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Off-the-cuff government responses to rising unemployment attract criticism and clarify very little about policy. 

Losing one's job should be seen as a challenge; the unemployed should try their hand at setting up their own business. That was the message from economy minister Fernando Canales at a time when the increase in unemployment to its highest level since 1999 has become a major political issue. The minister's exhortation, undoubtedly well intentioned, was not phrased all that felicitously. `Don't be upset,' he said; `it happens in the best families: after 20 years of work our boss tells us that our position is no longer necessary and we must resign.' 

The ruling Partido Acción Nacional (PAN) rushed to dissociate itself from Canales's remarks, which were described as `absolutely unfortunate' by the PAN's bloc in the senate. Then labour minister Carlos Abascal joined in, trying to find comfort in international comparisons: `We can't be satisfied, because there is still much to do, but we can compare favourably the Mexican unemployment rate with that of any country similar to ours.' This is only relatively so: if others were to count their unemployed a sparingly as Mexico, their rates would be much lower too. Abascal called on the one hand for more `flexible' labour legislation (a euphemism for making it easier to dismiss people) and on the other for a `strengthening' of the domestic market. `The country's design,' he said, `was thought up with exports in mind, without granting any importance to the domestic market.' 

The President's version 

Next to make his contribution was President Vicente Fox, who came up with a more sensitive version of what Canales had said. He said the changarros (small informal vending stands) were a good response to the loss of formal jobs. `Some people,' he said, `despise these small businesses, saying that they are informal, illegal, and trying to make them disappear. We think, on the contrary, that they are a manner of dignifying people, of dignifying the women who proudly and passionately set up these small businesses to bring better earnings to their families.' 

Fox went on to say that his ultimate aim was to `move towards the total legalisation of these small enterprises, so they become part of the nation's productive apparatus, run by first-class Mexicans.' The bit about legalisation (which entails turning the currently informal businesses into taxpayers) was ignored by the private-sector think-tank Ceesp, which added to its weekly report on the state of the economy a broadside against the government's pronouncements on employment. 

`The government,' said Ceesp, `seems quite satisfied with the increase in jobs outside the formal sector, to the point of stating that nobody should feel upset upon becoming unemployed.' This attitude, says the think-tank plays with high-risk elements: the growth of informal employment aggravates the crisis in the social security system and threatens the stability of public finances, potential economic growth and competitiveness.

Armando Valencia, head of the Millennium cartel, was engaged in a violent turf war with rival organisations. 

On 16 August, Armando Valencia (el Juanito) became the third major Mexican drug kingpin to be captured in a year-and-a-half. His downfall appears to have been the result of a chain of events triggered by the arrest of Osiel Cárdenas, reputed head of the Gulf cartel, in March this year. According to the man overseeing the joint military-police counternarcotics operations, defence minister Clemente Vega, the removal of Cárdenas from the scene created `a vacuum' which the rival cartels are now trying to fill. `They are fighting for the market,' he says; `to dominate certain areas that have become headless [...] We can't stop that. I'd like more investigation to determine exactly which groups are operating where.' 

Still, the turf wars appear to have flushed out drug gangs that had been keeping a low profile. Vega says the arrest of Valencia and seven of his lieutenants was `linked' with a major gunfight between military-police units and traffickers in the border city of Nuevo Laredo earlier this month (an episode that claimed five lives and left six injured) and the subsequent suspension of 198 of the city's 700 policemen to investigate their connections with organised crime. The implication was that that trail led to the restaurant in Tlajomulco, near Guadalajara, where Valencia was captured. 

[Chief prosecutor Rafael Macedo tells a slightly different story: he says the trail began earlier, with the capture last year of some of Valencia's men.] 

The Millennium cartel 

Luis and Armando Valencia, brothers, set up an export firm in Guadalajara, capital of Jalisco state, in the 1980s, selling avocados to the US. US sources say that el Juanito started working for the notorious Amado Carrillo Fuentes (the `Lord of the Skies') and stayed with him until he died in 1997 as the result of a plastic surgery operation. 

He then set up his own organisation, known as the Millennium cartel, establishing very close links with Colombian cocaine producers. This organisation is said to be responsible for about a third of all the cocaine entering the US (a figure which must be treated with caution, if only because nobody knows how much cocaine enters the US). The Millennium cartel earned itself a reputation for extreme violence, and spread out from its base to the states of Michoacán and Colima. In 1999 drug-trafficking charges were filed against Valencia in the US. 

Turf control has never been absolute. At present Mexican police say that in Jalisco, apart from the Millennium cartel, they have detected the presence of elements of the Tijuana, Sinaloa and Gulf cartels, as well as the outfit of the Amezcua Contreras brothers, reputedly specialists in amphetamines. The recent turf wars have involved almost all of these groups in the states of Jalisco and Michoacán. 

Before Valencia, the Mexican authorities captured Benjamí­n Arellano, reputed head of the Tijuana cartel, in March last year; Osiel Cárdenas of the Gulf cartel in March this year; and Manuel Medina Campos, reputedly the operations chief of the Sinaloa cartel, in July. Defence minister Vega warns, `People think that you arrest four or five and that's it - but no, it isn't.'

Gordillo announces an agenda to eliminate `the excesses of neoliberalism' while keeping its `good aspects'. 

Right up to the immediate aftermath of the midterm legislative elections, the opposition Partido Revolucionario Institutional (PRI) was talking about reaching a consensus with the government on the reforms it had been unsuccessfully trying to push through congress. No longer. On 13 August the PRI's new line emerged: no support for Fox's reform proposal, but instead the PRI's own agenda. And the message was conveyed by none other that PRI secretary-general Elba Esther Gordillo, the PRI leader deemed to be closest to Fox and, particularly, to his wife Marta Sahagún. 

According to Gordillo, the PRI will propose an economic programme which will reject `the excesses of neoliberalism' without abandoning its `positive aspects' - a neat way of sidestepping the fact that it was the PRI that introduced neoliberal policies to Mexico. 

At the top of the PRI's new legislative agenda, she said, will be the design of an improved agrarian policy, measures to reduce unemployment, and `reducing the cost of democracy for the citizens.' 

Fox's immediate response was a call for congress to approve his proposed reforms of energy legislation so as to allow greater private participation.

ECONOMY | Industry flattens QII growth. The virtual stagnation of economic growth in the second quarter was largely the result of three consecutive months of declining industrial output - itself reflecting poor US demand for Mexican industrial goods. In the first quarter, industrial output expanded by only 1.8%, way behind the 5.9% recorded in construction and a point below the 2.8% recorded for the services - the two sectors that have been left carrying what growth there was in QII. 

The second-quarter result is likely to lead the government to lower its growth forecast for this year from 3% to 2.1%. 

INVESTMENT | Foreign holdings in Bolsa up 17%. Foreign investment in the Bolsa Mexicana de Valores (BMV) and ADRs in the first eight months of the year reached US$53.8bn, 16.99% above the level at end-2002. The increase in July was 3.6%; sign of a tailing-off. Variable-yield holdings in July accounted for 99% of the total, and were up 15.9% on the same month last year. Investment in ADRs, 61% of the total, was up 14.2% in the year. 

WATER | Texas cutoff threat dismissed. Federal officials in Washington dismissed last week's threat by Texas governor Rick Perry to push for a cutoff of Mexico's water supply if it did not bring its water debt up to date. Mexico currently owes the US 1.4m acre-feet of water from the shared Bravo (Grande) and Colorado rivers (an acre-foot measuring the amount needed to flood an acre one foot deep). Even if the federal government were to take Perry up on this, officials say, there is no practical means of cutting off the water, at least not immediately. Some weeks ago, Mexico's foreign ministry said that Mexico would honour its water debt commitments for this year and the next, and begin to pay off the backlog.

Costa Rican bar association sees threat to `sovereignty and values' in updated version of 1960s experiment. 

The Colegio de Abogados de Costa Rica (the national bar association) has drawn attention to a US regional security initiative that had remained largely under the radar: the establishment of an International Law Enforcement Academy (ILEA) for Latin America in San José. This is the result of an agreement signed between the US and Costa Rica in June last year, which has yet to be ratified by the Costa Rican congress (it caught the lawyers' attention as it began to move last week at committee stage). 

The president of the Colegio de Abogados, Manuel Amador, summoned foreign journalists to tell them that the project was `a threat to Costa Rican sovereignty and values'. Actually, all Costa Rica provides is the premises and the administration. The school is to be run by the US State, Treasury and Justice departments, and the DEA, on a pattern already in use in four similar institutions (in Bangkok, Budapest, Gaborone and Roswell, New Mexico). 

Its purpose, as explained at the time to the US Congress, is to provide training to members of the Latin American police and security services, and their judiciaries, in dealing with `transnational crime issues, such as drug trafficking, money laundering, sexual exploitation of children, and violence against women [as well as] the terrorist elements who often use criminal enterprise to accomplish their goals.' The academy's director and deputy director will be US employees, the staff Costa Ricans, and the instructors professionals from the entire region. 

The Colegio de Abogados, drawing from the papers before the Costa Rican congress, say the curriculum also includes people trafficking, illegal migration, cybercrime, drug trafficking and the prevention of terrorist attacks. 

At the time the agreement was signed, there was some concern that the ILEA would be confused by the public with the old School of the Americas (now Western Hemisphere Institute for Security Cooperation), which trained many of those Latin American military officers who installed repressive régimes in the 1960s and 1970s. In the immediate region, though, another association could prove more damaging: with the Inter-American Police Academy (IAPA) established in Panama in the early 1960s to `train Latin American police officers in modern police administration and techniques, as well as how to counter uprisings.' After the `Panamanian flag riots' of 1964, the IAPA was moved to Washington, where it was subsumed in the International Police Academy (IPA).

While Costa Rica ponders ratification of the ILEA agreement (see above), training to deal with kidnappings has already begun at what is to become a permanent centre in Colombia. Under a recent bilateral agreement the US has begun to train some 400 officers of Colombia's Departamento Administrativo de Seguridad (DAS, secret police), chief prosecutor's office and the anti-kidnap units of the national police and armed forces. Run from the US embassy in Bogotá, the training centre will be permanently housed at the headquarters of an army battalion. Complementing it will be a new anti-kidnap database, the Sistema de Información para la Toma de Decisiones sobre Secuestro.

Further concessions allow the `flagship' pensions reform bill to move up to the senate. Lula announces slow but steady interest-rate reductions. 

No sooner had the pensions reform bill cleared a second vote in the lower chamber of congress than President Lula da Silva was proclaiming victory on a broad front. `We have done everything necessary,' he said in a recorded 11-minute broadcast on 14 August, `to return to the path of growth.' Inflation, he said, has been defeated: henceforth the new phase of his economic plan envisages a progressive reduction of interest rates [analysts have been gambling on a 1.5-point cut this week]. Lula also highlighted the increase in exports to India, China, South Africa and Russia, and the `political and economic opening' he himself had achieved with his visits to 12 countries since he took office just under eight months ago. 

A hint of what else might come in the `new phase' was provided by planning minister Guido Mantega. Only days after the government announced that it was planning public works worth R$191bn (US$63.6bn) for 2004-07, he said the total could well be higher than that - though part of the sum is expected to come from the private sector. A list of priority projects is expected this week. 

The emphasis of the `new phase' is on a slow but steady pace. `The government,' Lula said, `has its timeframe and its deadlines [...] Magical economic plans do not work.' The same goes for those like the movement of landless peasants, MST, who are pressing for a speedier agrarian reform. `That cannot be done overnight,' he said, adding. `Radicalisation does not benefit anyone.' In a firmer tone, he told the MST, `I will not allow confrontation, nor will I bow [to pressure].' 

Costly victory 

If the movement forward on the pensions reform was a victory, it was a costly one. The last vote won by the government, thanks to the support given by the opposition Partido da Frente Liberal (PFL) and Partido da Social Democracia Brasileira (PSDB), was one taken in committee the same day of Lula's address, which cost further climbdowns from the original proposals - the most significant being a lower reduction of top-of-the-scale pensions (30% instead of 50%). There was some comfort to be found in a formal assurance from both the PFL and the PSDB that no further demands for changes would be forthcoming. 

The pensions reform bill now goes to the senate, where it must clear two votes before returning to the lower chamber for final approval. 

One victory of sorts was not mentioned by Lula: the one that seems to be looming over the striking public-sector employees. As the reform bill cleared its first obstacles, and some of the strikers' demands were met, people began to ponder the wisdom of sacrificing more pay for the sake of the remaining, probably unattainable, demands. By the weekend, observance of the strike was down to an estimated 60%. This, too, has been a costly confrontation: the standstill in the customs is reckoned to have halted exports of machinery and equipment valued at about US$2.7bn. 

It should be noted that not all the strike organisers are about to give up just yet. Gilberto Cordeiro Gomes, secretary-general of Condsef, the confederation of federal public servants, reluctantly admits that the strike is losing strength. On the other hand, José Domingues Godoi Filho, the university teachers' leader who is also director of the umbrella confederation of public-sector unions, sees some hope in the successive concessions made by the government. `That lack of coherence,' he says, `strengthens our confidence that we might yet achieve our objectives.' He claims that while some strikers have been returning to work, others - like the customs inspectors - show no sign of wavering. 

MST: evictions will backfire 

Lula has failed to persuade the MST to retreat. Rather, the response has been more fighting talk from leaders of the movement. Valmir Ulisses Sebastião, active in São Paulo, says that that state's campaign to disperse all MST holding camps in the Pontal do Parapanema area is going to backfire: evicted from the camps, he says, the peasants will have no choice but to start `invading' fazendas in the area (ostensibly, they are waiting in the camps for the government to distribute land to them). Directing the campaign, based on arguments such as the health hazards posed by the camps, and the absence of schooling facilities for the children, is the state's justice minister, Alexandre de Moraes. 

He has already obtained court orders to close down two camps, holding about 300 families - of the 3,900 the MST claims to have concentrated in the area. The MST is appealing. 

Growth data: Tracking Trends, page 9.

Even if enacted, the new law would not have the proclaimed effect of allowing the prosecution of `dirty war' crimes; that is still up to the supreme court. 

On 12 August the lower chamber of congress approved a bill declaring null and void the two laws enacted during the Alfonsí­n presidency (1983-89) that barred further prosecutions of members of the military régime for crimes committed while they were in power in 1976-83. The vote was taken against the backdrop of demonstrations calling for an `end to impunity', and it was welcomed by the government, in the person of prime minister Alberto Fernández, as having `reinstated the rule of law in Argentina'. 

In the immediate celebratory mood few took note of a detail that jurists began to point out even before the bill was passed on to the senate for final approval: that the resulting law will have no legal effect. Congress may repeal a law (thus rendering it inapplicable from that moment onwards), but cannot declare it null and void from its inception - that can only be done by the courts; ultimately by the supreme court. 

Indeed, apart from playing to the gallery, the bill approved by the chamber of deputies can best be understood as yet another element of the pressure President Néstor Kirchner has been bringing to bear on the supreme court to come up with a nullity ruling. The court has been sitting on the case for two years and recently said it would rule in its own good time - a stance which must be seen in the light of the government's determination to have all Menem appointees to the court impeached. [The chamber of deputies has just voted to proceed with the impeachment of a second Menem-appointed justice, Eduardo Moliné O'Connor; his case has gone up to the senate, which must sit in judgment. Unlike Julio Nazareno, the first justice so challenged, Moliné has said he will not resign; indeed, that if he is removed from office he will take his case up with an international court.] 

The senate is due to vote this week, probably on 20 August, on the `annulment' bill. Disagreement is greater among the senators than in the lower chamber over the sense of passing a law which will have no legal effect. Vice-President Daniel Scioli has gone on the record with this view that the annulment would have `no juridical validity.' He feels strongly about this: `In a serious country,' he said last week, `laws are not annulled.'

Apart from eschewing privatisation, Duarte has provided few clues to his policy of `development with a human face' 

President Nicanor Duarte has joined the ranks of the Latin American rulers who have abjured of neoliberalism. In his inaugural address on 15 August he said, `Neoliberalism has been a failure because it denies and subjugates human dignity [...] The human being is more than the market.' Castigating the `oracles of unemployment and misery' and rejecting the adoption of `mimetic cultures [in the service of] foreign interests', Duarte promised to adopt policies seeking `development with a human face' and `a society with equality of opportunity'. 

He did not provide details, beyond promising to strengthen public finances and rationalise public spending (`without ever striking against the social question'). He appeared to rule out any move towards autarky, saying that Paraguay had to join the trend towards globalisation, while preserving its `genuine and original personality'. [He had previously ruled out privatising public-service companies.] 

As expected, Duarte appointed his economic adviser Dionisio Borda as finance minister. The industry & commerce portfolio went to Ernesto Bergen, leader of a Mennonite dairy cooperative. His campaign manager, Roberto González, was given the `political' interior ministry. Foreign affairs was entrusted to the seasoned diplomat Leila Rachid, former ambassador to Washington, and for defence he brought Carlos Romero Pereira out of political retirement.

Plea-bargaining and compensation package is applauded by politicians, but fails to satisfy victims' relatives. 

When President Ricardo Lagos announced, on 13 August, a series of measures designed to speed up the conclusion of the 180-odd pending trials of Pinochet-era officials for crimes committed while in power (1973-90) - usually referred to as human-rights trials - he took care to clarify that these were not `definitive' solutions , just `another step in this long process in which the state [...] responds to those who were victims.' 

The package, applauded by most politicians, including the opposition, envisages plea-bargaining by those who did not plan or direct the commission of crimes in exchange for information. It also provides for an all-party commission to determine `austere reparation' for victims of torture and former political prisoners, and for a 50% increase in pensions granted to relatives of victims (now US$300 a month). 

For opposite reasons, organisations of relatives of victims and of retired military officers have criticised the package for not explicitly taking a position on the 1978 amnesty which the Pinochet régime granted itself by law; the former want it overturned, the latter want it strictly applied.

BRAZIL | Domestic market still shrinking. In June, for the seventh month running, retail sales were lower than a year earlier, taking the total for the first half of the year down 5.57% year-on-year -- this was the worst such slump since the national statistics institute, Ibge, began to record these figures in January 2001. Ibge attributes these results to the increase in unemployment, the fall in workers' purchasing power and the high rates of interest on consumer credit. Worst hit by the downturn were food stores; the worst hit areas, São Paulo and Rio. 

BRAZIL | Agroindustry growth sharply down. Agroindustrial production in the first half of this year grew by only 1.5%, after having clocked 8.9% growth in January-June 2002 and 8.4% in the whole of last year. This said, agroindustry far outshone the average growth for industry as a whole, which was only 0.1% in the first half. The most dynamic lines were soya oil (with exports up 108%) and frozen pork (up 69%). 

ARGENTINA | Savings up, investment not as much. Argentines increased their savings by 45% last year, to US$5.6bn, but only devoted 62.5% of that to investment: the rest went to paying off debts or what the authorities are euphemistically describing as `safekeeping outside the financial system'. Argentina's investment-to-GDP ratio last year was 12%, down from 14.2% in 2001. The savings-to-GDP ratio was 19.6%, up from 14% the previous year. 

PARAGUAY | Partial debt restructuring. Recently installed President Nicanor Duarte says that one of his top priorities will be the renegotiation of `some maturities' of Paraguay's public debt. Falling due in the remainder of this year is US$62.4m of external debt and US$89.4m of domestic debt. The scope for restructuring is confined to that portion of the debt owed to some banks and governments.

The government relies heavily on the alternative indigenous federation it has been building up as a channel for largesse. 

On 15 August an `enlarged council' of the umbrella indigenous movement, Confederación de Nacionalidades Indí­genas de Ecuador (Conaie) met to adopt a formal position vis-í -vis the Gutiérrez government. It did not get much further than stating that it was moving into opposition, that it would seek to press the government to stop taking instructions from the IMF, and that it would oppose privatisations, even if these took the form of concessions. The reason for this is that much of the debate was taken up by the issue of Conaie's relations with its political arm, Pachakutik (PK), and the associated issue of Conaie's own leadership - which will come to a head when internal elections are held on 15 September. 

Some Pachakutik legislators who defied Conaie's directives were sanctioned with the traditional punishment of being bathed in icy water and later rubbed with nettles. Some may suffer political sanctions as well: the largest of the member organisations of Conaie, Ecuarunari - which represents the majority Quichua people of the highlands - has been demanding the expulsion of several PK leaders. 

One thing was made clear at the 15 August council meeting: that Conaie intends to exercise firmer control over PK. Another problem it hopes to deal with is the unity of Conaie, already showing vulnerability to government enticements. Two member organisations, Conaice (which represents the indigenous communities of the coast) and Confeniae (the confederation of Amazonian peoples) have already broken ranks with Conaie and declared their support for the government. 

Undermining Conaie 

The ruling PSP has been working hard at eroding Conaie's influence for months. It has been promoting the emergence of a rival organisation, the Federación de Pueblos Indí­genas, Campesinos y Negros del Ecuador (Fedepicne), formed by a group that broke away from Conaie in 1996 in a spat over the nomination of officials for the ministry of indigenous affairs created by President Abdalá Bucaram. That it never amounted to much is best illustrated by the fact that its leaders did not bother to seek formal registration with the ministry of social welfare - until three weeks ago, when they did so at the urging of the government. 

The government's wooing of Fedepicne began with the appointment of two of its leaders, Ricardo Guambo and Pedro Guamán, as presidential adviser and coordinator of indigenous affairs, respectively. The next step was to build up Fedepicne's prestige by using it as the channel for the distribution of government largesse (picks, shovels, computers and the like) to indigenous communities. The strategy appears to have enjoyed some success: Fedepicne president Luis Pachala claims that the federation now has 180 provincial branches representing about 350,000 people. To put this in perspective, Ecuarunari represents about 10 times more. Fedepicne wants all the ministries PK used to hold; the PSP does not rate it highly enough to grant all that. 

The government has also tried to play the racial card, by underlining that some of the most prominent Pachakutik leaders are actually mestizos, not pureblooded Indians. This does not seem to have made much impact on the Conaie leadership. Humberto Cholango, president of Ecuarunari, says that his aim is not to `indigenise' PK, only to judge the performance of those PK members who held government positions. 

First street confrontation 

Conaie has announced that it will support - but not co-sponsor - the countrywide protests against the government's economic policies called by a number of unions and social organisations for 21 August. The government, through communications secretary Marcelo Cevallos, chose to ignore Conaie's backseat role and issued an exhortation to the indigenous sector to `avoid chaos', adding menacingly that `there are legal mechanisms that will be applied [should the demonstrations] alter public order.' The ruling party, Sociedad Patriótica (PSP), has called for a counter-demonstration, in support of the government, on 22 August.

President Lucio Gutiérrez's approval rating has fallen to 31%, less than half the 64% recorded when he took office on 15 January. It is lowest in the key districts of Quito (30%), Guayaquil (29%) and Cuenca (28%). Only in his native Amazonian province of Napo has his rating risen, to 72%. There is also little doubt about the immediate reason for the fall: 45% disapproved of his break with his indigenous coalition allies. 

Bias can be safely ruled out in the survey. The leading partner in the polling firm Cedatos, Polibio Córdova, is the chief of the government's advisers.

The biggest association cuts off the Monzón valley to demand a drastic review of government policy. 

Peru's biggest coca-growers' organisation, the Asociación de Productores del Alto Monzón, has launched a preemptive strike against the government's plans to eradicate 8,000 hectares of coca plantations this year. Their own area has not yet been targeted by the eradication effort, but Iburcio Morales, their leader since 1996, says they could see it coming. He says the government's US-supported eradication agency, Devida, had sought to `surprise' them with proposals to carry out infrastructure work in the area, in exchange for voluntary eradication. 

This, says Morales, `was a clear provocation, because the coca leaf is our only livelihood.' His association claims to represent about 25,000 peasants growing coca in the upper reaches of the Monzón valley, a branch of the Huallaga basin in Huánuco, in the centre of Peru. Over the past week or so, they have set up barricades along the 62 kilometres of road running through the valley. The police have been unable to enter the area, and the local people can only travel with Morales's permission. 

The coca producers have a list of demands unlikely to be given a good reception by the government: a halt to coca eradication, declaration that the coca plantations are a national reserve, removal of NGOs from the Monzón valley, and a commitment from Enaco (the government agency charged with buying the `legal' coca crop) to buy their lower-quality leaf. 

Morales also says that any negotiations with the government must be channeled through the ministry of agriculture, since the coca growers will have no dealings with Devida. That agency's director, Nils Ericsson, claims to have been taken by surprise by the Monzón growers' protest, since Devida, he says, has not been engaged in any eradication efforts in their area. The protest also comes only shortly after the government reached an accord with the growers on a `gradual and mutually agreed' eradication programme. 

`Not terrorists' 

The Monzón coca producers are well aware of the possible political connotations of their action. Morales keeps repeating, `We are not terrorists or criminals.' Aurora Mastre, one of the leaders of the association, says, `It is unfair to claim that the cocalero leaders are linked to the drugs trade. We sell the coca leaf without knowing if [the buyers] are drug traffickers or not; we do it in order to survive.' 

The Peruvian military and police are currently engaged in a major campaign to hunt down what they describe as the `remnants' of the Sendero Luminoso (SL) guerrillas. The official line is that the `remnants' are financed by the trade in coca leaf and cocaine.

Anecdotal evidence suggests that the former dictator enjoys greater support in unsurveyed rural areas. 

If opinion polls are anything to go by, even if Efraí­n Rí­os Montt beats off the remaining legal challenges to his candidacy, he will not stand much of a chance come voting day in November. The most recent survey, conducted by Vox Latina, shows Oscar Berger, of the right-of-centre Gran Alianza Nacional (Gana) even further in the lead, with 44% of voting preferences - 7.1 points more than in the previous poll by the same firm. Also up, by 4 points to 17.1%, is secondrunner Alvaro Colom, of the leftist coalition Unidad Nacional de la Esperanza (UNE). As to Rí­os Montt, he has fallen from third to fifth place, polling only 3.3% (he has been overtaken by Leonel López of the Partido de Avanzada Nacional (PAN), with 4.1%, and Fritz Garcí­a-Gallón of the Partido Unionista (PU), with 3.9%. 

A problem an increasing number of observers have been underlining is that the polls, while providing a fairly accurate reading of urban opinion, may not wholly reflect the situation in small towns and rural areas. A growing body of anecdotal evidence suggests that support there for Rí­os Montt runs much higher than in the cities, even among the Indians who suffered the brunt of his brutal counterinsurgency methods in 1982-83, when he headed a military government. 

The reason for this is simple. The government of Rí­os Montt's Frente Republicano Guatemalteco (FRG) is seen as the provider of low-cost fertiliser, cheap credit, free healthcare, a higher minimum wage, roads and schools -- and, crucially, title deeds to the land hitherto precariously occupied by thousands of peasant farmers. The FRG portrays itself as the only party that really stands up for the poor in Guatemala, against the `oligarchy' embodied in Berger's coalition (and, needless to add, unlike the left which proved unable to protect peasants and villagers during the internal war). 

An indirect recognition of this situation has been provided by the joint effort of indigenous organisations to set up, earlier this week, the Comisión Consultiva Maya (Cocoma), an NGO devoted to informing the indigenous population of the electoral issues and procedures, and to encourage a high turnout. The 23 ethnic Maya groups account for about 60% of Guatemala's 12m inhabitants. 

Two more dropouts 

Two more presidential candidates have withdrawn from the race -- but not in order to ensure a united opposition stand. On 12 August, Rigoberto Quemé stepped down as candidate of the leftist Alianza Nueva Nación (ANN), in disgust at internal squabbling over candidacies. Quemé was the first Indian ever to register as a presidential candidate. On 13 August, Ricardo Bueso resigned as candidate of the Christian Democrat party (DCG), in protest against the ruling allowing Rí­os Montt to run. His running-mate Estuardo Cuestas also resigned. 

Former President Vinicio Cerezo, secretary-general of the DCG, says the party might endorse another of the candidates still in the race - but not Berger.

COLOMBIA | Warning of runaway deficit. Despite recent adjustments Colombia is facing an even larger budget deficit than the anticipated 2.5% of GDP - which was already 0.4 points above the level agreed with the IMF. 

A strong warning to this effect came from central bank manager Miguel Urrutia and, most dramatically, the bicameral congressional budget committee, which returned the draft budget to the executive for clarification of some suspect revenue items equivalent to US$1.4bn (just over 5% of budgeted outlays). 

The legislators queried just over US$1bn described as coming from capital resources over and above those already envisaged, and US$383m assumed to come from tax receipts arising from an anti-evasion law which has not even been submitted yet to congress. They also said they would like to see more funds allocated to investment. 

BOLIVIA | Growth in question. Government predictions of 3% growth for this year have been called into question by the president of the Cámara Nacional de Comercio, Guillermo Morales. He says the figures the authorities have been providing are not trustworthy. The official prediction is based on a 14% annual increase in export earning in the first half of the year (the biggest such upturn in four years) and the expectation that oilseed exports this year will bring in US$350m, the highest earnings ever. 

Morales points to a 10.4% increase in the external debt and an 8.5% rise in banks' debt arrears, to claim that this year will be worse than 2002, with growth at best reaching 2%. 

VENEZUELA | More debt buyback. The government will attempt to buy back more of its outstanding bonds, after the US$1.5bn operation three weeks ago. The national assembly has authorised it to issue up to US$3bn in bonds (in dollars or euros) for that purpose. The central bank has warned it to keep in mind the volatility of the euro vis-í -vis the US dollar, and to seek terms of more than 10 years.

Reelection bid will be submitted to the ruling party's consultative presidium - but few expect this to help the PRD. 

The presidential nomination saga in the ruling Partido Revolucionario Dominicano (PRD) - centred on whether President Hipólito Mejí­a should run for reelection - may be approaching its culmination. On 12 August, Mejí­a agreed for the first time to meet the other aspirants to the PRD nomination (only party leader Hatuey Decamps, the strongest opponent of Mejí­a's reelection, stayed away). The encounter did not produce a choice between the two proposed options: a straightforward primary elections, favoured by the Mejí­a camp, or a prior `plebiscite' on the reelection issue, to be conducted by independent pollsters, which Decamps and six other aspirants advocate. [Worth noting: a survey just released, conducted on 5-11 July, shows 81.1% or respondents against reelection.] 

They did, however, move a step closer: they agreed to submit the matter to arbitration by the PRD's presidium, a consultative body formed by the party's 26 vice-presidents - which is not usually asked to come up with binding decisions. It was left up to Mejí­a to find a date for the presidium meeting that could be accommodated within his agenda. 

With elections nine months away, the PRD is the only major party which has not yet selected its candidate. The Partido de la Liberación Dominicana (PLD) has nominated former President Leonel Fernández (1996-2000), who has been consistently heading voting preferences in the opinion polls. The Partido Reformista Social Cristiano (PRSC) nominated Eduardo Estrella in a hotly disputed contest with former Vice-President Jacinto Peynado. 

PRD futures in doubt 

Few analysts believe that a consensus-based solution to the PRD crisis will give the ruling party much of a chance. At best, many say, the PRD might be able to avoid a damaging schism. After three years in office, Mejí­a now faces a situation not too different from the one which allowed him to be elected: popular protests against a rising cost of living, rising fuel prices and a renewed round of power blackouts, a currency that has lost half its value over the past year - plus a government decision to cover the impact of a US$2.2bn fraud-induced bank collapse, which forced the country to seek IMF assistance. Last week alone, at least four protesters were killed in clashes with police. 

The Proyecto Presidencial Hipólito (PPH), the PRD faction promoting Mejí­a's reelection, still thinks victory is possible, via an agreement with the PRSC (the formula that allowed Fernández to win in 1996). This possibility was set back last week when the legislators faithful to Decamps foiled a PPH-led attempt to reelect Rafaela Alburquerque, of the PRSC, as president of the lower chamber - in an episode that descended into low farce when the PPH faction cut off the power to the chamber and shots were fired in the dark, in an unsuccessful attempt to disrupt the session.  

Presidential reelection 
Reelection, barred constitutionally to prevent a repeat of the multiple presidencies of Joaquí­n Balaguer, was reinstated by congress (ostensibly against Mejí­a's wishes) in June 2002. Mejí­a waited until April this year to announce that he would avail himself of the change.

"The coalition fell apart because of the ruling clique of Pachakutik - Indians with golden ponchos." Felipe Mantilla, interior minister of Ecuador 

"Don't be upset [if you lose your job]. It happens in the best families." Fernando Canales, economy minister of Mexico 

"I was elected to change Brazil, but not just any old way." Lula da Silva, President of Brazil

Beyond the isolation rhetoric, two episodes illustrate trends that are beginning to look durable. 

Over the past month three shipments of cattle on the hoof arrived in Cuba, 400 head in all. Their provenance: Florida, USA. The exporter, John Park Wright, says that he intends to go on selling to Cuba. Since late 2001, when Washington authorised the sale of foodstuffs to Cuba, the state marketing firm Alimport reckons that some 2.2m tonnes, worth about US$400m, have been imported. 

At present, imports from the US account for about 30% of Cuba's food import bill, estimated at US$1bn a year. Alimport reckons that the US share could rise to 60% soon, given the current rate of growth of transactions. Moreover, Alimport calculates that the island's spending on imported foodstuffs could increase to US$1.4bn in the next few years. 

There is only one real constraint on growth under the current arrangement: Cuba's liquidity. Washington has stipulated that the exports must be paid in cash. 

Deal on prison terms 

Last week a court in Camagüey handed down prison sentences of seven to 10 years on six Cubans who in mid-July had hijacked a boat to flee to the US. They were picked up by the US coastguard and, after a swift agreement by Cuba not to impose terms of more than 10 years, were handed back to Havana - braving the ires of the Cuban exiles in Miami, who recalled that it was only four months ago that Cuba was condemned for shooting three perpetrators of a similar hijacking.