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Against the backdrop of a turf war between drug gangs that killed at least a dozen people in Rio, Brazil's senate is considering a bill severely restricting gun ownership which - most unusually - has cleared committee stage. 

On 17 July a bicameral congressional committee unanimously approved a bill introducing drastic curbs on gun ownership, as a first step towards a complete ban on private handgun ownership by 2005. This is a breakthrough: more than 50 pieces of draft legislation restricting gun ownership ran into dead ends in congress over the past decade, largely due to the lobbying efforts of the gun manufacturers (led by Taurus, a strong contributor to the campaign funds of congressional candidates). 

The provisions 

The draft 'disarmament' law brings together features from a number of the initiatives blocked since 1997. Chief among them are: 

-The minimum age limit for gun ownership is raised from 18 to 25. The applicant will have to undergo training in the safe use of guns and pass a psychological test. 

-Gun registration passes from state to federal jurisdiction. 

-There will be an amnesty for illegal guns, sweetened by compensation for the firearms surrendered. 

-Bearing guns in public places will be banned; infringement will be punished with imprisonment. 

-A referendum on an outright ban on private gun ownership is to be held in 2005 [a recent survey by Sensus shows 63.6% of respondents in favour of such a ban]. 

The problem 

Brazil has one of the highest homicide rates in the world: 26 per 100,000. The rate rose sharply in the biggest cities: to 54.2 per 100,000 in Rio, and 50.7 per 100,000 in São Paulo. Nationwide, the homicide rate among young people in the 19-25 bracket is 150 per 100,000. As a point of comparison, in the US rates range from 9 to 11 per 100,000. Seen from another angle, over the past decade almost 270,000 Brazilians have been murdered. 

Guns play an important role in this. Between 1979 and 2000, deaths caused by firearms have more than trebled; the WHO reports that this has overtaken car accidents as the main cause of violent deaths. According to one police estimate, there may be about 8m guns in private hands in Brazil, of which only 5m are legally registered. The promoter of the new gun law, congressman Luis Eduardo Greenhalgh, says that in São Paulo there are about 1.5m guns in circulation, of which only 1,180 are registered. 

Most of the illegal guns are smuggled in from Paraguay ? but the bulk of these are actually of Brazilian manufacture, legally exported and then sent back. The efficacy of restrictions on gun ownership is called into question by many who note that criminals are unlikely to apply for registration, and that the new rules do nothing to curb a very profitable gunrunning trade. 

Statistics are deployed on both sides of the argument. Police figures show that 95% of guns used in crimes are illegally held. However, as pointed out by the sociologist Antônio Rangel Bandeira, of Viva Rio, a civic organisation that campaigns for gun control, of all guns seized by police at crime scenes, 36% were originally bought legally - though most were later sold on illegally, or stolen, which made them illegally held guns at the time the crime was committed. He points out, also, that the transit from legally to illegally owned takes place on a grand scale: in one year in Rio, 10,000 guns legally bought by private security firms simply 'disappeared'. A telling detail: privately employed security guards outnumber the police in Rio.

Index variation and % change 25 July '03 - 01 August '03 

Buenos Aires (Merval): 
733.76 - 747.78 (1.91) 

São Paulo (Bovespa): 
13750.36 - 13129.81 (-4.51) 

Santiago (IPSA): 
1301.84 - 1333.51 (2.43) 

Bogotá (IGBC): 
2174.67 - 2123.12 (-2.37) 

San José (BCT): 
12174.16 - 12239.19 (0.53) 

Quito & Guayaquil (Interinvest): 
74.77 - 74.93 (0.21) 

Mexico (BMV): 
7349.96 - 7320.41 (-0.4) 

Lima (ISVBL): 
1855.95 - 1853.31 (-0.14) 

Caracas (BC): 
14132.84 - 13953.48 (-1.27) 

Source: Daily market reports.

Despite having reversed his predecessors' policy on opposing the extradition of Argentine human rights violators, President Néstor Kirchner said on 30 July that these people 'ought to be tried in Argentina'. He followed this up by urging the supreme court to speed up its ruling on the constitutionality of the laws that have shielded them from prosecution.  

That same day a survey by Ricardo Bouvier y Asociados showed that 64.9% of respondents also believed that trials should take place in Argentina; only 25.1% approved of trials abroad.

Former President Gustavo Noboa has sought (and been granted) political asylum in the Dominican Republic, to avoid prosecution on a charge of irregularities with government bonds during his tenure of office - which he claims is a politically motivated vendetta hatched by another former President, León Febres Cordero (1984-88).  

The government of President Lucio Gutiérrez has said it will not oppose Noboa's departure - indeed, that he doesn't even need a safeconduct to leave Ecuador (Noboa is taking no chances). Formal charges have not yet been filed against Noboa; the investigation is only just getting under way.

A Santo Domingo judge has ordered Editora Listí­n Diario, the holding company of jailed banker Ramón Báez Romano, returned immediately to its legal owners - in this case, Báez's father. The media conglomerate, the biggest in the country and including its oldest news paper, Listí­n Diario, was placed under administration after the collapse, due to fraud, of Báez's bank, Baninter (WR-03-22). This led to the dismissal of dozens of journalists and the closure of two newspapers.  

The government, claiming that it had ordered the takeover of the media outlets under the country's anti-laundering legislation, has said it will appeal. The prosecutor handling the case has already begun the restitution process.

Endesa, the power company building the controversial Ralco dam, has initiated the process for the eviction of the four Pehuenche families blocking the filling of the reservoir, by paying into a court the mandated compensation. The company expects to start the flooding in May next year, but must yet clear another hurdle: a suit challenging the legality of the environmental impact study which led to the project being authorised in the first place. Endesa is still hoping to avoid forcible eviction of the resisting Pehuenche, who have become international icons.

Coca cultivation in Latin America is now down to 173,100 hectares across the three main regional producers, Colombia, Peru and Bolivia. Of these countries, Colombia accounts for 102,000ha and 222,100t of dry coca leaf production. This in turn translates into 580t of potential cocaine. The assessment comes from the UN's Office on Drugs and Crime (UNODC), in its 2003 Global Illicit Drug Trends Report, published on 26 June. 

For coca, 2000 was Colombia's peak year, with 695t of potential cocaine output. For the entire region's drugs industry, 1996 was the top year, with 950t of potential cocaine output.

The other two coca producers are Bolivia, which has 24,000ha of coca bushes (half of which are legal, under Bolivian Law 1008) and 60t of cocaine, and Peru. Peru's coca acreage has been creeping up and now stands at 46,700ha, down from the peak of 129,000ha in 1992, but up from the low of 38,7000ha in 1998. Its production is well down on the peak of 460t in 1996, at 160t in 2002. 

The big change the UN reports is the 30% fall in Colombian coca acreage between November 2001 and December 2002. The overall figure, however, masks a geographical shift in cultivation, mostly northeast, but also to Nariño state in the west. The heart of the coca business used to be Putumayo, which borders Ecuador. Yet here, the coca acreage dropped by 33,000ha and in neighbouring Caquetá it fell by 6,000ha.

On the other hand, Guaviare, which sits above Caquetá, is now the most important coca growing area in the country: it increased acreage by 2,000ha, to 27,000ha. The second-biggest production area is now Nariño on the Pacific coast west of Putumayo, which saw an even greater increase (of 8,000ha) in acreage. The other big growing areas are in the mountains of Bolí­var and Antioquia in the north of the country and along the Venezuelan border in Norte de Santander and Arauca. 

Coca is harvested four times a year. The UN admits that its forecast for output is probably on the low side because it does not include uncultivated coca plantations, which it puts at 480t.

What is interesting is how steady coca prices have been, despite what the UN reckons are quite substantial variations in output. The price of coca base in Colombia did jump in 1994, to US$1,500 per kg, but since then it has been pretty stable for the past eight years at US$850 per kg.

AS MANY AS 27% OF MILITARY PERSONNEL DESERT 

A major storm has broken over the recent announcement that the chief prosecutor's office was offering a reward for more than 30 army deserters, mainly officers, who had switched jobs to become hitmen for a drugs cartel. On the one hand, the military have been arguing that they are committed to a major purge of wrongdoers; on the other, attention has been drawn to the huge scale of desertion from the military. 

Cleaning house. The defence ministry has come out with a report highlighting that it has conducted 299 courts-martial since President Vicente Fox came to office in December 2000. Of this total, 21 dealt with cases of drug trafficking, 33 with homicide, 26 with fraud and embezzlement and 3 with cases of 'abuse of authority causing death'. Guilty verdicts were handed down in 210 of the trials. 

The defence ministry notes that it has 30,000 members of the military assigned to counternarcotics tasks, and that since 2000 its successes had 'denied to organised crime' more than M$167bn (US$15.9bn). 

Desertions. The other side of the story is the ministry's admission that over the past three years there have been 48,407 desertions from the army and the air force -a number equivalent to 27% of the total strength of the two services. 

Some members of the military say that this is partly due to the high 'rotation' of military personnel: every year the army and air force jointly induct 79,248 recruits. This combines with low pay and the risk and temptaions attached to counternarcotics operations. 

Not yet Colombia. Further investigations into the activities of the former military men now working for the Gulf cartel have uncovered a clandestine communications network in Tamaulipas, used to intercept communications between government agencies. 

Investigators seized recording devices and lists of government officials' names, including 182 identified as receiving bribes. 

Despite the impressive scope of this organisation, procurator-general Rafael Macedo de la Concha has come out strongly against media claims that Mexico is becoming 'Colombianised'. 

For this to happen, he said, 'we would have to be facing an absence of authority and a lack of control over areas of territory by the state, which is not the case. The only aspect in which there might be some likeness with that South American country is the presence of armed groups of outlaws.'

Deploying the army to support the police has not halted Guatemala' rising wave of violent crime - indeed, many suspect involvement of the military in some crimes. 

On 9 July interior minister Adolfo Reyes announced that 400 troops would be ordered out into the streets to help the police contain a violent crime rate which, according to Reyes, had increased by 5% in the previous month. In the week prior to the decision, there had been 12 highly-publicised murders: four lynchings, six assumed gangland killings and two assassinations of opposition politicians. Also, several journalists and rights activists received death threats from the so-called 'clandestine security groups' widely believed to have links with the security services and the military. 

Minister Reyes said the army had been called in - not for the first time - because the national police (PNC) lacked the manpower to cope with the situation. The PNC has 20,000 officers, or one for every 600 inhabitants. His decision was strongly criticised by the human rights prosecutor and Minugua, the UN verification mission in Guatemala. They were not assuaged by Reyes's assurances that all operations would be under the command of the police. 

Poor results 

Reyes's plan was to increase patrolling, with combined military-police units, in areas known to be frequented by criminals. Its effectiveness began to be questioned right away. The very day after the joint-patrolling began, five killings (twice the statistical average) were reported in the capital. Four bore the signs of gangland killings, the other took place in a residential district flagged by the police as a hotbed of drug trafficking. The emergency services reported calls from more than 80 people injured in violent incidents. 

The political crime dimension 

Those were just the 'common' crimes. Political killings continued as well. The day after Reyes's announcement, Ismael Doní­s, coordinator of the youth branch of the leftist Unidad Nacional de Esperanza (UNE), was killed by unknown gunmen. He was the second UNE leader to have been murdered in less than a week (the first was Margarita de Rosales, local leader in San Miguel Pochuta, gunned down on 3 July). 

On 18 July, Ramiro Garcí­a, congressional candidate of the conservative Partido de Avanzada Nacional (PAN) was shot dead in Escuintla, 65 kilometres southwest of the capital. He became the tenth politician to have been killed since the beginning of July. The toll also included six members of the Alianza Nueva Nación (ANN) ? one of them badly mutilated - and another member of the UNE. Death threats were far more numerous, aimed mostly at journalists, but also at human rights activists and members of the judiciary. 

'Clandestine security groups'

Guatemala is still awaiting the establishment of a special commission of inquiry, with the participation of the UN and the Organization of American States (OAS), charged with looking into the 'clandestine security groups' considered to be behind most of the political violence. Some of the journalists who have received threats have openly claimed that high-ranking members of the military are responsible for these groups. They describe these military men as the real power behind the throne in Guatemala, and allege that they are involved in organised crime and drug trafficking. 

There is little doubt about army collusion in the riots recently organised by the ruling Frente Republicano Guatemalteco (FRG) to intimidate the judiciary and the media as the candidacy of their leader, former dictator Efraí­n Rí­os Montt, was being considered in the constitutional court. The chief of the defence staff is General Enrique Rí­os, son of the former dictator. 

This does not help make the military credible participants in the anticrime operation (quite independently from the organisational inadequacy of the military for police work). It is also fostering fears about the possibility that violence, or the threat of violence, will be a prominent feature of the run-up to Guatemala's 9 November general elections. 

The political context: full report and analysis in WR-03-30.

Carlos Slim, the Mexican billionaire reputed to be the richest man in Latin America, has triggered a heated debate in political and economic circles with a call for the government to start spending more and worrying more about growth than about inflation and budget surpluses. 

Mexico, he says, 'needs development models not adjustment models.' He argues that the authorities have acted 'intelligently' in monetary and fiscal matters in recent years, but that they have not done enough to ensure growth. In this, he says, official thinking in Mexico lags behind that of multilateral lenders like the IDB and the World Bank. 

Slim criticises the accumulation of international reserves by the central bank, which he says represent an enormous cost for the country. Instead of the current US$53bn, he maintains, something between US$35bn and US$40bn would be 'reasonable'. 

His tirade coincided in time and content with another from the opposite end of the entrepreneurial spectrum: the small-business commission of Concamin, the confederation of industrial chambers. Last week it urged the government to reorganise its promotional schemes to favour the development of the domestic market, and to make growth the top priority.

The latest batch of official statistics show that Mexico's economy is running out of steam. The official statistics agency, Inegi, reported that there was a 0.9% fall in economic activity in April. Earlier, the central bank had reported that there was negative inflation in the first half of June, following May's fall of 0.3% in prices. 

The Inegi figures were horrible: industrial production was down by 4.8% year-on-year. Manufacturing, the key sector of the economy, was down by 6.7%. 

The only reasonable bits of the economy were farming (up 2.7%, despite the worries about cheap imports at the beginning of the year) and services (up 0.6%). 

Inegi tried to put a gloss on the figures by saying that they were distorted by Holy Week, which fell in April this year. Ignoring this, output was 0.5% up on April 2002. 

What is worrying is that key sectors, such as construction, which seemed to be on the mend earlier in the year, are now floundering. April 2002 was the poorest month for the industry since President Vicente Fox took office in 2000. Yet output in April 2003 was just 0.4% up on this. 

Inegi's new data on construction companies show that those that are working are doing so at only just over 62% of capacity. 

In the private sector, too, there are those who are trying to talk up figures that do not look all that encouraging. Daniel Romero, president of the national council of the maquiladora industry, CNIME, proclaimed last week that the crisis in that sector had bottomed out, and that in 2004 it would recover the 300,000-or-so jobs lost in the past couple of years. 

Actually, Inegi figures show employment in the sector in January-April only 2.9% above the same period last year -and that was a low point. Employment in the maquiladora sector last year alone shrank by 10%. 

Exports in the first quarter of this year totalled US$17.8bn, a decline of 1.5% on the same period of 2002. With imports at US$13.3bn, the sector's net contribution in the first quarter was US$4.48bn.

BEATRIZ MERINO GETS POST AFTER STRING OF REFUSALS  

President Alejandro Toledo did manage to come up with a surprise in an early cabinet reshuffle which, in defiance of pressure from all quarters, kept all the 'heavyweights' of his earlier cabinet in their posts. The surprise was the appointment of Peru's first woman prime minister, Beatriz Merino.  

She was not his first choice, though he had let it be known that he would be picking someone from outside the ruling Perú Posible (PP). Among those who had been approached earlier were Luis Bedoya Reyes (former mayor of Lima and president of the Partido Popular Cristiano, PPC), Lourdes Flores, former presidential candidate and current leader of Unidad Nacional (UN) -and, according to some sources, the novelist and former presidential candidate Mario Vargas Llosa.  

The PP bloc in congress had unsuccessfully advocated the appointment of the outgoing president of the legislature, Juan Carlos Ferrero. The local media suggested that Toledo had even tried his luck with retired General Francisco Morales Bermúdez, a former military President.  

When the candidates were not blackballed by Toledo's party (Bedoya's case), they were simply unwilling to take on the job.  

The task of finding a new PM was proving so difficult that Toledo decided to stay away from the Andean Community Summit in order to finalise it. In the end, it appears that it was Vargas Llosa who suggested the name of Merino.  

The new PM. Beatriz Merino is a tax expert who obtained her master's degree at Harvard and went on to postgraduate studies at the LSE. Well known in hemispheric forums, she has led the IDB's programme for women leaders and has been associated with the Inter-American Dialogue and the Comisión Andina de Juristas.  

In 1990 she was elected to the senate under the Banner of Fredemo, the coalition backing Vargas Llosa's failed bid for the presidency. In 1995 she won a seat in the lower chamber of congress. Under Toledo, Merino has been serving as head of the Superintendencia Nacional de Administración Tributaria (Sunat), the tax collection agency.  

The rest. Apart from Merino's appointment, the reshuffle was a bit of a damp squib. Five new ministers were appointed, mainly to 'social' portfolios: Carlos Malpica (education), Alvaro Vidal (health), Ana Elena Townsend (women's affairs and social development) and Jesús Alvarado. The fifth, Francisco Gonzales, went to agriculture.

PERSONAL INVOLVEMENT IN TWO-PRONGED STRATEGY

President Lula da Silva has turned his attention towards one important group of erstwhile allies that has been turning into a thorn in the side of his administration: the Movimento dos Sem-Terra (MST, the movement of landless peasants). Hoping to steal their thunder, last week Lula unveiled a US$1.6bn credit package aimed at 'family' farmers -as his political operators manoeuvred to sidestep the more radical elements of the MST.

To launch his 'national plan for family agriculture', aimed at 1.4m families of small farmers, Lula invited to the Planalto palace an array of peasant organisations, excluding the MST. He underlined to them that this was the first time that loans are being handed out before sowing time.

As the ceremony was unfolding, several hundreds of MST members were launching land seizures throughout the country, including the Pontal de Parapanema, the site of past bloody clashes between peasants and landowners.

Personal intervention. Lula has announced that he intends to intervene directly in negotiations with the MST, starting with a meeting in the presidential palace in July. Until now, the negotiations between the government and the MST have been handled by the minister of agricultural development, Miguel Rossetto.

The MST leadership was not receptive to the government's overtures. The MST's national coordinator, João Paulo Rodrigues, said that the pace of invasions would not slow. Rodrigues claims that no landless families had been given land since Lula took office: Rossetto immediately corrected him saying that 3,000 families had been awarded land and the government expected to resettle 7,000 this year, and expropriate 200,000 hectares of idle land.

Pressure from landowners. How much scope there will be for diplomacy is anyone's guess. The landowners are losing patience with what they see as an excessively tolerant attitude on the part of the authorities.

Last week, the president of the União Democrática Ruralista (UDR), Luiz Antônio Nabhan Garcia, called for the government to clamp down on the MST. Himself a victim of an MST squat in 1996, Nabhan Garcia -like the government- is particularly concerned about the growing MST camp at Pontal do Paranapanema, which now has 3,600 families living in it. The encampment, which is in the state of São Paulo and away from the main areas of MST activity in the northeast, was only set up on 25 May. The MST wants 5,000 families in the encampment by the end of July.

The MST claims that it simply wants to put pressure on the government to speed up agricultural reform. The UDR argues that the MST is not interested in reform, only in revolution.

The UDR is increasingly worried about the MST's move down from the poor northeast to the richer lands in the centre and south of the country in the states of Minas Gerais, Paraná and Mato Grosso do Sul.

It claims that the government may have missed its chance to take preventative action and that the confrontation may lead to conflict. It argues that these areas should be excluded from the government's agricultural reform policies. Instead, it suggests, the reforms should focus on Acre, Pará, and Maranhão.

Peru's northern regions of Lambayaque, Amazonas and Cajamarca have launched a drive to form the first 'macro-region', to be known as Marañón. The three regional presidents have agreed to apply to the national electoral body, the JNE, for permission to call a referendum on the merger. They argue that by pooling their resources they can better ensure the growth and development of the area.  

This is in line with President Alejandro Toledo's strategy to dilute the power of the opposition-held regional governments. Toledo's enthusiasm for decentralisation was dampened last November when the opposition Partido Aprista Peruano (PAP) won 13 of the 26 regional presidencies, and his own Perú Posible (PP) won only one. He stalled on funding the regions or delineating the formal status of the presidents in the government hierarchy until early April, when they threatened to boycott a meeting with him unless he confronted the issues (WR-03-15).  

Peru's decentralisation committee (CND), presided over by legislator Walter Alejos, has advocated the formation of nine macro-regions, including Marañón. This is similar to an initiative launched in Colombia in April, where the Uribe administration encouraged departments to come together to form 'regions', establishing their own 'regional parliaments' (WR-03-15).  

Peru's finance minister, Javier Silva Ruete, did not await his confirmation by President Toledo (see main story,above) to announce that he would press ahead with his controversial tax proposals in a bid to balance the budget. His first attempt was thwarted at committee stage in congress (WR-03-24).  

Silva Ruete wants to raise NS752m (US$216m) to cover outlays not foreseen when the budget was approved last year. The figure includes NS192m (US$60m) to finance a NS100 (US$29) monthly salary increase pledged to teachers to end their recent strike (WR-03-22).  

The umbrella private-sector association Confiep has urged legislators to stand firm in rejecting the tax on telephone calls.

The decision to lower the benchmark interest rate for the first time in almost a year (albeit by only half a point, to a still high 26%) is being interpreted by many as a turning-point. The government is basically declaring victory in its effort to contain inflation, and can now shift the emphasis onto growth.

The change was marked by the launch, on 25 June, of two new subsidiaries of the Banco do Brasil to promote lending to small businesses. One is a bank, the other will be a finance company.

Reportedly, President Lula da Silva himself chose the name of the bank, Banco Popular do Brasil. It will aim to lend, and provide other banking services, to people whom the existing banks believe are not worthy of credit.

It will be separately capitalised from Banco do Brasil and will aim at serving the informal sector and people on low incomes. The target is to create links with 1m people in 2004.

The other subsidiary is a leasing and finance company, which will aim to provide the same sorts of people with access to big ticket items such as vehicles and farm machinery.

Another of the state-owned banks, Caixa Econômica Federal, announced this week that it was halving its monthly interest rates on small loans to poor people (micro-credit) from 5% to 2.5%.

It is not yet clear when this programme will start or how much money will be available under it: negotiations about financing it are still going on with the finance ministry. The Caixa expects heavy demand: it pointed out that its simplified account, (in which people do not have to prove their income, just their identity), which it launched three months ago, has signed up 200,000 people: this is well ahead of the target for the first year, which was 500,000.

Separately, the government confirmed that its long-term inflation target is 4%, significantly above the target set by the previous government of 3%. Antônio Palocci, the finance minister, admitted that the government would not meet its target next year.

Justice minister Márcio Thomaz Bastos last week told congress that Brazil has become one of the countries with the greatest number of homicides and armed robberies, ranked after Colombia, South Africa and Jamaica. His address opened the 'week of public security' launched by the government to muster support for an anti-crime drive.

Latin America has been a major beneficiary from the boom in commodity prices. In this section we will look at the prospects for three key commodities: oil, copper and soya. We take each of them to represent their particular sector: energy, base metals and agricultural commodities. Oil prices hit their highest level since 1990 on 3 May 2004. Ogres from past, such as the Oil Producing and Exporting Countries (Opec) are now jerking the strings of the world economy. Although the general view is that Saudi Arabia remains the driving (and not always pro-US) force in Opec, it is clear that Saudi Arabia and Opec's influence depends on its links to other important oil producers. 

Mexico and Venezuela (an Opec member, which only started obeying Opec's instructions on quotas under President Hugo Chávez ) were key allies to Saudi Arabia in imposing production cuts which pulled oil prices back from the sub-US$10 a barrel levels of 1998. Both Mexico and Venezuela have long featured among the top five oil exporters to the US.

Venezuela is likely to continue with the policy of maintaining Opec discipline to hold prices up. The big threat to this policy, opening up the oil industry to foreign investment, has receded under President Chávez . Although the state oil company, Petróleos de Venezuela, talks about increasing its production capacity, there is little sign of this happening. Indeed, the International Energy Agency reported that PDVSA's oil output was 2.16m bpd in February. This is down 60,000bpd on January. 

The official figure for PDVSA's output in February is 3.17m bpd, still some way below production levels before the strike-cum-lockout at the end of 2002 and beginning of 2003. The difference between the two figures is due to the fact that the official figure includes gas and oil distilled from the Orinoco tarbelt. 

Mexico, however, is showing signs of changing its oil policy. Its state oil company, Petróleos Mexicanos, is now getting the investment it needs to expand its output. Pemex had record net exports in 2003 of US$15bn. Total exports were around US$17bn, the company said. It said that export volumes were 1.84m bpd of crude oil, 8% up on 2002. 

Pemex's average daily production of crude oil in 2003 was 3.37m bpd. This was the highest ever recorded by the company. The company was also pleased to have produced more natural gas for the first time since 1998. In 2003 it produced about 4.5m cubic feet a day. The company claimed that its heavy investment in exploration and production was starting to pay off. In 2003, it found 41 new oilfields. The company claims that its replacement rate (ie the amount of new oil it found compared with the amount of oil it produced) jumped to 45%. In the 1990s the replacement rate had averaged 26%. In 2004 the company expects to invest another US$10bn in exploration and production.

The dilemma for Mexican policymakers is that while high oil prices help to balance the budget, they slow down the US economy, to which the bulk of Mexico's manufactured exports go. Around a third of the government's revenues come from oil royalties and taxes. Successive governments have wanted, but failed, to wean themselves off oil rents. Ironically, it could be a President from the oil-rich state of Tabasco, probably Andrés Manuel López Obrador, but possibly Roberto Madrazo, who could end the use of oil as an economic wet nurse.

The higher Mexico's oil production goes, the greater the temptation for policymakers to make up for lower prices by increasing volumes. The added kicker for Mexico is that lower oil prices should boost the US economy and thus demand for its manufactured products. The increasing hostility in the US to the House of Saud, shown by John Kerry's criticism of it and the Bush administration's embarrassment at the links between some of its members and prominent Saudis, is likely to shift the US towards a regional (or western hemispheric) energy policy. Kerry has hinted that this is way the US has to go, though he has yet to flesh out the way of achieving this. 

A regional energy policy will increase US demand for Mexican, and possibly, Venezuelan oil. The US has already looked at the idea of importing gas from South America and at least one major project, to use Australian gas to produce electricity for the US in Mexico, has an even greater global reach. 

The rise in Chinese demand for oil has been the main factor in pushing oil prices higher. If Iraq, or the Caspian, does not start producing a lot more oil in the next 18 months of so, Opec will have to produce at its stated capacity just to meet world demand. Simply from a strategic point of view the US is likely to seek oil suppliers from the region, which is now one of the more stable parts of the world. With the substantial exception of Colombia, political terrorism is almost unknown in the region. 

Currently the US imports around 9.6m bpd. Around 5m bpd come from the US. By 2008, Latin America could be supplying the US with an extra 3.5m bpd (say 1.5m bpd from Mexico; 1m bpd from Venezuela and 1m bpd from smaller producers such as Ecuador, Trinidad and Tobago, Argentina and Brazil). This increase may be disproportionately important because US oil consumption is unlikely to increase substantially. If Kerry is elected policies to lower carbon emissions are likely to be imposed. 

Copper
Copper is a crucial export for Chile, and to lesser extent Peru. It is also a significant non-oil mineral export for Mexico. Brazil and Argentina have both developed copper mines in the past five years to help meet their domestic demand. On the demand side, China has replaced the US as the main market for the red metal. So when China's monetary authorities tightened monetary policy at the end of April to try to bring the economy back under control, the price of the metal plummeted. 

Even evidence that the US was likely to take up some of the slack created by slower economic growth in China did little to pep-up prices. US housing starts in March were 6.4% higher than they were in February. The construction industry uses around 40% of the copper consumed by the US.

The surge in US demand means that the world copper market will still probably run a substantial deficit this year. Unfortunately for copper bulls, there is plenty of mothballed mining capacity waiting to come back on stream. The world's biggest copper mining company, the state-owned Chilean mining company, Corporación del Cobre, which accounts for 12% of world output, is already increasing its production by 14% this year. By 2009 it expects to be producing 2.3m t a year. In 2003, it produced 1.56m t of fine-copper equivalent. Furthermore, high copper-prices, and more efficient mining and smelting techniques, may prompt renewed interest in the Central African copper belt and in developing deposits in the former Soviet Union.

Our assumption is that by 2008, Codelco alone will probably be supplying between 15% to 20% of the world's copper. Other Chilean mines will still probably match Codelco's production, at least until 2008. So by 2008 Chile should still be producing between a third and 40% of the world's copper. 

On the demand side it is clear that China has been a huge factor in maintaining copper demand in the past 10 years. China has taken up some of the slack in the market created by the delicate state of the Japanese economy. Japanese demand may return, but the trend towards silicon-based miniturisation and wiring is likely to put a cap on demand. It is also likely that the spectacular growth in Chinese demand is now over. China's demand for copper has increased six-fold since 1990. In 2003 the country used 3m t, up from 500,000t in 1990. We doubt that China's demand for copper can continue to rise at the rate of the past 15 years. World copper demand was 15.44m t in 2003. 

Our expectation is that copper demand will flatten off. In the US, we do not expect more houses to be built, though the comparatively impermanent nature of most houses built in the US means that there will be a fairly constant demand for copper. Scrap may become more important as a source for copper in construction, especially if President Kerry is elected and environmentalists hold greater sway.

Soya
The outlook for soya is dependent on three variables: US agricultural policy, China's economic development and the weather. Brazil and Argentina, taken together, have become the world's biggest exporter of the protein which is used to feed livestock. One of the first consequences of economic growth is an increase in meat consumption. This in turn leads to a demand for animal feed. Soya has replaced fishmeal (another significant Latin American export, from Chile and Peru) as the staple protein in animal feed. 

In 2003/04 Brazil and Argentina grew around 92m t of soya. The US crop, harvested in 2003, weighed in at 85m t. China is by the far the most important market for soya products. Its imports of soya have doubled over the past three years to 21.5m t.

Unlike energy and metals, we expect China's demand for soya to hold up. The economy's peak period of rapid growth, powered by a burst of export-led manufacturing may be over, but Chinese demand for a better diet is likely to endure. 

One of the issues with soya is whether genetically modified (GM) soya, grown largely in Argentina and the US, will find greater acceptance amongst consumers. China has been one of the pickier markets, preferring Brazil's (ostensibly) non-GM soya to Argentina's and the US's. 

Soya is an environmentally damaging crop. In Argentina, environmentalists claim that the virtual mono-culture of oil seed is wrecking the pampas and that GM-soya is helping to create herbicide-resistant weeds. Some environmentalists even go as far as to claim that the soil is dying and dead weeds are not rotting because they have become pickled with herbicides. 

In Brazil, soya is grown along the southern frontier of what used to be Amazonia. The lure of the easy money to be made from the crop has spurred the destruction of Amazonia. 

Our view is that these problems mean that Latin America's output of soya has probably peaked. Over the next five years it is much more likely that soya will be grown in rotation with other crops and thus output levels will be a bit (15% to 20%) lower.

KIRCHNER VINDICATED AS NAZARENO STEPS DOWN

It is now clear that President Néstor Kirchner did not miscalculate in his campaign to shake up the supreme court. After making a show of willingness to fight to the bitter end, court president Julio Nazareno submitted his resignation on 27 June.

He did so just before the impeachment commission of the chamber of deputies took a vote on the 22-charge accusation sheet that was to be the basis for his impeachment. His letter of resignation laconically cited 'personal' reasons, but a member of his team of lawyers, Gregorio Badeni, said he had decided to go because he was being denied the right to defend himself.

Political analysts and commentators were almost unanimous in assessing that this episode has greatly strengthened Kirchner -though some critical jurists have argued that his methods had not done much for the respect due to the main institutions of the state).

Kirchner clearly saw the outcome as an endorsement of his approach. 'They had told us,' he said, 'that it was impossible to buck the theory of negotiated compromise, that we had to reach a consensus with the established power. That was the worst that could have happened, which is why we have bet strongly on change.'

The final verdict will have to await the appointment of Nazareno's successor. Kirchner (who as governor of Santa Cruz 'stacked' the provincial supreme court much as former President Carlos Menem did at the federal level) has promised to introduce a selection process of 'unprecedented transparency'.

The only details so far about this new procedure were provided by prime minister Alberto Fernández: he said the proposed nominations would be open to objections from the public at large.

Kirchner has a month in which to come up with a name -and perhaps another month in which to get his new system enacted.

The other justices. The impeachment commission has announced that it intends to go ahead with the evaluation of the charges filed against the remaining nine supreme court justices. Nazareno was going to be impeached on the strength of 22 charges. Though the number of accusations is no gauge of their gravity, it is worth noting that the charge sheets of all but one of the remaining justices is far more voluminous. Enrique Petracci is at the bottom of the scale with 51 charges; Eduardo Moliné O'Connor at the top with 67 (see table).

It is an indication of the current state of the judiciary that Juan Carlos Maqueda, who only joined the supreme court last December, has already had six charges filed against him.

Justice minister Gustavo Béliz ventured this last weekend that the next to be out through the mill might be Moliné O'Connor and Guillermo López.

On 24 June, during a visit to Buenos Aires, IMF managing director Horst Köhler confirmed what we anticipated last week: that the IMF and Argentina had agreed that the next step should be a medium-term agreement.

According to Köhler, the proposed deal will not represent a continuation of the existing arrangement, which expires at the end of August, nor will it be a long-term debt solution. Rather, it will be 'a clear programme for both parties [...] of medium length, or three years.'

A three-year programme would just about cover the remainder of President Néstor Kirchner's term of office.

Köhler said the Fund had underestimated the vigour of Argentina's recovery, then warned that its slowing pace over recent months was a reminder that means had to be found to strengthen that growth and consolidate it.

He said his visit had given him a better understanding of Argentina's present situation and admitted that the IMF should have listened more carefully to the Argentines -only to qualify this by saying that the Fund should not be made the scapegoat for situations the Argentines themselves had created.

This went down very badly at a meeting with NGOs which had been intended as a public-relations exercise.

Köhler promised that he would 'design' a programme that will be 'clear' to both sides. The usual line is that it is the member country that designs the programme; the IMF only 'helps'.

After Köhler's departure, President Néstor Kirchner called for the IMF to conduct a 'healthy self-criticism' of the policies it had recommended in the past, and warned that Argentina would not accept impositions. 'From now on,' he said, 'the time is over when they could come and tell us off.'

Prime minister Alberto Fernández said that Kirchner had told the IMF chief that the only possibility of reaching a medium- or long-term agreement 'entailed ensuring first a process of development of the Argentine economy.'