All Categories

COSTA RICA: Elecciones presidenciales (5 de febrero de 2006)
Candidato	Partido	% de votos
Oscar Arias	Liberacion Nacional	40.9
Otton Solis	Accion Ciudadana	9.8
Otto Guevara	Movimiento Libertario	8.5

HAITI: Elecciones presidenciales (7 de febrero de 2006)
Candidato	Partido	% de votos
Rene Preval	Front de l'Espoir/Fwon Lespwa	51.2
Leslie Minigat	Rass. Democrates Nat. et Progr.	12.4
Charles Baker	Regroupement Respe/Konba	8.2

PERU: Elecciones presidenciales (% de votos)
Candidato	Partido	9 de abril de 2006	4 de junio de 2006
Ollanta Humala	PN-UNEP	30.6	47.4
Alan Garcia	PAP	24.3	52.6
Lourdes Flores	UN	23.8	-

COLOMBIA: Elecciones presidenciales (28 de mayo de 2006)
Candidato	Partido	% de votos
Alvaro Uribe	Primero Colombia	62.2
Carlos Gaviria	Polo Democratico Alternativo	22.0
Horacio Serpa	Partido Liberal	11.8

MEXICO: Elecciones presidenciales (2 de julio de 2006)
Candidato	Partido	% de votos
Felipe Calderon	Partido Accion Nacional	36.4
Andres Lopez Obrador	Coalicion por el Bien de Todos	35.3
Roberto Madrazo	Partido Revolucionario Institutional	21.6

GUYANA: Elecciones generales (28 de agosto de 2006)
Candidato	Partido	% de votos
Bharrat Jagdeo	People's Progressive Party/Civi	54.7
Robert Corbin	People's Natl Congress/Reform	34.1
Kemraj Ramjattan	Alliance for Change	8.4

BRASIL: Elecciones presidenciales (% de votos)
Candidato	Partidos	6 de octubre de 2006	29 de octubre de 2006
Lula da Silva	PT-PRB-PCdoB	48.6	60.8
Geraldo Alckmin	PMDB-PFL	41.6	39.2
Heloisa Helena	PSOL-PSTU-PCB	6.8	-

ECUADOR: Elecciones presidenciales (% de votos)
Candidato	Partidos	20 de octubre de 2006	26 de noviembre de 2006
Alvaro Noboa	PRIAN	26.8	43.3
Rafael Correa	Alianza Pais	22.8	56.7
Gilmar Gutierrez	PSP	17.4	-

The approval by congress of the controversial civil service law, which the IMF is especially keen on, poses a problem for the trade unions. They had promised an indefinite general strike if the law was passed. The law went through congress on 25 September. Virtually all the 195 provisions of the new law were approved by congress in the form the government had drafted.  

The key point from the government's view is that it was able to marshal a new majority. It drew support from the Partido Social Cristiano, the ruling Partido Sociedad Patriótica, Prian (the party of the defeated presidential candidate Alvaro Noboa) the DP and independent members of congress, including one from the government's former partner, Pachakutik, the indigenous poeples' party.

Equally significant was the fact that the Bucaram party, to which President Lucio Gutiérrez had made overtures, did not back the government. The party, the Roldosistas, started by voting against the government and then walked out of congress.  

In order to avoid violence from protesters outside congress, the authorities deployed policewomen, rather than policemen, to patrol the streets.

PALM OIL: Ramón Pérez, the president of the Federación Nacional de Palma Africana de Honduras, said that the industry was in good shape, despite getting off to a slow start to the year. Exports in the first quarter were down on the same period of 2003. The country produces around 200,000t of palm oil each year and exports almost half of this output to Mexico and Central America. The biggest single area of production is along the Valle de Sula, in the north of the country, where production is likely to hit 45,000t, worth US$22m. There are 600 palm oil growers in the country. Palm oil prices are decent: raw oil fetches around US$550 per t and processed oil US$700 per t. 

The industry employs 20,000 people. The biggest single producer is Corporación Cressida, a conglomerate headed by Miguel Facussé. It has 17,000 hectares of palm oil plantations. Cressida is looking to spend a further US$200m on adding 20,000 hectares of plantations. Reynaldo Rosales claimed that the palm oil industry now turned over the equivalent of 10% of the country's GDP: Rosales said that the industry could grow further because Mexico had unsatisfied demand for at least 200,000t of palm oil a year. The Banco Centroamericana de Integración Económica is investing US$3m in a power station which will run on waste material from the palm oil industry. This project assumes that electricity can be produced for around US$0.05 per kilowatt. 

NATURAL GAS: Peru's energy minister, Jaime Quijandrí­a, reckons that the country will be exporting 600m cubic feet of gas a day to Mexico from 2007. Quijandrí­a said that Mexico is likely to be the country's main export market for the gas from the Camisea field. Mexico is forecast to need to import at least 3m cubic feet of gas a day from 2007. Camisea contains 13 trillion cubic feet of natural gas and 600m barrels of natural gas liquids. The Peruvian government reckons that it will cost US$2.165bn to build the liquefaction plant. The project is being developed by the Hunt Oil company from the US. 

BANANAS: A Russian company, JFC, is investing US$100m in Ecuador to develop banana exports from the country to Russia. It is not clear whether JFC will grow its own bananas: it seems more likely that it will set up its own stores and transport systems for the highly perishable fruit. Already 95% of the bananas sold in Russia come from Ecuador. The fruit is Ecuador's second-biggest export after oil. In 2003, banana exports were worth US$746m. In the first quarter of this year, banana export revenues came to US$242m, down 20% on the same period of 2003.

The financial markets are jumpy for several reasons. One is the political crisis caused by the government's attempt to knock the mayor of Mexico City, Andres Manuel López Obrador, out of the presidential election in 2006. Another reason for the jumpiness is the volatile state of the US economy. Decent manufacturing output figures on 21 April reassured the US and domestic investors, but the contradictions in US economy policy must eventually send the economy into recession that will have grim implications for Mexico. The third reason for the markets' jumpiness is the central bank's inability to squeeze inflation out of the economy. 

The most obvious sign of the market's jumpiness is the fall in the Mexican stock market index. It has fallen by 14% from its peak on 7 March, just before the Partido Revolucionario Institucional started to swing against the mayor of Mexico City, Andres Manuel López Obrador, and mid-April, when the scale of the mess created by the attempt to prosecute the mayor became apparent. On top of this, domestic demand is wilting and the problems of the US economy are becoming more apparent. 

The car industry, always a good proxy for the state of retail demand in Mexico, is having a difficult time. In March, domestic sales of new cars were down by 5% while exports (predominantly to the US) were down by 23%. This combination meant that vehicle production in March was 15% down on March 2004's. 

To be fair, domestic sales of vehicles in the first quarter were 2.2% up on the same period of 2004, and March's sales figures were probably affected by Holy Week falling in the month this year: last year Easter was in April. Domestic sales are dwarfed by exports, so overall vehicle output is down significantly on the first quarter of 2004. The Asociación Mexicana de la Industria Automotoriz said that output in the first quarter was 334,217 vehicles, down 10% on the 370,760 produced in the first quarter of 2004. 

The big problem is the weakness of the US market. In the first quarter, exports of Mexican-built vehicles to the US were down by 14% (at 232,077 vehicles) compared with the same period of 2004. Carmakers expect the second quarter to be as bad but they hope that things will pick up in the second half of the year. In March only 81,043 vehicles were shipped to the US compared with 105,703 in the same month of 2004.

Employment
Another sign of the economy's difficulties is the drop in manufacturing employment. In January employment in manufacturing was down by 0.9% compared with the same month of 2004. The industry which saw the biggest drop in employment was textiles, where the number of jobs was down by 3%. 

The slackness of the labour market has led to a fall in average real wages of 0.5%. Benefits are taking the brunt of the fall (they are down by 2.5% in real terms between January 2004 and January 2005). Pay is actually up, but only fractionally, by between 0.2% and 0.3% depending on skills. 

What is actually happening month-on-month in the labour market is hard to make out because the official statistics agency, Inegi, has changed its series for unemployment statistics. It has, however, neither revised earlier figures to make them compatible with the new series nor continued publishing the old series. This means that it is impossible to work out, as Jonathan Heath, the influential chief economists for Mexico at HSBC points out, whether unemployment rose or fell between January and February 2005. 

Independent economists such as Heath fear that the government may have been fiddling the figures because it has backed away from fully implementing recommendations from the Organization for Economic Cooperation and Development on how to improve its employment statistics. The OECD recommendations were that the labour force should be broken down into four categories: unemployed; under-employed; people employed with IMSS or ISSSTE (ie social security) coverage and those employed without it. The big innovation is the introduction of statistics for underemployment. The problem is that these statistics, though apparently collected, have yet to be officially published. Economists sifting through the data from the official statistical agency, Inegi, claim that they can infer what the under-employment rate is (8.9% in January and only fractionally less in February). Adding this figure to the unemployment rate produces a "truer" unemployment rate of 13% in January and 12.7% in February. 

These economists point out, however, that the statisticians have fiddled the figure by including rural workers in the denominator for February, but not for January. The rural labour force is composed, mostly, of peasants who define themselves as employed, though they are barely in the proper economy. What economists want is to be able to compare urban unemployment rates but the statistics do not allow this.

What economists fear is that the (increasingly authoritarian) government has lent on the statisticians to hide statistics that are politically embarrassing. The Fox government's handling of the economy has been deeply disappointing, even to its own supporters: in his election campaign Fox promised 7% annual growth. If he is lucky, the economy may grow by 7% over the whole of his six years in office. And oil prices, which provide the government with a third of its income, have been at record levels. 

Maquiladoras on the up

The maquaildora industry appears to be doing better than the rest of Mexican industry. The official statistics agency, Inegi, reported that in January 2005 there were 7.8% more people working in maquiladoras than 12 months earlier. The actual number employed is 1.143m. The most buoyant part of the maquiladora industry is the service sector. Its labour force has increased by 29% in the 12 months to January. Chemicals have done almost as well, rising by 28%. The traditional heavyweight, equipment assembly, had 19% more people working for it than in January 2004, while electronic equipment increased its payroll by 12%.  On the other hand the toy industry is wasting away. Its labour force which has been contracting for years in the face of competition from China was down by another 26% in the year to January. The shoe and leather industry is also having a rough time: it laid off 13% of its employees in the year to January.  What is clear is that the industry is rediscovering its roots on the border with the US. There were significant increases in employment in maquiladoras in Baja California (10%); Nuevo León (10%); Sonora (9%); Tamaulipas (8%). Even Coahuila and Chihuahua managed to increase their maquiladora employment albeit by only 3% and 1% respectively. In Estado de México, the country's economic hub, maquiladora employment dropped by 37% as clothing factories moved out of maquiladora programmes. In January clothing and textiles still accounted for 13% of the maquiladora's valued-added in exports. The big two sectors remain electrical and electronic components, which accounted for 24% of the industry's value added and the building, repair and assembly of transport equipment (ie, the vehicle industry). Although the number of people working in maquiladoras is increasing, pay levels are falling. The Inegi reported that average real pay was down by 2.7% in January compared with January 2004. Oddly it is manual labourers who have seen the smallest fall in their pay (just 1.9%, compared with a 4.3% fall in managerial pay and a 3.5% fall in skilled workers' pay.

Retail sales
Another sign of the looming economic problems is the weakness of retail sales. Like-for-like retail sales in February were down by 2.5% year-on-year, according to the national retailers association, Antad. The association does not include Mexico's biggest single retail chain, Wal-mart de México. The main reason for the fall in Antad sales was a 4.9% fall in sales from self-service outlets. There were minor (0.1% and 1.5%, respectively) increases in sales at department stores and specialist outlets. Economists said that the figures were affected by the fact that this February had one fewer Sunday than 2004. Overall, Antad members' sales were up year-on-year because the shops increased their sales space by 11%. The biggest increase was in specialist stores which increased their sales space by 24%. 

Credit
A more encouraging, and, paradoxically, slightly disturbing, economic indicator was the increase in credit in the first two months of the year. Figures from the central bank show that consumer credit was up by 45% in January, year-on-year and then by 30% in February, again year-on-year. What is disturbing is that consumers are beginning to borrow just as interest rates start to rise and the economy looks as though it might be about to turn downwards. 

Another sign of the problems facing the economy is the sharp rise in Mexico's country risk premium. In the second half of March the premium shot up by 47 basis points to 191 basis points over US Treasuries. 

Madrazo's economic team

Roberto Madrazo, the leader of the Partido Revolucionario Institucional and that party's likely candidate for the presidential election in 2006, has started to assemble a team of economic advisers. His key economic adviser is Fernando Pandal, a long time senior lobbyist for the manufacturers' association, Concamin. Pandal is responsible for building up links with business. Madrazo also has close links with Pedro Aspe, the disastrous finance minister under President Carlos Salinas de Gortari (1988 to 1994). That administration's refusal to devalue created the economic crisis of 1995 when the economy contracted by 7% Another familiar economic policy face from the past, Angel Gurrí­a, who now advises a Spanish media company, Recoletos, is also talking to the Madracistas. Gurrí­a was finance minister and foreign minister under Salinas' unfortunate successor, Ernesto Zedillo.

Inflation: In March inflation came to 0.45%, the highest rate for four months. The increase brought the lagging 12-month rate to 4.4%. Independent economists expect the central bank to tighten monetary policy further. Since January 2004, interest rates have more than doubled from 4.6% to 9.5%. The consensus forecast from independent forecasters at the beginning of April, according to the central bank's monthly poll of them, is that inflation will come in at 3.95% this year.

Fiscal deficit: In the first two months of the year the country ran a fiscal surplus of M$500m (US$44m). The deficit in February was M$700m. Buoyant oil revenues have helped the income side. In February oil revenues were up 5.5%, while non-oil tax revenues were up by 4.5% in real terms. Non-oil tax revenues came in at M$141bn while oil revenues (from the state oil company, Pemex, royalties and taxes on domestic sales of oil products came to M$97.5bn. This was 0.7% down on February 2004, but the February figures were flattered by the M$7bn received from the sale of Pemex's shares in a Spanish oil company, Repsol. On the spending side, net government spending was up by 8%. This was mainly due to higher social security spending.

In January, the flash indicator for growth (IGAE) showed a year-on-year rise of 4%. Services in January were up by 5.2%; industry by 3% and agriculture by 2%. Month-on-month, the overall rise was 0.19%.

FDI: The consensus forecast for foreign direct investment in 2005 is that it will be US$13.75bn in 2005. In 2004 FDI was US$16.6bn. In 2003 FDI had been US$10.7bn.

Budget dispute: The dispute between the lower chamber of congress and the government over whether the government had the right to alter the budget after it had been approved by congress ended on 30 March when the supreme court stopped taking evidence on the issue. 

The court said that it will not rule on the details of the dispute (such as whether spending on various projects can go ahead) but only on the principles. The government wants to strike out 53 lines of spending in the budget approved by congress. The court's judgment is likely to be published at the end of April or the beginning of May. 

Pemex: The state-owned oil company, Petróleos Mexicanos, still reckons that there are 54bn barrels of oil in its bit of the Gulf of Mexico, but it now reckons that it will only be able to recover 47% of this oil. The new, realistic forecast, came from Guillermo Pérez Cruz, the manager of the special unit for deepwater exploration at Pemex exploration and production.

A lot of the oil, apparently, lies at depths of more than 3,000 metres below sea level. Only about half the oil lies in the shallower, and therefore exploitable, continental shelf. Pérez Cruz reckons that there are 25bn barrels there. The big question is whether there actually are 29bn barrels in the deeper waters. The 54bn barrel forecasts was made by Pemex's director, (who was then production and exploration development director), Luis Ramí­rez Corzo. 

The company's critics say that the company is still being managed to maximise its income rather than to ensure that it can continue as one of the world's major oil companies. 

An alarming report from the US Petroleum Finance Corporation, published in mid March, suggested that the US was likely to find that the Brazilian state oil company, Petrobras, would overtake Pemex as an oil supplier to the US. Ramí­rez Corzo said that the report was just a plan, rather than a fact. 

Pemex is working with Petrobras as well as the oil majors, Shell, BP, ExxonMobil, ChevronTexaco, ConocoPhillips and Unocal on its deep water developments. Ramí­rez Corzo added that even if the appropriate legislation was passed to allow Pemex to go into partnership with foreign companies, it would still take between six and eight years before any oil flowed from the deepwater fields.

President Fidel Castro broke one of the cardinal rules of politics by setting a deadline for the implementation of an ambitious programme. On 18 January Fidel promised that by 1 May 2006, 95% of Cuban households would be enjoying an uninterrupted supply of electricity.

This is ambitious because the country's electricity industry is in a ropey state. Even in cities people are using kerosene cooking gas to run boilers and to cook. The government has been trying to improve the electricity supply industry and is installing 4,000 new generators across the country. Some will use environmentally sustainable fuel such as waste sugar cane.

Fidel was speaking at Pinar del Rí­o to commemorate the 47th anniversary of his triumphant entry into the town. He said the investment in upgrading the electricity industry would deliver a clear "before" and "after", Officials say that the programme will expand the country's electricity generation capacity by 60% and bring in solar and wind power. The bulk of the country's power stations are oil-fired and have a capacity of 2.94m kilowatts per hour. Fidel said that the country would build not more oil-fired power stations: all the new ones would be either gas-powered or be able to use a variety of fuels, most of them renewable.

Fidel added that the investment in the electricity industry would deliver significant savings. He claimed that the country would be able to cut its oil bill by US$1bn a year. There will also be other savings: battery powered fans are among the biggest selling items in hard currency shops in the summer.

This statement has regional strategic implications. Venezuela is supplying Cuba with about 60,000bpd of cheap oil, most of which is used to generate power. Before the Berlin Wall came down, Russia used to oversupply Cuba with oil which Castro used to sell for hard currency. Cuba may now start doing something similar with Venezuelan oil, if it needs less of it.

The Venezuelan government, and educated Cubans, are very happy with the Cuban involvement in healthcare and educational programmes in Venezuela. The Cuban professionals are paid in dollars and can bring back virtually unlimited amounts of consumer goods: the sale of these products can keep them going for months back in Cuba.

Panamanians voted, by a thumping majority, to approve the government's plans to expand the Panama Canal on 22 October. The decision has major regional and international implications.

South Americans date the start of their long economic decline to the opening of the Panama Canal in 1914. South Americans, particularly Argentines, argue that the Canal switched the direction of world trade. Argentina and South America in general had benefited from North-South trade. After the Panama Canal opened trade became much more East-West. The Northern Hemisphere started to trade more with itself than with the Southern Hemisphere.

So successful has the Panama Canal become that it now handles 4% of world trade. Its share of US trade is four times higher: 16%. The expansion of the Canal depends on Panama at least retaining this share of world and US trade.

Shipping companies point out that 30% of the ships using Los Angeles in 2005 were too big for the Canal. As Los Angeles sees its cargo handling doubling by 2020, it does not regard the expansion of the Panama as a strategic threat. So huge has transpacific trade become that shipping companies have been searching up and down the western seaboard of North America for spare capacity. Ports as far south as Manzanillo in central western Mexico have become transhipment points for goods from Asia destined for the US. Ports in Canada that were last used to service the Yukon gold rush, over 100 years ago are also being brought back into service. Both Mexican and Canadian ports are attached to railway networks which transport the Asian goods to markets in the east coast of the US.

What is significant is that the expansion of the Panama Canal will have most effect on container shipping. These vessels are big but not as enormous as the new generation of bulk carriers and tankers which will still be too big for the Panama Canal. This means that manufacturers in Asia will still enjoy the huge benefits of scale that have enabled them to profit so heavily from globalisation.  

All that the Panama Canal may change is that ships as big as the world's biggest container ship, the Emma Maersk, which currently travels to Europe via the Suez Canal, will instead be able to use the Panama Canal. This ship delivered 11,000 containers from China to Europe at the beginning of November.  

The expansion of the Panama Canal will accentuate this trend. It will help China and East Asia to remain the world's manufacturing hub as it will tighten the links between producers and markets. This will continue to leave Latin America out of the loop. The region has become a major supplier of commodities to Asia, particularly metals and food, but little of this trade goes through the Canal. Arguably, the expansion of the Canal could affect this business adversely, since US (and possibly East European) farmers could send containers of processed food back through the Canal on the ships that bring all these manufactured goods to their markets.  

The question is whether the expansion of the Panama Canal will allow Latin America to diversify its export markets. The Panama Canal is unlikely to become a route from the Caribbean to Asia. So Venezuela will not be able to use the Canal to send substantially more oil to China. Most of Venezuela's oil will continue to go North.  

Where the Canal may have a positive effect is on the economic development of central South America. Traditionally, this area has looked to Europe. In the rubber boom 100 years ago, the new rich of Manaus sent their laundry to Paris. Now the economic development of South America's bulge is likely to be geared to Pacific rim consumption. Iron ore from Mutún, or gas from Camisea, is as likely to go North to the US west coast as it is to cross the Pacific.  

What may happen is that Panama City, at the Pacific end of the Canal, will become a transhipment point. There will be a lot of East-West trade, but an increasing amount of South-North trade up the west coast of South America. If this happens more trade will go west in South America. Argentina has long dreamt of exporting fruit to Asia, but its rivalry with Chile has prevented it using Chilean ports.  

Regionally, what the expansion of the Panama Canal will do is knock out any rival scheme. In the run-up to the vote in Panama, Nicaragua revived its scheme to dredge the San Juan river and then cut a canal from Lake Nicaragua to the Pacific. The cost of this project is budgeted at US$18bn. Besides this the Panama Canal expansion looks a snip at US$5.25bn. In addition, the Nicaragua project involves untried technology and geology. The preliminary geological work on the Panama Canal was done in 1938, so there are unlikely to be any surprises when construction starts.  

The expansion of the Canal will confirm Panama as Central America's financial centre. The centre is relatively sheltered from international financial eruptions largely because the country has always used the dollar, though it does mint its own small change. Unusually Panama has no central bank nor a monetary board. In economic terms its scope for a monetary policy that is independent of the US's is non-existent.  

This unusual financial set-up has implications for the way the Canal expansion will be financed. Credit rating analysts claim that the Autoridad del Canal de Panama, which has run the Canal since the US handed it over in 1999, would have a better credit rating than the Panamanian government. Indeed the ACP has never defaulted nor rescheduled, partly because it has never issued debt. The ACP's income is booming thanks to the surge in world trade.  

The Panamanian government has not said how it will raise the US$2.3bn in debt the expansion project needs. The safest way to do this would be to allow the ACP to issue debt: any other solution runs the risk of creating money and inflation in the Panamanian economy.

The economy and finance ministry said at the beginning of August that the first quarter economic indicators pointed to an economy in sound shape.

In the first quarter the economy grew by 9.4%, year-on-year. In cash terms, the ministry said that the increase was worth US3.9bn. The ministry said that the strong first quarter figures underlined the fact that the growth rate was sustainable at its current rate and could even accelerate.

The ministry said that exports of fruit, beef and chicken and transport services were growing at annual rates of 15% and the construction boom, which is being led by housing and luxury apartments is also looking strong. In the first quarter the construction sector grew by 12.2%, year-on-year.

The only sectors that are misfiring are marine exports and, surprisingly, given the strong growth in Colombia and Venezuela, the free zone at Colón. The ministry admitted that both sectors had seen sales fall.

On the fiscal side the government is in decent shape. The government's income was up by 20% in the first quarter. Compared with the same period of 2006. Public sector debt is at US$10.55bn, up 6% on March 2006.

Inflation: Inflation in the year to March 2007 was 2.6%. In 2006 it was 2.3%.

The Brazilian government reported on 15 June that 40% of the country's soya and beef are produced in the huge area known as the Amazonia Legal. This area, covering nine states of the Amazon basin, is 83% true Amazonian forest and 17% pasture and arable land. The Amazonia Legal has been earmarked by the government for agricultural developments that are supposed to allow 80% of the forest to be preserved.

The problem for policymakers is striking a balance between environmentalists  who want to preserve the Amazonian rainforest, which they  claim is crucial to the world's climate, and farmers. The farmers argue that the world needs them to turn forest into first pasture for cattle and then land for soya in order to produce food. Over the past three years the pace of deforestation in Amazonia has slowed. The problem is that this year, the pace appears to be accelerating again. On current trends, the environmental regulatory agency, Ibama, reckons that this year12,000 square kilometres (sqkm) of rainforest will be stripped of most of its trees and turned into agricultural land .

Government ministers differ over whether this increased pace of deforestation is important or not. Reinhold Stephanes, the agriculture minister, and the big farmers' lobby, the Confederação Nacional da Agricultura (CNA), argue that agriculture's expansion into Amazonia is inevitable and need not lead to complete deforestation, thanks to the Amazonia Legal rules of an 80:20 split between rainforest and agricultural land. Environmentalists dismiss this argument as wishful thinking: they say once the rainforest starts to go, it never comes back.  

The arguments over deforestation also have nationalistic overtones. The government of President Lula da Silva has been particularly touchy when it has been accused by international environmental groups of failing to protect the Amazon rainforest.

As Brazil has become such a huge agricultural exporter in the past 10 years, any change to its Amazonia protection policies will have major implications for the prices of agricultural commodities. The CNA reckons that in 2005 Amazonia Legal produced 20m t of soya: that is 10% of the world's total soya crop. Non Governmental Agencies claim that Amazonia Legal is also a major supplier of cotton and sugarcane which is used to produced alcohol for use in biofuels.

Is deforestation accelerating?

The very fact that the pace of deforestation appears to be accelerating is significant. The rate of deforestation (broadly defined by the Brazilian authorities as complete clearing or progressive degradation) has been falling over the past three years. In the 12 months from August 2006 to July 2007, 4,964sqkm of the Amazonia were cleared, yet in the nine months from August 2007 to April 2008 5,850 sqkm were cleared. The worry is that the summer months (May, June, July and August) are the peak months for clearing the Amazonian forest, so the rate of deforestation will accelerate further.

Cí¢mara says that the Deter system is almost at its limit. It can only pick up deforestation of more than 25 hectares. This means that the official figures probably understate the true picture because clearers have moved towards partially clearing rather than totally clearing the forest.

One obvious reason why the pace of deforestation is picking up again is the surge in international food prices. When farmers burn the Amazonian forest they use the land first for cattle and then soya. The new environment minister, Carlos Minc, said that ranchers were responsible for between 70% and 80% of the deforestation.

The Ibama has been trying to make examples of the worst deforesters, but its efforts are puny given the size of the problem (and of Amazonia). So far this year, the Ibama has seized 3,500 head of cattle and confiscated 4,300t of grain from farmers operating in protected areas.

Minc himself, however, has had to back track on his criticism of Blairo Maggi, the governor of Mato Grosso and the world's largest producer of soyabeans. Minc had alleged that the bulk of the deforestation was taking place in Matto Grosso. On 2 June, Minc admitted that although Mato Grosso was still clearing the forest, the pace at which it was doing so had diminished. In 2003 the state cleared 11,000 sqkm of forest; in 2007 it cleared only 2,700 sqkm. This was the biggest fall in the rate of deforestation anywhere in Brazil.

Maggi, however, is still grumbling that the federal government is picking on him and Mato Grosso. He says that the satellites pick up much more of what happens in Mato Grosso than other states. In April the Inpe reported that 794 sqkm of Mato Grosso were deforested, making it the state with the greatest amount of forest cleared in that month. Roraima came second with 285 sqkm.

Amazonia, as defined by Brazil, covers 4m sqkm. The Inpe says that 700,000 sqkm have been deforested. Of this 360,000 sqkm have been cleared in the past 20 years, since Inpe started monitoring Amazonia by satellite.

• Slave labours

Amnesty International (AI) said it found evidence of the use of slave labour in Brazil's sugar cane industry which is also spreading northwards into Amazonia. This charge was vehemently denied by the industry's association, Unica, which said AI had “generalised isolated cases".

The industrial output figures for April were a bit better than independent analysts had feared. Although output is down year-on-year it was up on a seasonally adjusted basis over March. This is a better result than it appears,  because Easter fell in April this year, which meant that there were five fewer working days in April (17) than in March (22).

The official figure, from Indec, showed a 3.3% rise in seasonally adjusted output (i.e. reflecting Easter) and a 2.3% increase in unseasonally adjusted output. These figures look on the low side, given the extra working days.

Manufacturing output in April was 1.2% down on April 2008, seasonally adjusted, and 1.4% down unseasonally adjusted. For the first four months of 2009 manufacturing output was 1.8% down, unadjusted, and 2% down seasonally-adjusted.

Looking forward, most businesses (82%, according to the Indec survey) expected little change in sales in May. Just 5% expected an improvement, but only 13% expected things to get worse. Exporters were a bit more pessimistic: 18% expected a fall, while 69% expected things to be much the same.
Another equally unalarming statistic was the unemployment rate. In the first quarter this was unchanged, year-on-year, at 8.4%.

As neither the industrial output nor unemployment figures meet the apocalyptic claims made by government critics, these critics continue to allege that the government is manipulating the figures. This maybe the case, and with crucial elections imminent there is a considerable temptation for the government to do so, but there is no conclusive evidence that all the country's economic statistics are fraudulent. To be fair, although unemployment was almost unchanged year-on-year, the jobless rate rose when compared to the fourth quarter of 2008, when it stood at 7.3%.

President Cristina Fernández de Kirchner has made preserving jobs a top priority since the economy started to slow. She has unveiled public works projects to try to avert job losses and launched cheap loans to maintain consumer spending. Unemployment has been falling as the economy grew by at least 7% in each of past six years as it recovered from the ending of convertibility between the peso and the US dollar in 2001. In the economic crisis that followed the end of convertibility, unemployment surged to 21.5%.

Another mildly encouraging figure is the steadiness of tax revenues. In April tax collection rose by 14% year-on-year to Arg$23.05bn (US$6.2bn). President Fernández announced the good figure a day early, on 5 May. The government argues that the strength of the fiscal figures suggests that the economy is doing better than critics fear. So far this year, tax revenues have continued to rise. In January the rise, of 11%, was the lowest since April 2006. Overall tax revenues for the first four months came to Arg$91.7bn, 15.7% above the figure for the first four months of 2008.

The government's critics argue, however, that the jump in April is nothing compared to previous Aprils. In 2007 the year-on-year increase in the tax take was 33%, while in 2008 it was 52%.The government's critics point out that the figures are flattered by an Arg$1bn contribution from the state takeover of the private pension system.

Soya: The soya price surged over the Arg$1,000 per tonne mark at the beginning of May. This is the highest prices have been since the conflict between the government and farmers pushed prices up in June 2008. Prices are rising because there are planting problems in the US and demand from China appears to be strong. The weakness of the dollar against most currencies (apart from the Argentine peso) is another reason for the rise of soya. Commodity prices tend to rise when the dollar weakens. The surge in prices has increased supplies onto the local market.

Construction: Construction output fell 2.7% in the first four months of 2009 compared with the same period of 2008. In April activity was 3.6% up on March 2009, but 3% down on April 2008. In 2008 construction activity rose 5% over 2007.
Inflation: In April inflation was 0.3%, half March's 0.6%. This brought the official rate to 1.9% for the first quarter and to 5.7% for the past 12 months. In 2008 the official inflation rate was 7.2%, though independent economists say the actual rate was over 20%.

In mid-March the colón jumped against the US dollar, pushing the exchange rate to its highest level since July 2008. The unit was nudging C$520/US$ on 15 March.

The main reason for the jump is a decision by the central bank to raise wholesale deposit rates by half a percentage point on 12 March. A contributing factor to the colón's strength may be the government's decision to allow foreign capital into the insurance market. The third factor is that corporate tax payments, due by the end of March, tend to lead to an appreciation of the colón every year, as companies sell dollars to buy colones to make the payments. Turnover in the local foreign exchange market is pretty thin: even on an active day, less than US$17m is traded on the colón/dollar market.

The move in the exchange rate on 15 March was the biggest jump in a day since 21 November 2007, when the dollar fell C$19. On 15 March, it fell C$12. So far this year, the dollar has fallen C$32 and since August 2009 it has fallen C$61. This is almost nothing compared to the appreciation of both the Brazilian Real and Colombian peso against the dollar over the past 12 months.

The central bank has tended to avoid intervening in the foreign exchange market, preferring to let the market find its own level. The bank said in mid-March that it had not been intervening in the market to move the exchange rate but said that it had been buying and selling dollars as part of its role as the bank for the public sector.

The bank increased interest rates on short-term electronic deposits from 7.65% to 8.15% on 12 March. Such deposits are also liable to an 8% income tax. Three year deposit rates also went up from 8.2% to 8.7%, while the rate on five year deposits increased from 10.5% to 11%. Deposits of over five years now pay 11.55%. The bank had announced the new rates on 20 February.

Finance minister: The new president-elect, Laura Chinchilla, who takes office in early May, has started to draw up her cabinet. Her finance minister will be Fernando Herrero, currently the public services minister. He was previously been finance minister in 1994-1996.

Herrero confessed that he was unsure where the government would raise the money to meet Chinchilla's campaign promises. He promised that there would be no shock measures, though he did say that the tax burden would have to rise. He pointed out that in 2009 the tax burden fell to 14% of GDP, from 17% or 18% in previous years. Chinchilla will also have to appoint a new central bank president, following the announcement by incumbent Francisco de Paula Gutiérrez of his intention to resign at the end of the current administration.

Herrero said that his priority would be to ensure strong and sustainable economic growth. He said that he would look at finding new sources of revenue and examine potential savings. In January, the public sector deficit stood at C$87bn (US$167m).

Inflation: In February the consumer price index rose 0.69% month-on-month, well down on the 1.63% increased recorded in January. The February rate brought the 12-month rate to 5.6%. In calendar 2009 inflation was 4.05%.

President Juan Manuel Santos is focusing on agriculture, infrastructure and energy to drive the economy forward. The big omission from his plans is exports, which had been the main engine of growth under his predecessor, President Alvaro Uribe (2002-2010).

The long term goal is to get Colombia up the global economic rankings. HSBC, a UK-Hong Kong-based international bank, reckons that if Colombia managed to grow at an annual average rate of 4% over the next 40 years it would be one of the world's 30 biggest economies by 2050, with a GDP of US$725bn. Currently the economy's GDP is around US$285bn.

HSBC is forecasting that by 2050 the country's population will have grown from 46m currently to 63m.  Over the same period GDP per capita will increase from US$3,052  in 2010 to US$11,530.

Santos likes the HSBC forecasts but underlined that achieving it will mean spicing up the annual growth rate. He argues that the targets are achievable because the big expense on security, which had acted as a break on economic growth, is becoming a thing of the past.

Although Santos is keen to emphasise the country's agricultural potential, it is most likely that its growth will come from the further development of its energy resources. Ecopetrol, the state oil company, has upped its game since it was partially privatised. Foreign mining companies, such as Drummond and Xstrata, have made Colombia the world's fourth biggest coal exporter behind Australia, Indonesia and Russia.

The latest economic figures, for the third quarter, showed the economy slowing. In the third quarter the economy grew 3.6% year-on-year. Local economists had expected a growth rate of 4.5%. The main problem was a 10.5% contraction in the construction industry, which was hit by a drop in orders for public infrastructure. Santos's emphasis on infrastructure aims to reverse this.

The best performing sector is mining, which was 10.3% up in the third quarter year-on-year.

For the first nine months of 2010, GDP rose 4.1% over the same period of 2009. The heavy floods in December and the first part of 2011 are likely to mean that growth in the final quarter of 2010 and the first quarter of 2011 will be lower than expected. Some local economists claim that the bill for flood damage and losses will top US$5bn. By mid-January at least 300 people had been killed by the floods, with 2m left either temporarily or permanently homeless.

The government, however, is sticking to its forecast of 4.5% growth for 2010 and 2011.

Inflation: Consumer price inflation in 2010 was 3.17%. This was 1.17 percentage points above the 2% rate recorded in 2009. The figures come from the Departamento Administrativo Nacional de Estadí­sticas (DANE). The 2010 figure was a little bit worse than the central bank's targeted 3%.
The sector with highest inflation rate was the health sector, where prices rose by an average of 4.3% in 2010.

Tony Saca, the presidential candidate for the ruling rightwing Alianza Republicana Nacionalista (Arena), has built a commanding lead over Shafick Handal, the veteran former guerrilla leader running for the leftist Frente Farabundo Martí­ para la Liberación Nacional (FMLN), according to a Cid Gallup poll carried between 15 and 19 August.

This is a significant turnaround. The previous poll, taken before Handal won the FMLN party primaries at the end of July, had the FMLN as clear favourites to capitalise on their success in the legislative elections last March in next March's presidential elections.

The poll confirms the widely held suspicion that Handal is far less popular than the party for which he is running. A total of 44% of respondents said that they would vote for Saca, while only 20% favoured Handal. Even more damning, in a run-off between the two, Saca would receive 57% backing; Handal 21%, the poll suggests.

Handal seems to be more concerned about bolstering his image abroad than at home. He is planning his second trip to the US in less than a month in early September in an effort to persuade congress that an FMLN government would maintain close relations with the US.

Meanwhile, former Mayor of San Salvador Héctor Silva announced yesterday that he will run for a coalition of the Partido Demócrata Cristiano (PDC) and the Centro Democrático Unido (CDU), which together account for ten seats in the 84-seat legislature. Silva is a former member of the FMLN, who left because he favoured a more reformist stance. He received a notable 9% of support in the Cid Gallup poll, which was taken before he officially announced his candidacy. His popularity on the left could put a further dent in Handal's presidential aspirations.

For a more detailed analysis of the forthcoming elections in El Salvador see our latest Caribbean & Central America report

US negotiators rejected the proposal put forward by the Brazil-led Mercosul that the Free Trade Area of the Americas (FTAA) should be scaled down. Mercosul made the proposal at the preparatory meeting for the FTAA ministerial meeting in December in Miami. The US was careful, however, to ensure that its rejection did not lead to a full-scale row with Brazil. It is mindful that another row, after the failure of the World Trade Organization (WTO) talks in Cancún in mid-September, would be a disaster.

The US and Brazil are co-chairs of the FTAA negotiations, which involve 34 countries of the Americas: Cuba is the only country not involved. The private preparatory meeting is being held in Port of Spain, Trinidad & Tobago and is at the level of senior officials and ambassadors. It is supposed to produce a report from the nine FTAA working groups which will form the basis of the next stage in the negotiating process, to be launched by trade ministers in Miami on 20 and 21 December.

There are now real fears that the FTAA will collapse because of the deadlock between Brazil and the US. Neither country seems prepared to compromise on its vision for the FTAA. Brazil wants a limited FTAA, which may boost intra-regional trade but which will not allow US and Canadian companies to dominate its market. The US argues that free trade in industrial products is the quickest way to speed up economic growth. It is unwilling to open up its agricultural markets or reduce subsidies for farmers. Given that next year is an election year in the US, taking money from farmers is out of the question, politically. The original US intention is to have an FTAA in place by the beginning of 2005.

The chairman of the Port of Spain meeting, Ken Valley, Trinidad's trade and industry minister, admitted that the negotiations, which started in 1998, have proceeded much more slowly than expected. There were, he said, 7,000 different issues on which there were differences.

The Mercosul idea is for a three-track (or three-tier) process. This would limit the trade liberalisation produced by Nafta and leave the settlement of tricky issues such as agricultural trade, investment and trade in services to the WTO. Mercosul encompasses Brazil, Argentina, Uruguay and Paraguay, with Bolivia and Chile as associate members. Its proposal was supported by most of the Caribbean countries, which are fearful about what a full liberalisation of their economies will produce.

The Brazilian/Mercosul idea is essentially that there would be a bilateral liberalisation in trade in industrial goods and agriculture between emerging market economies, but that the industrialised countries (ie, Canada and the US) would be left out of this process. As the US alleged, the Brazilian idea is really just an extension of the Aladi process, which has not done much to boost trade. Furthermore, the big issues of services, investment, government purchasing and agricultural subsidies would not be considered by the FTAA negotiations but left to the WTO.

Uruguay, a member of Mercosul, is however much cooler on the less ambitious three-track idea, and yesterday produced the equivalent of a minority report supporting the US proposal of a full-bore FTAA. Uruguay's document antagonised both Brazil and Argentina because it contravened their common policy that agricultural subsidy issues should be left to the WTO and not considered by the FTAA. Uruguay supported the US position that agricultural subsidies should be considered by the FTAA.

Another significant development in the meeting was a document supported by Mexico and Chile (which already have their own FTAs with the US), the Central Americans and the Dominican Republic (which are negotiating an FTA with the US), and Colombia (which would like to negotiate one), opposing the US and Canadian idea of a comprehensive or full-bore FTAA.

Colombia is, however, blowing hot and cold on trade issues with the US. Although it is lining up with the critics of the US over the FTAA, it has bowed to US pressure and announced that it will leave the Brazil-led G21, which pressed for the US to lower its agricultural subsidies at the failed WTO meeting in Cancún last month.

Whoever wins the presidential elections on 9 November will have a weak mandate. Firstly, the contest is almost certain to go to a second round on 28 December to be disputed by two from three: Oscar Berger, Alvaro Colom or retired General Efraí­n Rí­os Montt. Secondly, according to the latest poll by Vox Latina, the new president will need to be adept at horse-trading for, in common with other heads of state in Central America, he will not enjoy anything like a majority in congress.

The legislative elections look like being a close-run thing. The biggest single representation in congress is expected to go to the small right-of-centre party Gran Alianza Nacional (GANA) of frontrunner Oscar Berger, the poll suggests. GANA legislators received 21.8% of voter preferences, equivalent to 35 seats in the new 158-seat congress. Congress is to be enlarged from 113 seats to 158 seats. The left-of-centre Unidad Nacional de la Esperanza (UNE) of second-placed Alvaro Colom has 17.1% support (27 seats).

The big losers, according to Vox Latina, will be the ruling Frente Republicano Guatemalteco (FRG), which has a majority of 59 seats in the current 113-seat congress. This could be scythed to 20 seats, the poll suggests. The right-wing Partido de Avanzada Nacional (PAN) and Partido Unionista would return 11 and nine seats respectively, according to Vox Latina. The left would be poorly represented: the former guerrillas' Unidad Revolucionaria Nacional Guatemalteca (URNG) and Alianza Nueva Nación (ANN) would get a combined total of 11 seats. The remaining 45 seats would be split amongst the 10 smaller parties.

Meanwhile, President Alfonso Portillo has vetoed a controversial law passed by congress last week banning all productive activity, including that of the media, on the day before the election, on the day itself and the day after. The government came under fire from international electoral observers, the umbrella business organisation Cacif, the media and the supreme electoral tribunal (TSE) over the law. Electoral observers were especially concerned. They said that the law would impede voters going to the polls as no public transport would be running and service stations would be closed.

Figures published by the Bolivian central bank at the weekend show that the country's foreign debt burden is beginning to rise again. The debt burden has been falling for the past couple of years following the country's induction into the IMF's Highly Indebted Poor Countries Initiative (HIPC). Between 2001 and 2002, the Bolivian central bank reported that the country's foreign debt had dropped from US$4.46bn to US$4.2bn, thanks to the HIPC. In the first 10 months of this year, however, the debt has risen by US$490m to US$4.79bn.

The central bank said that the main reason for the increased borrowing was the persistent fiscal deficit. The finance ministry argues that it has little leeway to cut spending when revenues wither because 89% of the budget goes on non-discretionary spending such as wages and pensions and debt service payments. Borrowing is the only way, the finance ministry says, of meeting spending commitments.

The IMF yesterday approved its first review of the US$12.5bn loan deal signed with Argentina in September 2003. The Fund clearly has some major concerns; not only was the approval delayed by 40 days, but also eight of the 24 board members abstained from voting rather than endorse Argentina's progress under the deal.

The IMF's principal bugbear is Argentina's lack of progress in convincing bondholders to accept the 75% cut in the value of its US$88bn defaulted commercial debt. In a statement released yesterday the IMF asserted that 'The restructuring of Argentina's sovereign defaulted debt remains the most critical task for the coming period,' and called on Buenos Aires to deepen 'its relations with private creditors' before the second review, which is due to take place in March.  

This endorsement was hardly unanimous. Japan, the UK, and Italy, of the G7 nations, as well as Holland, the Nordic countries, Belgium, Switzerland and Australia, also from the IMF's executive board, all refused to vote on the issue. According to one source, this was more than was expected.

The news yesterday that three more investment banks have pulled out of the running to oversee Argentina's debt restructuring came, therefore, at an inopportune moment. Since Argentina dallied in choosing two banks for the task before the initial deadline in December 2003, the list of institutions from which it can choose has been dwindling rapidly; JP Morgan and Citigroup were the first to withdraw, to be followed yesterday by Morgan Stanley, Lehman Brothers, and Goldman Sachs. This leaves UBS as the only truly global bank on the list of potential candidates. The concern is that the banks are pulling out of the process because they don't believe the 75% debt cut to be a viable offer.

On other issues the Fund was more positive. It did have to grant two waivers where Argentina had failed to achieve minor stipulations of the agreements. Economy minister Roberto Lavagna was keen to stress that the issue of tariffs was not raised, and that the targeted primary fiscal surplus for 2004 remained at 3% of GDP. IMF spokesman Thomas Dawson described Argentina's economic growth - some 8% last year - as 'impressive', and it was acknowledged that some of the objectives demanded by the Fund had been overachieved.

As a result of yesterday's approval, the IMF will disburse US$358m to Argentina, while the World Bank will go ahead with a US$6bn four-year credit agreement.

Argentina will have to decide today whether to meet a US$3.15bn debt payment to the IMF or fall into default with the multilateral. There now seems no chance that the Fund will approve its second review of Argentina's loan deal, due to the continuing uncertainty over the government's proposals for dealing with its US$88bn defaulted commercial debt.

If Argentina does not meet the payment, approved loan disbursements are immediately suspended. Then follows a month grace period, and a year in which the IMF will register its complaints to Argentina. After a year or more, Argentina may be finally exiled from the IMF and isolated from the global financial community.

Default does not, therefore, mean instant catastrophe for Argentina. Indeed, this is not the first time it has missed a loan payment; in September last year the government refused to pay out US$2.9bn which fell due on 9 September, and instead waited for the IMF to agree a US$13.3bn three-year debt deal the next day. This explains why President Néstor Kirchner was yesterday playing down the importance of the deadline, saying that everything has been said on the subject.

However, the frantic phone calls between the government and the Fund suggest otherwise. According to the cabinet chief, Alberto Fernández, the government and the IMF have reached an agreement on two of the four demands made in a phone call by acting managing director Anne Krueger last Friday (5 March).

The major outstanding issue is the level of acceptance required on the commercial debt; Argentina has said it will be happy if between half and two thirds of its bondholders accept the proposed deal (a 75% cut in the value of the debt) while Krueger wants at least 80% to take up the offer. The economy minister, Roberto Lavagna, yesterday sent off a new draft agreement with the IMF with a compromise. He suggested that the banks organising the deal define the level of acceptance required, and that they do so at a later date. At the same time, Lavagna refused Krueger's demand for assurances that the banks chosen to help restructure the debt will stay with the deal to the end.

The government has, however, said it will be in touch with the Global Committee of Argentine Bondholders (GCAB) - another demand of the acting IMF chief. This has fuelled speculation that the government is at long last willing to negotiate its offer to a level closer to the 50% cut deemed acceptable by bondholders, but such a move is very unlikely.

The final issue - that of a deadline for signing the commercial-debt deal - seems also to have disappeared into confusion. The President said that the IMF was demanding that a deal be done by September this year before Argentina starts discussing the fiscal targets for 2005/06 with the Fund. The economy ministry denied Krueger ever asked for this. This discrepancy is all the stranger given that Kirchner is in constant contact with Lavagna over the current negotiations, in contrast to last September when Kirchner went it alone, sparking rumours of a major falling out between the two.

This is just one factor that suggests Kirchner is getting nervous about the IMF. Argentina simply cannot afford to lose touch with the IMF, thereby losing all the multilateral aid it needs to rebuild after the traumas of recent times. Kirchner might baulk at meeting a payment that equates to some 20% of its reserves, and will almost certainly not pay out today, but in the longer term his options are limited.

The G-7 is still very unimpressed by Argentina, especially the UK, Japan, and Italy, who have all said that they will once again not give their approval to Argentina's second review. Foreign minister Rafael Bielsa will meet the Italian government today in order to repair relations, but this is unlikely to give instant results.

The crucial thing for Argentina is that this time it does not have the backing of the US. It might not be as outspoken as the rejectionists in the G7, but there is little chance of President George W Bush intervening as he did in September. The consensus is that Argentina has used up all its favours with the international community and now has to start keeping its side of the deal. A defiant default might occur today, but Argentina is no longer holding a winning hand, and will soon have to give ground. The Fund is also keen to send out a message to the rest of the region that it is not to be pushed around.

Retailers claim that the economic recovery is doing nothing for them. The Consejo de Comercio reckons that sales of basic goods in the first quarter are down by between 5% and 8%. Only food sales are holding up

The president of Consecomercio, Jorge Botti, claimed that sales of everything from white goods to ironwork, shoes and clothes were still falling. He also warned that the government's crazy financial policies, notably issuing domestic debt to soak up excess bolí­vares was creating a timebomb which would explode within the next 18 months. He expected inflation to take off during this period

Botti pointed out that everyday items are starting to see their prices rise week by week. This points, he said, to an inflation rate getting close to 40%. He claimed that supermarkets were starting to lose sales to informal markets, known as buhoneros, where prices were higher but goods were available.

The government of President Néstor Kirchner is running out of patience with its critics. One of the president's top ministers, Julio de Vido, the planning minister, is currently attempting to have an outspoken opposition leader, Elisa Carrió jailed for libel. She called De Vido the president's bagman.

More seriously, Carrió has also called on 18 May for the government to rethink its appointment of Carlos Bettini as ambassador to Madrid. He is, she says, a lobbyist for the oil industry. Carrio claims that the government's self-proclaimed battle with the oil companies is a fiction and in fact they are in clear alliance. Kirchner comes from the oil rich state of Santa Cruz.

Carrió is the leader of the third biggest party in congress, the Alianza para una República de Iguales. The government points out that Bettini is a lawyer who built up good relations with the Spanish socialist party when he was in exile in Spain during the military regimes in Argentine. Four of Bettini's immediate family disappeared during the military government. 

Bettini is a controversial choice because he has dual Spanish and Argentine nationality.

Development: Retired General Lino Oviedo will fly into Asunción today, 29 June. He will be met by members of the armed forces, who will escort him to a military prison where he will await trial on several counts, including a coup attempt in 1996 and complicity in the supposed assassination in 1999 of then-vice-president, Luis Marí­a Argaña, and seven of his supporters.

Significance: Oviedo's return has been eagerly awaited by the press. Although the authorities have been keen to downplay its significance they have taken extensive precautions to prevent demonstrations that might spark any unrest. They have cordoned off the international airport of Silvio Pettirossi in Asunción and the domestic airport of Ciudad del Este, on the border with Brazil, where Oviedo and his entourage of legislators and Senators will catch a connection to Asunción . Oviedo shared a meal on 28 June with legislators from his political party Unión Nacional de Ciudadanos Eticos (Unace) in the Brazilian border town of Foz do Iguaçu, where he has been in exile since 2000.

A number of political commentators have criticised the government of president Nicanor Duarte for the extensive security operation, which, they argue, simply confirms Oviedo's self-fashioned image as the subject of political persecution. The spokesman for Unace, Velásquez Ugarte said that Oviedo was unconcerned about returning to face justice in Paraguay provided that his case was 'treated judicially and not politically.'