Sahagún. However, in the past year Sahagún's expenses have shot up and legislators now want to remove her from the state's payroll. The proposal is indicative of the widespread animosity that Sahagún generates among Mexico's political classes, who believe that she abuses her unelected position.

When congress sits again, on 1 September, the commission will recommend it strikes the word “spouse" from the text of the budget so that the expenses pertaining to the presidency only apply to the personal expenses of the president himself. According to statistics put out by the commission, Sahagún has 38 assistants, of whom just 11 of them draw salaries totalling US$782,000. In the opinion of the commission's legislators, Sahagún has no right to use state funds to pay for these people. The proposal would also stop the first lady from drawing on the presidency's funds for ball dresses, general clothing and personal accessories.

Development: On 23 August the weekly magazine IstoÉ published the results of an opinion poll on President Lula da Silva's popularity. 

Significance: The survey, conducted by Ibope, reveals that President Lula's popularity is fading fast following the allegations that members of the ruling Partido dos Trabalhadores (PT) were involved in corruption. The Ibope's figures confirmed the findings of another opinion poll conducted by DataFolha and published on the newspaper Folha de São Paulo on 12 August. 

According to Ibope, the government's approval rating has fallen from 54% in July to 46% in August, while the number of Brazilians who disapprove of Lula's administration has risen from 38% to 47% in the same period. About 29% of those interviewed rated Lula as “good", compared with 36% a month ago. The percentage of those rating the government as “bad" increased to 31% from 24% in the same period. 

Crucially, the Ibope's figures reveal that if President Lula da Silva decides to run for re-election in 2006 he will have to counteract the corrosive effects the recent corruption scandals are having on his administration. The Ibope's figures show that the Brazilian electorate is shifting to conservative parties such as the Partido da Social Democracia Brasileira (PSDB) and the Partido do Movimento Democrático Brasileiro (PMDB). 

One month ago Lula would have had to face only one candidate in a second-round vote; his contender in 2002 and now mayor of São Paulo, José Serra, from the PSDB. The August poll, however, reveals that Lula would have to face a run-off vote with three other candidates, former President Fernando Henrique Cardoso and the governor of São Paulo, Geraldo Alckmin, both from the PSDB as well as the governor of Rio de Janeiro, Anthony Garotinho, from the PMDB. 

The only candidate able to win the second-round vote against Lula, however, continues to be Serra. The Ibope's survey shows both men neck-and-neck with 41% support each, with 14% of votes spoiled and 4% still undecided. According to Ibope, Lula would beat Serra in the poorer regions of the country but would lose by 42% to 36% in the wealthier southern and south-east regions, largely due to a migration of middle-class votes to the PSDB's candidate. Serra, however, would have difficulties in leaving his post after stating on several occasions during the mayoral elections last year that he would not use São Paulo as a springboard to the presidency. 

Ibope's surprise finding was the victory of Garotinho in the event that both Lula and Serra decide not to run in 2006. Rio's governor would beat all other possible candidates, including the finance minister, Antonio Palocci, who could run for the PT if Lula gives up his re-election bid; and Alckmin in a run-off vote. Despite still losing to Lula in a second-round vote, Garotinho has increased his support. In comparison to July, Garotinho won 4% vote-intensions. In the same period, the president lost 7% of his support, bringing a run-off vote to 45% to 31% to Lula's advantage, in comparison with 52% to 27% a month ago. 

President Lula da Silva is expected to make a new statement on the political crisis that has engulfed his administration in the next few days. Lula is said to be more relaxed following the positive repercussion of Palocci's press conference on 21 August. The minister rebuffed the allegations made by a former aide that he received bribes from a waste-collection company while serving as mayor of Ribeirão Preto between 1993-1996 and again in 2000-2001. The money was supposedly used to pay for the PT's campaigns in the state of São Paulo. The consensus opinion in the Brazilian press, however, is that the establishment accepted Palocci's excuses in order to shield the economy. Following the allegations the dollar jumped by 2.94% against the Real, the biggest increase in 15 months. Palocci's declaration and the oppositions' “positive reaction" to it seem to have soothed the financial markets, bringing the dollar down by 2.65% on 22 August to R$2.38. 

Lula's opinion is that Palocci's interview created “breathing space" for the government. Lula, however, resists the idea of facing a press conference himself and is most likely to opt for a televised speech. The president will meet with the presidents of the lower chamber of congress, Severino Cavalcanti, and with the supreme court president, Nelso Jobim, to discuss what he considers “abusive falsehoods" about the crisis. The president is particularly concerned about the constant leaks coming from the attorney-general's office that reach the press every day. Responding to the government's criticism, the public-prosecutor of São Paulo, Sebastião Sérgio da Silveira, declared that the work of the attorney-general's office is “to guarantee the principles of transparency in public investigations".

Development: On 26 September two founders of the ruling Partido dos Trabalhadores, Hélio Bicudo and Plí­nio de Arruda Sampaio, quit the party. On the same day, four members of the PT in the chamber of deputies also defected.

Significance: The departure of Bicudo and Sampaio, who helped found the PT 25 years ago, shows the scale of the split between the centrist Campo Majoritário and the PT's leftwing membership. The pair said they were leaving because the government of President Lula da Silva had pursued the conservative economic policies of his predecessor, Fernando Henrique Cardoso, and because they were tired of the Campo Majoritário exerting an undue influence on the running of the PT.

The parting shot of the two departing founders before they join the ranks of the minuscule Partido do Socialismo e Liberdade was to offer their full support to leftwing candidate Raul Pont in the second round of the election for the PT's presidency. The results of the election, held on 18 September, will be announced today (27 September); the Campo Majoritário's candidate Ricardo Berzoini is sure to have won the first round but it is not clear who he will face in the run-off vote. According to the latest figures, Raul Pont leads another leftwing candidate, Valter Pomar, by the narrowest of margins: Pont has received 14.68% of the votes confirmed thus far against 14.65% for Pomar.

Meanwhile, the defection of four deputies means that the PT is no longer the largest party in the lower house. Ivan Salente, Maria José Maninha, Orlando Fantazzini and Chico Alencar are all leaving the PT in time to register for other parties ahead of next year's elections, meaning that the ruing party holds only 84 seats in the chamber of deputies against the 87 controlled by the Partido do Movimento Democrático Brasileiro.

Development: The Corte Nacional Electoral (CNE) enforced its 28 October deadline and announced that the 4 December elections for the presidency, congress and regional prefects would be postponed.

Significance: The leftwing candidate for the presidency, Evo Morales, (who also heads the opinion polls) claims that the CNE decision is another attempt by the right to deprive him of electoral success. His claim is based on the fact that the four CNE directors (vocales) are white: Morales and the bulk of his supporters are Indians. All of the vocales are appointed by the current congress which is dominated by the traditional (rightwing) parties. These parties probably now have little or no support in the country.

The CNE decision does not mean that the elections are definitely cancelled, but it opens up that possibility. The CNE took its controversial decision after congress failed to revise the electoral law and reallocate congressional seats between departments according to the most recent census. The election law, passed by congress, mandates the use of the 1992 census rather than the 2001 census: the later census would give two eastern departments, Santa Cruz and Cochabamba, six more seats in the 130 seats congress at the expense of three Andean departments, La Paz, Oruro and Potosí­. 

Both Morales and his closest rival for the presidency, Jorge Quiroga, are in effect ignoring the CNE decision and maintaining their campaigns. There are strong legal grounds for arguing that the CNE does not have the right to cancel elections that have been properly called: the CNE is essentially only in charge of the running of the elections. Even rightwingers from Santa Cruz took this line and say that congress alone can postpone the elections. Indeed, one of the vocales of the CNE admitted that the elections could go ahead on either the 11 or 18 December. 

Morales said that he would give congress one more week to come up with a solution to the problem of seat allocations between departments in the new congress. On 28 October, he said that if congress failed he could not rule out a repeat of the 1952 insurrection in which miners overthrew a military coup to allow Ví­ctor Paz Estenssoro and his Movimiento Nacionalista Revolucionario, which won the 1951 elections, to take power. By 29 October, Morales and the MAS had toned down his rhetoric, saying only that they would take suitable steps if congress failed to resolve the issue this week. 

Other politicians also believe that the CNE's decision on 28 October does not mean that elections on 4 December are definitely postponed. The CNE claims that it needs the time from now until 4 December to print and distribute ballot papers for the various elections and get its systems in place. The logistical challenge does not look insuperable: there are only about 4m Bolivian electors. 

Congress, which failed to meet in the second half of last week, will probably have a final chance this week to agree a solution. If congress fails, President Eduardo Rodrí­guez may impose a solution via a decree. The comprise that seems most popular at the moment comes from La Paz: it would increase the overall size of congress to 134 and give Santa Cruz three more deputies and Cochabamba one more. Crucially, none of the Andean departments would lose seats.

The allocation of seats between the departments matters because in the past five elections congress has ended up choosing the president. Under Bolivian electoral law if no candidate gets an absolute majority on the first round congress chooses from between the two candidates who got most votes. 

The election schedule is beginning to rub up against constitutional deadlines: the CNE has 25 days after the elections to count the votes and declare and official result: if there is no winner, congress then has to choose the president so that he can be inaugurated on 22 January 2006.

Development: On 1 December the finance minister, Antonio Palocci, talked to reporters about the 1.2% fall in GDP in the third quarter.

Significance: Palocci has come under fire recently for his management of the economy, not least from members of the government. Most analysts have (so far) considered the minister's strategic priority of an operating budget surplus equivalent to 4.25% of GDP combined with high-interest rates to control inflation as effective. But this policy is being questioned after a higher-than- expected fall in GDP between July and September was announced by the official statistics agency, the Ibge, on 30 November.

According to Palocci, the political crisis that engulfed the government and congress following a series of corruption allegations has "affected negatively the expectations of consumers and businesses" and thus the most recent economic data. Despite the drop in GDP in the third quarter, Palocci expects economic activity to bounce back in the last quarter because "people have perceived that economic forces are stronger than political crisis".

Palocci continued to defend high interest rates as the most effective way to contain inflation. According to Palocci, the "the fight against inflation incurs costs". Yet, despite Palocci's conviction that monetary tightening curbs inflation, the central bank's monetary committee announced it would have to increase its inflation forecast for 2005 to above its 5.1% annual target when it published the proceedings of its last meeting on 1 December.

Most economic analysts forecast a more aggressive cut in the basic interest-rate (Selic) next month. The central bank is increasingly under pressure to cut the Selic from all sides, including from cabinet ministers. Palocci has so far managed to keep the central bank's decisions independent, yet he has been - slowly but clearly - losing his influence with President Lula da Silva.

Development: The President-elect, Evo Morales, returned from his whistle-stop trip to Venezuela, Europe, China, South Africa and finally Brazil on 13 January. He has one more foreign trip, on 17 January to Argentina, before settling down to draw up his cabinet.

Significance: The world tour showed that Morales has a sharp eye for publicity. He refused to put on a tie or wear a suit for anyone, creating claims that he was launching a new political style. What Morales did achieve was meetings with world leaders and plenty of publicity. As the president of the Confederación de Empresarios Privados de Bolivia, Roberto Mustafá, said, Morales had done what other presidents had failed to do and put Bolivia on the world map.

The shape of Morales's government is still dim. There are strong rumours that Hugo Salvatierra, a Movimiento al Socialismo (MAS) deputy, will be appointed to the crucial job of interior minister. He comes from the secession-contemplating department of Santa Cruz. Santa Cruceño Masistas also expect to get the agrarian reform portfolio. This could lead to major problems with the commercial farmers in Santa Cruz, who do not want to give up land to peasants.

It is also significant that Morales will not only be dealing with a congress in which he has a comfortable majority in the lower house, but also one that is composed of new faces. Only 17 of the 157 senators and deputies held seats in the previous congress. Of these 17, six each come from the big two parties, MAS and Podemos, while five come from the Movimiento Nacionalista Revolucionario (which has only seven congressional and one senatorial seats anyway). The other comes from the Unidad Nacional which has eight congressional and one senate seat.

Development: The government issued a decree on 16 February exempting foreign investors from paying tax.

Significance: The decree is the first of a series of measures the government is expected to take this year to make Brazil more investment-friendly. In practice the rule exempts investors based in countries where income tax is above 20% from paying tax if they invest in long-term sovereign-issued bonds. Until yesterday, investors had to pay a 15% withholding tax on any investment in Brazilian bonds.

With the measure the government will forego R$152.3m (US$70.8m) in 2006 and a further R$165.2m (US$76.83m) the following year. On the other hand, the government expects foreign investors to double their investments in sovereign bonds in the period to R$10bn (US$4.65bn). More significantly, the government hopes the measure will reduce the cost of refinancing its debt by R$1.2bn (US$558m) this year and by a further R$7.6bn (US$3.53bn) in the next five years, silencing critics that say public debt continues to increase despite the tough budget savings. Last month public debt totalled R$984.93bn (US$447.69bn).

According to the National Treasury secretary, Joaquim Levy, "the sacrifice is small next to the expected results". The tax exemption is expected to boost investment in long-term bonds, specially the ones expiring between 2010 and 2012. For Levy the measure will help to change the public debt profile by increasing maturities while at the same time reducing the amount of bonds pegged to floating interest-rates.

Market analysts, however, say that the decree will affect the exchange rate and strengthen the Real further. As expected, the dollar fell 0.98% against the Real after the government's announcement to R$2.11 at close of business on 16 February. After the announcement the Brazilian investment-risk measured by JP Morgan fell to 229 points. The São Paulo's stock exchange, the Bovespa, reacted to the government's decision with euphoria, going up by 2.75 percentage points. Turnover reached R$3.92bn (US$1.82bn) yesterday.

Development: Mercosur signalled on 22 March that it is ready to make concessions to the EU to move forward the World Trade Organisation's (WTO) trade-liberalisation negotiations.

Significance: The Brazilian delegation made an informal proposal to the Europeans in Brussels in the hope it will "make an accord possible". According to Ambassador Régis Arslanian, Mercosur is ready to completely open its services and automobiles markets within 18 years if the EU speeds up the opening of the European agricultural sector to Mercosur. The proposal was outlined as a free-trade agreement between the two blocs, but its main objective is to pave the way for worldwide trade liberalisation under the auspices of the WTO.

The European reaction was almost immediate. The President of the European Commission, José Manuel Barroso, welcomed the proposal but insisted that Mercosur should also move ahead to open up all its manufacturing and financial services sector. To that the Brazilians answered that the proposal will also have clauses containing deadlines for such matters, but were clear they expected the EU to take "substantial measures" to open up its agricultural sector first.

The Brazilians continue to insist that rich nations have more responsibility than developing countries when it comes to cutting trade tariffs. They are also adamant that concessions should be understood in a "proportional framework", since the agricultural sector employs a substantial part of the population in developing countries while only 2% of the European workforce still farms commercially. At the same time the services and industrial sectors employ a greater proportion of people in developing nations than in rich countries.

Development: On 27 April several piquetero groups came together to form a political movement called Movimiento Libres del Sur.

Significance: It looks like President Néstor Kirchner is getting ready for presidencial elections in 2007. The piquetero groups, led by Patria Libre and Barrios de Pie, are all loyal to the government. They will provide Kirchner with boisterous support at forthcoming political rallies, starting with independence day (and the third anniversary of Kirchner's coming to power) on 25 May. Many see Kirchner's 25 May rally as the unofficial opening of his re-election campaign.

The public launch of the new movement in Buenos Aires received the blessing of the secretary general of the presidency, Oscar Parrilla, and the pro-Kirchner Governor of Buenos Aires, Felipe Solá. Solá took a swipe at Hilda Duhalde, the wife of former president and political rival Eduardo Duhalde, saying that “some who carry the badge of the PJ (the ruling Partido Justicialista) described the piqueteros as violent mobs; I say they are an organisation." 

The government, keen as ever to co-opt moderate piqueteros to try and squeeze out the more radical elements, might be trying to give its piquetero supporters a clean face. Its biggest concern ahead of the 2007 presidential elections is not the political opposition but the threat of social unrest. Interestingly, Solá said in a radio interview on 27 April that he would like to be a running mate for Kirchner in the elections.

ARGENTINA: Tax collection increased 19.2% in May in comparison with May 2005, reaching a new record of Arg$14.35bn (US$4.64bn).

BOLIVIA: Inflation in May was 0.8% bringing the lagging 12 month rate to 4.4%.

BRAZIL: The IPC-S, the weekly inflation index measured by Fundação Getulio Vargas, registered a 0.19% deflation in May, the lowest inflation rate since September last year.

BRAZIL: Brazil ran a US$3.44bn trade surplus in May. This is the second consecutive month that the monthly trade result is lower than the comparable month of 2005.

BRAZIL: Industrial activity in the state of São Paulo fell 1.4% in April in comparison with March. Year-on-year output was up by   4.8%.

BRAZIL: Banco do Brasil announced that foreign companies can own up to 12.5% of the bank's capital, up from 5.6%.

PARAGUAY: Inflation in May was negative, to the tune of 0.3%, bringing the annual rate down to 8.7%.

URUGUAY: The Brazilian energy company Petrobras bought the Uruguayan Gaseba for US$13m and now has the monopoly of gas distribution in the country.

URUGUAY: Petrobras also bought all businesses owned by Shell in the country and now controls 25% of petrol distribution in Uruguay.

Development: On 6 July an opinion poll published in El Nuevo Diario put Daniel Ortega, the candidate of the Frente Sandinista de Liberación Nacional, in the lead in the race for the presidency.

Significance: The poll was conducted between 20 June and 2 July, the day on which Herty Lewites, the dissident Sandinista candidate running for the Movimiento Renovador Sandinista (MRS), died suddenly of a heart attack. The snap judgement is that Lewites's death will benefit Ortega as the Left's vote will no longer be split. The Right remains divided with José Rizo, of the traditional Partido Liberal Constitucionalista just behind Eduardo Montealegre, from the dissident Alianza Liberal Nicaraguense (ALN). Ortega, previously president from 1984-1990, obtained 30.1% of voter intentions; followed by Montealegre, with 24.4%; then Rizo, on 21.6%. Lewites polled 17.2%.

On 5 July the MRS voted in its new candidates. Edmundo Jarquí­n, a former ambassador to Spain and Mexico, who has worked for the Inter-American Development Bank and is married to Claudia Lucia Chamorro, a daughter of former president Violeta Barrios Chamorro, is the party's new presidential candidate. The MRS hopes to soften Jarquí­n's technocratic image with its choice for the vice-presidency: Carlos Mejí­a Godoy, a famous musician who has a popular TV programme, and has accepted the ticket on the condition he is given time to continue composing.

Meanwhile former US president Jimmy Carter is in Managua ahead of the November elections. Carter criticised the current US government's explicit endorsement of Montealegre and Lewites. Carter was due to meet all of the presidential candidates prior to Lewites's death; in the event he saw Rizo and Montealegre, but Ortega failed to turn up to the appointment. Carter also criticised the interference of "other countries" (ie, Venezuela) for supplying cheap oil and fertiliser to FSLN-controlled municipalities.

Development: The federal government announced on 9 August it will finally disburse promised resources to improve public security in the state of São Paulo. 

Significance: The announcement may signal that the federal government and the opposition-controlled administration of São Paulo are starting to be serious about cooperating to curb violence at last. Up to now both authorities seemed more concerned about electoral gains, trading accusations instead of working together to stop the violent riots that have terrorised the population of São Paulo in recent months.

The federal government said R$80m (US$35.5m) is ready to be disbursed to pay for the building of two more high-security prisons in the state and to buy new police equipment. The federal government also said it will release more resources for intelligence in the next few days to stop new attacks from taking place. The money was the main demand made by the authorities in São Paulo who still refuse help from the National Force to patrol the streets. 

The announcement followed a new series of attacks perpetrated by the notorious criminal gang Primeiro Comando da Capital (PCC) at the beginning of the week, and the third since May. The attacks on government building, banks, shops and the public transport system (and the subsequent police reaction) left over 200 people dead so far as well as million-dollar damage bills. Worryingly, the attacks are becoming more politicised and violent. Several home-made bombs have been used in the latest wave.

Development: On 17 September a poll by a US firm Penn, Schoen & Berland Associates (PS&B) found that only 50% of the Venezuelan electorate intends to vote for President Hugo Chávez . His main rival, Manuel Rosales, had 37% of voter intentions.

Significance: Although anti-Chavistas were excited by the news, which gave Rosales 20% more support that he has received in other polls, the accuracy of PS&B's polling is questionable. Prior to the recall referendum on Chávez in 2004, PS&B predicted the president would be voted out of office. Chávez won that vote 60:40. To be fair, Rosales is a credible candidate, and the opposition is showing unprecedented unity, but serious doubts remain over whether he can overhaul the president's lead and, if he did so, whether the Chávez camp would let an opposition victory stand. Furthermore, even if it did, Rosales would have to rule the country, for at least his first four years, with the entire congress loyal to Chávez . For the more sober elements of the opposition, the main encouragement is less the polling figures, but the splits emerging in the government.

The PS&B poll, published in the opposition newspapers El Nacional and El Universal, asked the question, "if the presidential elections were today, who would you vote for?" Of the 2,000 electors polled via telephone in the country's main cities, 50% said they would vote for Chávez , 35% for Rosales, 10% said they didn't know and 3% said they would vote for one of the other 26 presidential candidates. The urban emphasis in the poll certainly contributed to Rosales's impressive numbers; most of the opposition to Chávez is concentrated in Venezuela's cities.

Another question mark surrounding the poll is the issue of framing. As well as asking respondents whether they intended to vote for Chávez , pollsters carried out a survey to "find out the perception of Venezuelans about the efficacy of Chávez in solving the country's most critical problems". According to PS&B's findings, on the issue of reducing poverty, 62% thought the president had done badly, versus 37% who thought he had done well or excellently. As regards personal security, 73% thought he had done a bad job, compared with 25% who were impressed. A majority (54%) of Venezuelans thought he had done badly in managing the country's hydrocarbon reserves. In fact, the only area in which a majority thought Chávez had performed well was education: 56% said he had done a good job. Douglas E. Schoen, the author of the study, said that the election was "going to be much closer than some people think". If Chávez wins comfortably, such comments may help to back up the opposition's claim the election was rigged.

Certainly, that was the message issued from the Rosales camp. Prior to the PS&B survey, Datanálisis, another supposedly anti-chavista poll, put Chávez on 58.5%, up from 55% in June. In second place, with 22.7% were the "don't knows", with Rosales in third with 17.4%. Benjamí­n Rausseo, the clown who some commentators had tipped to make a strong impact, registered just 1.4%. Both Rosales and Rausseo countered these figures by saying the government was publishing false information. Rosales refused to give his own assessment but said his numbers "were looking pretty and getting prettier by the day".

Although the odds are still firmly stacked against the opposition, one unexpected boon has been the recent public spat between two senior members of the government over the pace of the "Bolivarian Revolution". The mayor of Caracas, Juan Barreto, ordered the expropriation of two golf courses at the end of August, as a way of dealing with the city's chronic housing shortages. However, Vice-president José Vicente Rangel rejected the expropriations and issued a statement claiming the decision was Barreto's alone. The debate is symptomatic of tensions within the Chávez camp, with many of his followers complaining that there has been plenty of revolutionary rhetoric but not enough action. Chávez 's response was to urge greater unity and for now the issue has subsided, but the opposition may be able to exploit these underlying tensions for electoral gain.

Development: Panamanians approved a government-proposed project to expand the Panama Canal in a referendum on 22 October. 

Significance: According to the Panamanian electoral authorities, the project was approved with 78.33% of votes for and 21.67% against. Such an outcome had been predicted by the opinion polls. The turnout, however, was much lower than previously forecasted. Only 43.30% of the 2.1m Panamanians registered to vote went to the ballot box, just over half the number pollsters and the authorities expected. 

After the result was announced, President Martí­n Torrijos went on TV to celebrate the project's approval declaring it will allow “the building of a better country". Torrijos, who campaigned hard for the expansion, said the “benefits of the [expanded] Canal will be used to reduce poverty and improve the living conditions" of poor Panamanians. Some 40% to 60% of the population live below the poverty line. Torrijos also deemed the referendum as “an exemplary democratic exercise". 

Opponents of the expansion, however, denounced irregularities in at least 10% of the polling stations, where “no to the expansion" inspectors were not allowed in. Many also maintained the campaign was “not fair" because the government poured money in to promote the project while the “no" camp lacked resources. They also said there was “no proper debate" and that Panamanians were voting “in the dark". 

The Autoridad del Canal de Panamá (ACP) is expected to initiate the expansion next year. The project will take seven years to execute and cost US$5.2bn, which the ACP says will be financed by a six-fold increase in toll revenues (currently US$1bn annually). The ACP expects to double the traffic of ships in the Canal, which following the expansion will allow the passage of larger post-Panamax ships. Currently 5% of global trade passes through the Canal.