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DOMINICAN REPUBLIC | IMF credit finally comes through. On 29 August the IMF finally approved the two-year, US$600m standby agreement that the Dominican Republic had seen seeking ever since the government's decision to underwrite the collapse of Baninter had disrupted public finances [WR-03-22].

In its accompanying communiqué, the Fund outlines the government's strategy to restore confidence in the banking system, based on four planks: `The first, already implemented, focused on resolving the problems of identified weak banks. The second, now under way, aims to assess the situation of the banking system as a whole through internationally-assisted audits of all banks, and to identify further necessary measures. The third will put in place a legal and regulatory framework to deal with systemic banking problems. The fourth plank is the enhancement of prudential regulations and supervision.'

JAMAICA | Sugar output at 60-year low. Jamaica reports that, as a result of the lowest production level in 60 years, it has had to double its imports of sugar over the past year. Sugar production fell by 12.7%, from last year's 174,840t to a new low of 152,568t. 

The local industry was able to meet its European Union quota of 126,000 tonnes, but failed, for the first time, to fulfil its US obligation of 11,580t. The downturn has been attributed by local industry analysts to poor farming practices and the flood rains which adversely affected agriculture in late 2002.

COSTA RICA | Exports seen raising growth rate. The private consulting firm Ecoanálisis is predicting 5.3% GDP growth in Costa Rica this year. This is only slightly higher than the 5.1% forecast by the central bank, but well ahead of the 4%-or-so estimated by other private economists.

Ecoanálisis bases it calculations on the expectation of a 19.2% increase in export earnings (to US$6.23bn). It expects exports to continue growing, at a somewhat lower rate, into 2004, when it expects them to bring in US$6.89bn.

NGOs report on the high toll exacted by land disputes over the past 18 years, and concentration of ownership increased.

Three Brazilian NGOs have come out with a document to counterbalance the adverse publicity the movement of landless peasants, MST, has been receiving in the media. They have focused on what they describe as `the crimes of latifundia'*.

Between January and August this year, they report, 44 peasants have been murdered as a result of land disputes. This comes on top of a toll of 1,280 peasants, lawyers, technical experts, union and religious leaders, killed between 1985 and 2002. `Impunity,' says the report, `is practically the general rule in these cases.' Of the `intellectual authors' of these crimes, it says, 121 were investigated, 14 were put on trial and only 7 were convicted - together with two material authors.

The report also says that in the period surveyed there were 6,300 cases of `arbitrary imprisonment of rural workers', 715 of torture and 19,349 of physical aggression. At the root of this, says the report, is the defence of a system of high concentration of land ownership: `Close to 1% of the owners hold 46% of all the land. Of the 400m hectares registered as private property, only 60m hectares are cultivated.' The rest, it adds, are idle, under-utilised or devoted to cattle ranching. At the other end, 4.8m peasant families are landless.

A telling detail: concentration of land ownership has continued. Between 1992 and 1998 the area covered by farms of more than 2,000 hectares increased by 56m ha. This is three times the 18m ha the Cardoso government expropriated for redistribution to landless peasants. There are now in Brazil 2,200 establishments of more than 10,000ha, as against 4.3m of less than 100ha.

*Relatório sobre os Crimes do Latifúndio, prepared by the Rede Social de Justiça a Direitos Humanos, Comissão Pastoral de Terra and Instituto Carioca de Criminologia.

Annulment of the Alfonsí­n laws by congress is cited as the main reason not to proceed with `dirty war' cases.

The annulment by congress of the Alfonsí­n laws barring prosecution of `dirty war' criminals has already had one side effect which is unlikely to be celebrated by those who want to see the cases reopened. On 29 August it was cited by the Spanish government as its reason for not requesting the extradition of the 39 former Argentine military and one civilian to stand trial in Spain on charges of genocide, terrorism and torture.

Spanish Vice-President Mariano Rajoy invoked the bilateral extradition with Argentina which says that extradition shall not proceed when the country where the crimes were committed is able to prosecute those responsible. He went on to say that as the Argentine congress had declared the nullity of the laws barring the prosecution of the cases in question, and in view of public statements made by President Néstor Kirchner, it could now be expected that the accused would be tried in Argentina.

The congressional annulment of the Alfonsí­n laws may yet be challenged in the courts [WR-03-33], but the Spanish government has preferred to steer clear of that eventuality.

Other objections
The extradition request had also been disputed in Spain on purely domestic legal grounds. Spain's chief prosecutor, Pedro Rubira, argued that according to jurisprudence Spain can only try torture cases in which the victims are Spaniards, and that the charge of genocide is inapplicable. Torture could be actionable, but only in cases dated after July 1978, when this possibility was incorporated into Spain's penal code. However, he noted, all the torture cases involving Spanish nationals brought by Garzón refer to events that took place either in 1977 or earlier.

Rubira also provided some of the grounds for the recent decision of the Spanish government. Jurisprudence also says, he argued, that Spain cannot prosecute when the events are being tried in the country in which they took place - and that there was information about political and judicial changes in Argentina which would enable trying over there the cases judge Baltasar Garzón is pursuing. The Spanish prosecutor added that, in any case, it is in Argentina `where all the evidence can be found and where trials of the accused can be carried out with due attention to the principles of publicity, orality, concentration and immediacy.'

Political dimension at home
While President Kirchner was the one who had cleared the way for the Spanish extradition request in the first place (by withdrawing the standing opposition by two successive governments), he had later expressed his preference for conducting the trials in Argentina. Similarly, his approval of the congressional annulment of the Alfonsí­n laws has gone hand-in-hand with pressure on the supreme court to rule that those laws are unconstitutional, and therefore null and void. The obverse of that situation is that the supreme court appears to be using its pending ruling on that issue as a bargaining chip in its efforts to avoid impeachment by congress. News that a federal appeals court in Buenos Aires is already reopening cases must be viewed in the light of the pending supreme court decision.

Human rights, environmental and religious organisations in the violence-plagued state of Olancho are accusing the administration of President Ricardo Maduro of permitting an atmosphere of impunity that has led to the death of environmental activists. The national human rights organisation Cofadeh says wealthy landowners, logging companies and industrialists use death threats and murder to intimidate Olancho citizens who protest illegal logging and dam construction. 

Catholic priests and environmental activists, who in June led a 160-kilometre `March for Life' from Olancho to the presidential palace, received so many death threats that Amnesty International expressed concern for their safety. Amnesty's appeals to President Maduro in June failed to prevent the 18 July murder of one of the `March for Life' leaders, 23-year-old Carlos Reyes. The founder of the Olancho environmental movement (MAO) was gunned down in his own back yard. No arrests have been made in this murder. 

Olancho residents say the `intellectual authors' of the 2001 assassination of anti-dam activist Carlos Flores have also escaped prosecution. Flores's cousin, Gilberto Flores, is assigned a police escort since an AK-47 was levelled at him from a passing car. Still protesting illegal logging and dam construction, Flores told an international fact-finding mission, `[Olancho] is going dry. This has happened over the last 20 years, along with the exaggerated exploitation of our forests. There are around 100 trucks full of timber leaving Olancho each day.'

The June `March for Life' demanded a 10-year ban on logging in Olancho, an audit of the region's biological diversity, and cancellation of the Babilonia dam project in the remote Sierra de Agalta National Park. President Maduro refused to meet the 3,000 protesters at the end of their six-day march.

`Armed environmentalists'
On 28 July, President Maduro told news reporters that he would crack down on an `armed environmental group' that threatened to use violence to stop illegal logging in Olancho. Comparing this group to the Zapatistas in Mexico and Shining Path in Peru, Maduro said, `These kinds of attitudes give the country a bad image, an image of a land where armed people take justice into their own hands.' A week later the president took to TV and radio airwaves to assure citizens that his government is on the side of law, order and environmental protection. `I. reject violence as a way to resolve our differences, Maduro said.

Cofadeh claims that the report of armed environmentalists is a fabrication designed to justify military intervention and repression of the region's growing environmental movement. Olancho has the highest biological diversity in all of Honduras, according to Mark Bonta, assistant professor of geography at Delta State University, Mississippi. `Logging is rapidly destroying Olancho's unique old-growth pine and thorn forests,' says Bonta, who has published research on Olancho's ecology.

He told the supreme court president he expects the whole court to step down; replacements will be `non-partisan'.

As explained by President Nicanor Duarte, the meeting he held early last week with supreme court president Bonifacio Rí­os haD been to tell the magistrate that `he has an historic responsibility.' In the context of Duarte's plans for a reform of the judiciary, this means that Rí­os was told that the government expects him and his colleagues to resign. Duarte said Paraguay needed a court that would inspire confidence, if it wanted lower courts to act `with a real sense of justice'.

Vice-President Luis Castiglioni later joined the dots, stating explicitly that the overhaul of the judiciary would include everything `from the supreme court to the last justice of the peace' and the state prosecution service as well. Both Duarte and Castiglioni have emphasised that the aim is to appoint a non-partisan supreme court, `neither Colorado nor Liberal [but with] respected people.' According to Castiglioni, the supreme court justices are `well disposed [and] open to this kind of dialogue.'

BRAZIL | Touching bottom? Some industries are predicting an economic upswing in the last quarter of the year, based on the prospect of a bumper harvest and signs that job losses have tapered off. Meanwhile, the official statistics show a further decline in the second quarter of the year: GDP was 1.6% lower than in the first quarter - a far steeper fall than the 0.1% recorded between the last quarter of 2002 and the first quarter of this year. With the QII fall, first-half GDP was 0.3% lower than in the same period of 2002.

With two quarters running of GDP decline, Brazil is technically in recession. The official statistical institute, Ibge, has dismissed this by saying that `the concept of recession is quite complex and its interpretation is quite subjective.'

ARGENTINA | Wrist-slap with last IMF disbursement. On 28 August the IMF board approved the release of the remaining US$310m of the current US$3bn standby arrangement. The announcement included a slap on Argentina's wrist for having incurred in a `breach of obligation' by misreporting the number of `competitiveness' (tax break) schemes that had been eliminated. 
After saying that this was `highly regrettable', the Fund granted a waiver.

A day earlier Argentina's chamber of deputies had approved two related laws promised to the IMF, one establishing deposit recovery priorities when banks go under (small depositors first) and barring provincial and municipal governments from issuing quasi-currencies, the other allowing the central bank to lend to the executive for the purpose of repaying multilateral lenders.

CHILE | Industrial output down ... or up. The national statistical institute, INE, reports that industrial output in the first seven months of the year was 3.2% higher than in the same period of last year, but that in July it was down 2.9% year-on-year. (Sales appeared headed in the other direction: up 3% in the first half, 3.2% in July). Not for the first time, the industrialists' association, Sofofa, disagreed. Their figures for July showed production up 0.6% (yoy), and sales also up, but only by 0.5%.

"The concept of recession is quite complex and its interpretation is quite subjective."

Roberto Olinto of Brazil's statistical office, Ibge, after figures showed two successive quarters of shrinking GDP.


"If we don't have a [supreme] court that inspires trust, we won't have lower judges who act with a sense of justice."

Nicanor Duarte, president of Paraguay, after suggesting that the supreme court should resign.


"If it is possible to hold trials [where the crimes were committed] they should be held in that country. This is the principle of territoriality."

Mariano Rajoy, vice-president of the Spanish government, when refusing to proceed with the extradition of Argentine `dirty warriors'.

New man at State tells Kirchner he must define a `coherent and predictable' economic plan.

If anyone was wondering what the Bush administration was going to do next regarding Cuba, the uncertainty has been removed by the top Latin America official at the State Department, the recently appointed Roger Noriega. It is currently analysing options to determine its ability to `promote democratic change' on the island. According to Noriega, President George Bush has made explicit commitments to support change in Cuba and it is now his [Noriega's] job to see those commitments implemented. At present his task is one of preparing an `inventory' to pinpoint `concrete, specific objectives' deemed achievable.

For this purpose, he says, State is working in consultation with other parts of government, including the congressional representatives of south Florida, which is home to a large Cuban exile community renowned for its hostility to the Castro régime.

The effort also has a diplomatic dimension which Noriega appears to have set in motion. When passing through Buenos Aires last week he said the US hoped Argentina might assume a `leadership role' in defending human rights in Cuba - with more than a hint that President Néstor Kirchner is not quite there yet. Said Noriega, `We want to continue our discreet dialogue with the [Argentine] government and its representative before the OAS over how we can work together and constructively to prepare the transition [in Cuba] after the dictatorship.'

There was another strand to Noriega's statements in Buenos Aires: US backing for Argentina's effort to reach a new agreement with the IMF. Noriega was a little less positive than his colleagues at the US Treasury. While reaffirming that the US was supporting the negotiations, he said that Argentina should come up with a better definition and explanation of its economic plan, which should be `coherent and predictable'. In his view, he said, Argentina's problems are `structural and political rather than economic.'

By the way, the US ambassador in Brazil, Donna Hrinak, has just stated that there is no evidence of terrorists in the `Triborder' area where Brazil meets Paraguay and Argentina, and that most of the remittances of funds from there to the Middle East are made 'for noble purposes and with legal aims.' This will not be news to our readers, but may raise eyebrows among Hrinak's colleagues in the US military who insist on the opposite. For more on this see our Special Report Latin America and the US `War on Terror'(SR-03-02).

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		30.08.02	22.08.03	29.08.03
Argentina	peso	3.59	2.98	2.98
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.30	7.74	7.75
Brazil	real	3.03	2.98	2.97
Chile	peso	713.00	_	700.00
Colombia	peso	2,713.68	2,853.76	2,846.45
Costa Rica	colón	366.02	404.76	405.47
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	_	34.08	34.24
Ecuador	dollar	1.00	1.00	1.00
El Salvador	colón	8.75	8.75	8.75
Grenada	EC dollar	2.70	2.70	2.70
Guatemala	quetzal	7.80	_	7.94
Honduras	lempira	16.78	17.67	17.69
Mexico	nuevo peso	10.03	10.92	11.13
Nicaragua	córdoba oro	_	15.40	15.40
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,180.00	_	6,260.00
Peru	nuevo sol	_	3.48	3.48
Uruguay	nuevo peso	29.75	28.50	28.80
Venezuela	bolí­var	1,416.50	1,600.00	1,600.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	May	June	July	Last 12m	Jan-Dec 2002
Argentina	Indec	-0.40	-0.10	0.40	7.30	41.00
Bolivia	INE	0.02	0.20	0.60	3.42	2.45
Brazil	FGV	-0.67	-0.70	-0.20	24.14	26.41
Chile	INE	-0.40	0.00	-0.10	3.10	2.80
Colombia	Dane	0.49	-0.05	-0.14	7.04	6.99
Costa Rica	DGEC	0.52	0.67	0.80	9.49	9.68
Ecuador	Inec	0.17	-0.21	0.03	7.73	9.36
El Salvador	Min.Ec.	-0.10	-0.10	-0.40	1.00	2.80
Guatemala	BCG	0.25	0.22	0.27	4.65	6.33
Honduras	BCH	0.10	0.30	0.40	6.70	8.10
Mexico	Bco.Mx.	-0.32	0.08	0.14	4.13	5.70
Paraguay	BCP	-1.20	-1.50	-0.70	12.00	14.60
Peru	INE	-0.05	-0.47	0.15	1.98	1.52
Uruguay	DGEC	0.37	0.16	0.50	19.46	25.94
Venezuela	BCV	2.30	1.40	1.80	31.90	31.20
US	DOL	0.20	0.10	0.10	2.10	1.60

The stockmarket in figures
Market	Index	22.08.03	29.08.03	Variation (%)
Buenos Aires	Merval	683.87	713.33	4.31
São Paulo	Bovespa	14613.03	15174.49	3.84
Santiago	IPSA	1367.35	1369.62	0.17
Bogotá	IGBC	2109.59	2081.65	-1.32
San José	BCT	11630.46	11870.72	2.07
Quito & Guayaquil	Interinvest	69.51	69.51	0.00
Mexico	BMV	7493.73	7591.42	1.30
Lima	ISVBL	1892.59	1896.82	0.22
Caracas	BC	14433.20	14497.20	0.44
Source: Daily market reports.

Enough, says a report by the comptroller-general's office, to carry out a long-heralded agrarian reform.

If the Colombian government wanted to carry out a far-reaching agrarian reform - which has been much talked about but little acted upon over the past three decades - it could easily do so by seizing and redistributing farmland owned by drug traffickers. The suggestion comes from the comptroller-general's office, attached to heavy criticism of the manner in which the government has so far acted in this respect.

A report by the comptroller-general's office notes that 320,653 hectares of land have been confiscated from drug traffickers. Of these, only 1.74%, some 5,600ha, has been distributed to landless peasants. The total seized, the report notes, is an estimate, as it has been unable to determine the exact size of the farms, the identity of their owners, their commercial value, the current state of the expropriation process, and even which court is handling each case.

Extent of narco holdings
The inefficient handling of seized farmland is not, however, the most important finding of the report. It also estimates that the total surface of farmland owned by drug traffickers is close to 4m ha, or 48% of Colombia's most productive lands, valued at about US$2.4bn. The highest concentration of these properties is in the `coffee axis'; the departments of Caldas, Quindí­o and Risaralda. Other clusters are found in northwestern Antioquia, central Tolima, southwestern Valle del Cauca, and the Caribbean departments of Córdoba, Guajira and Magdalena. All told, the report says, narco-owned farmland is to be found in 40% of the country's municipalities.

Farmland was bought by the drug traffickers as a vehicle for money-laundering (cattle-ranching is ideal, due to the mobility of the main assets, cows), a store of value and, the report says, `a measure of political leadership in the regions where they acquired their farms.'

The comptroller-general's report comes as further evidence on the origins of the paramilitary organisations. These are usually, and euphemistically, said to have been formed initially by farmers, particularly cattle ranchers, to defend themselves against the guerrillas. As we have reported several times in the past, very many of those `farmers' were drug traffickers, interested not only in defending their farms, but also in repelling guerrilla attempts to extort `protection' money from the drugs trade.

It is not often that one finds Colombians suggesting that they should emulate Bolivia, but that is precisely what Camilo González Posso, candidate to the governorship of Cauca and former health minister, is recommending regarding his department's coca plantations. He wants to industrialise the coca leaf, much as Bolivia does with its legal `traditional-use' plantations of the Yungas. This, he says, would provide a good living for Cauca's Páez and Guambiano indigenous peoples, who form a substantial segment of the local population.

Electoral authority asserts its independence from domestic and external pressures.

The newly installed national electoral council, CNE, has announced that sometime this week it will rule on the validity of the signatures collected by the opposition to endorse their call for a mandate-revocation referendum. This is not as simple a proposition as it might seem, as there are at least two big issues at stake: whether the signatures collected before the mid-term threshold for a referendum are valid, and whether each and every signature is genuine. As things stand, it seems likely that the CNE will only be able, now, to rule on the first.

If it rules them invalidly collected, the opposition will have to go back out on the streets to collect them all over again. Several legal experts have noted that the law says nothing about when signatures should be collected, just that the right number should be submitted. However, there have been claims that the endorsements submitted had been padded with signatures collected last year for a different purpose: a `consultative' referendum on whether President Hugo Chávez should remain in office. If proven, these could be thrown out.

If the CNE accepts the signatures, it will have to begin the laborious task of verification - mindful of the fact that judicial and police investigations have already been launched into allegations that signatures had been forged, and that databases of opposition-linked banks had been `dumped' into the mass of signatures. On 4 September the CNE showed that it was not going to be pushed around: when a prosecutor turned up with vans to cart away the signatures for verification, he was refused access and told that any verification would have to be conducted without removing anything from CNE premises. The following day, chastened investigators turned up to do their work.

Pressure from two sides
The CNE was left in no doubt that it will be under pressure all the way. President Chávez , into one of his bluster phases, warned that if the CNE granted validity to the signatures collected by the opposition he would appeal to the electoral panel of the supreme court and, if necessary, to the court's constitutional panel. While it is the government's right to do this, Chávez made it sound menacing.

The CNE also received an uninvited visitor: US ambassador Charles Shapiro, ostensibly on a `courtesy call' during which he offered `technical assistance.' As with the police and state prosecutors, he was given short shrift by the electoral authority. CNE president Francisco Carrasquero told the press that he had `expressly' told Shapiro that the council would not accept any `interference'. `It was a clear warning,' said Carrasquero, `that this body is independent and that it will defend the country's sovereignty.'

What the latest polls say
	Datanálisis	Mercanálisis*
Stance	%	%
Anti-Chávez	42.2	53
Neutral	34.7	24
Pro-Chávez	22.6	23
Voting intentions
Oust Chávez	68.6	62
Keep Chávez	31.4	26
*Caracas only.

Government admits that planting is keeping pace with coca eradication, spreading from Chapare to new areas.

The government of Bolivia has, to all intents and purposes, acknowledged that it cannot win its campaign to eradicate illegal coca plantations. In an interview granted to the magazine La Epoca, deputy social defence minister Ernesto Justiniano said that the `zero coca dream of previous administrations' is simply unattainable. `No matter how much effort we put into eradication,' he said, `they will go on planting coca.'

He said this was the result of the large number of people living in the Chapare region - where most of the illegal coca is grown - and the demand from the drugs trade. This has given rise to what he described as `a dynamic equilibrium with two forces at work: eradication and planting.' 

New target plus `balloon effect'
According to Justiniano, the government's new target is to contain coca cultivation in Chapare at 4,000 hectares [which is anything from 2,000ha to 8,000ha short of what is now devoted to the crop]. He acknowledges that this may well trigger the `balloon effect', whereby pressure to reduce cultivation in one place leads to its increase elsewhere.

`We have already started having coca,' he said, `in the Parque Amboró, where some 40 hectares have been destroyed, as well as in the Parque Madidi - and I'm not counting Isiboro-Securé, which is part of the [Chapare] zone, where we have more than 1,500ha that are being eradicated.' The Parque Amboró is a nature reserve that fans out just west of Santa Cruz, the most eastward of the coca cultivation areas so far; coca was discovered there in mid-June. The Parque Madidi, another conservation area, is in the north of La Paz department, and the Isiboro-Securé area, named after the rivers that traverse it, is the far northwestern reaches of Cochabamba.

In August the government reported that coca eradication was proceeding at a rate of 34ha a day, equivalent to 12,400ha a year. This, says, Justiniano, is `a race without finishing line'. The aim is, `if we can reduce [cultivation] we will, but at least we'll stop it growing.' Rather than `zero coca', he says, Bolivia will have `a virtual zero'.

Almost a month after US President George Bush authorised the resumption of the antinarcotics aerial interdiction programme in Colombia, Peruvian prime minister Beatriz Merino is off to Washington in the hope of persuading him to do likewise for her country. The programme was suspended two years ago after a US missionary and her daughter were killed when her light aircraft was shot down, mistaken for a drugs flight, over the Peruvian Amazon.

Peruvian military sources say that there are more than 300 unauthorised landing strips in the jungle regions where coca is grown, and that drug traffickers are reckoned to operate out of 77 of them. For the interdiction effort Peru has a fleet of six A-37Bs, refitted and donated by the US, to be piloted by Peruvians who are currently being trained in the US. The maintenance of antidrugs airbases and personnel will cost about US$12m a year, and the interdiction operations are expected to cost an additional US$10m.

Colonel confirms thefts from arsenals going back years; this matches claims made by the Colombian military.

Suspicions about the involvement of members of the military in gunrunning were fed last week by recently retired Colonel Guillermo Cobo, a former commander of artillery brigade 27. He said that since 1999 some 109,000 rounds of ammunition had been stolen from the brigade. A first batch of 65,000 between 1999 and 2000 (on which court action was taken), and another of 44,000 between 2001 and 2002 — when the man in charge of the brigade was the army's current chief of personnel, General Gustavo Reyes. Cobo claimed that in June this year Reyes had put pressure on him to keep quiet about this.

Questions have been raised about Cobo's credibility, given that he has only spoken out now, just after he was denied promotion to general. On the other hand, a report dating back to mid-2001 cites Colombian military sources saying that over the previous three years they had seized from the Farc guerrillas a large assortment of Ecuadorean military hardware: 300 rifles, 522 sidearms, 773 sticks of dynamite, 450 kilos of pentolite, 186 antipersonnel mines and about 1m rounds of varied ammunition.

Also revived: the suspicions that a November 2002 explosion at an army arsenal was meant to disguise the theft of weaponry.

COLOMBIA | Portfolio flight leads investment plunge. The net inflow of foreign investment in Colombia last year reached little more than US$1bn — a plunge of 82% from the US$5.86bn recorded in 2001. What most influenced this was the outflow of US$1.01bn of portfolio investment, as against an inflow of US$3.34bn the previous year. Foreign direct investment (FDI) shrank by 19%, to just over US$2bn. Deputy trade minister Claudia Uribe, who painted this discouraging picture from data provided by the central bank and Coinvertir, the investment promotion agency, said, `The government is very concerned, not only to attract investment but also to retain what we've got.' She attributed the poor performance last year to the international financial environment and the public-order situation in Colombia.

PERU | Growth expectations lowered. The Peruvian government has lowered its growth forecast for next year from 5% to 4%, as part of a review intended to make `more realistic and consistent' its macroeconomic projections up to 2006 (originally made in May last year). Economy minister Jaime Quijandrí­a blames the world economic environment for the poorer performance expected. The government is expecting private investment next year to reach 14.9% of GDP (instead of 16.4%), and has cut its own investment from 3.3% of GDP to 2.8%. In real terms, the falls are greater than these figures suggest, since GDP will be smaller than anticipated.

Last year Peru grew by the highest rate in the region, 5.3%. In the first half of this year the rate slowed to 4.5% (still among the highest), but most economists expected a further slowdown in the second half.

Quijandrí­a has warned that a key feature of the projections, the fiscal deficit target of 1.4% of GDP, could be jeopardised if the budget is compromised by demands for higher spending from the regional governments and some unions.

Seasoned PAN politicians brought in to pilot priority reforms — but these are threatened by the party in congress.

The new cabinet reshuffle conducted by President Vicente Fox on 2 September was quite explicitly intended to add political nous and weight to his team, chiefly in order to secure approval by congress of at least one of the priority reforms. Fox replaced energy minister Ernesto Martens and environment minister Ví­ctor Lichtinger - both representative of the independent talent Fox prided himself on having attracted into government. In both cases, the replacements were seasoned politicians with a reputation as skilful negotiators.

To drive home the point, Fox's new communications czar, Alfonso Durazo [WR-03-30], said that the changes `privileged politics as the guiding axis of an ever more efficient, sensitive and committed government action.' Foreseeing the criticism that the reshuffle marked the end of Fox's `total quality' criterion for cabinet appointments, Durazo said that the new appointees not only have a `broad political track record' but also `personal experience in the areas entrusted to them.'

The energy ministry went to Felipe Calderón, a man with a long track record in the ruling Partido Acción Nacional (PAN): he served successively as secretary-general and president of the party, then as leader of its legislative bloc in the chamber of deputies. Most recently he had been serving as head of Banobras, the state's public works bank. The environment portfolio was entrusted to Alberto Cárdenas, former governor of Jalisco and most recently a member of the PAN's national executive.

Explaining half a reshuffle
When he announced the changes, Durazo heaped praise, on Fox's behalf, on the departing Martens, adding that his replacement had been decided in order to give an extra boost to the energy sector and `promote the necessary reforms'. Opening up the energy sector to greater private participation is one of the two reforms Fox considers vital to the Mexican economy.

Much less clear is the change at the environment ministry. Durazo laconically reported that Fox had decided to `remove' Lichtinger. Actually, for undisclosed reasons he decided to conduct a major purge of the whole environment area.

Apart from Lichtinger, he dismissed environmental protection undersecretary Raúl Arriaga (no replacement yet announced), and the federal environmental prosecutor, José Campillo. The latter was also replaced by a seasoned politician: José Luis Luege, leader of the PAN in Mexico city.

For the record: with the last two ministerial changes, the total since Fox took office just under three years ago has risen to seven.

The only hint Fox had given that another reshuffle was coming was his admission in his state-of-the-nation address that he was aware of `demands regarding greater efficiency in the government and disagreements within the team.'

Threat from within the PAN
Fox may have added political weight and skill to his cabinet, but his quest for congressional support for his reforms may stumble on a very vulnerable political flank: his own party's congressional representatives. Last week the president of the lower chamber's ruling board, Juan de Dios Castro, a panista, appeared to have undone all the work put into striking an agreement with the opposition Partido Revolucionario Institucional (PRI). He did so by scheduling a session to debate the lifting of the parliamentary immunity enjoyed by PRI senator Ricardo Aldana, to be tried on corruption charges.

Castro, who served as Fox's legal adviser before winning a seat in congress, is close to the panista faction led by senator and former presidential candidate Diego Fernández de Cevallos, an outspoken critic of Fox's performance in government. He says that he is only acting in accordance with a recommendation of the chamber's steering committee, after receiving a formal request from the state prosecutor. Aldana has been accused of involvement in the case known as `Pemexgate', centred on the irregular transfer of funds from the Pemex workers' union to the PRI campaign funds in 2000.

Sources close to both the PAN and the PRI say that Castro cannot but have known that his action would clash with an informal agreement between PRI chief Elba Esther Gordillo and the government to delay action on `Pemexgate' until the reforms were approved. Indeed, this agreement is said to have been a key factor in the near-agreement reached between both sides on the energy reform.

Gordillo's immediate, some say inevitable reaction was to warn that the understandings with the government were in jeopardy. She also started mounting an opposition to Castro's move on the grounds that it had breached lower-chamber procedural norms. Several analysts say that the prospect of Aldana losing his immunity has greatly weakened Gordillo's position vis-í -vis the PRI hardliners and other rivals within the party.

The episode may not only harm the government's reform plans, but also the PRI's public image, as it shows the party closing ranks, as in the past, over the shadier of its practices.

He wants assured votes in congress and a boost for next year's municipal elections. PT leaders acknowledge that this means ceding ministries.

The number of Brazilians who see President Lula da Silva leaning heavily towards the right - 38%, according to a recent poll (WR-03-34) - may well increase after two developments last week. The first was Lula's explicit offer of an alliance with the right-of-centre Partido do Movimento Democrático Brasileiro (PMDB); the second, the dismissal of Marcelo Resende as head of the agrarian reform institute.

The overture to the PMDB was made at a meeting between Lula and PMDB leaders on 2 September. On offer are some (as yet unspecified) ministries and a coalition for next year's municipal elections. The PMDB had already entered a loose arrangement to support the government's pension and tax reforms in congress, but the recent high-pressure horsetrading which led to substantial amendments of the original proposals [WR-03-31] has convinced Lula that he needs to tie in the PMDB more firmly.

What is at stake
The PMDB has the second-largest bloc in the lower chamber of congress and the largest in the senate. So far, its leaders had held back from a closer relationship with Lula because they wanted to retain independence for next year's municipal polls. The PMDB is the party that controls the largest number of municipal governments, and it wants to extend that control further.

Put simply, Lula wants to piggyback on the PMDB's municipal power. This puts him in the position of the supplicant on two fronts - which means that the PMDB is in a position to exact a considerable political price. The experience of the three recent governments in which the PMDB was a partner (Fernando Collor in 1990-92, Itamar Franco in 1992-94, Fernando Henrique Cardoso in 1995-2002) suggests that this is unlikely to be a one-off transaction: the PMDB's style is constant exaction of concessions.

The argument being deployed off the record by PT congressional leaders is that they have no real choice but to go for a `strategic merger [...] even if it costs some ministries.' They say they are just being realistic: `We have a weak base in congress, and apart from the bills we are now pushing, we will need help for future plans in other areas.'

Change of tack on land issue
As Lula was putting his offer to the PMDB, a government spokesman was announcing that Lula had dismissed Marcelo Resende as president of Incra, the agrarian reform institute. It was made abundantly clear that this was due to Resende's refusal to condemn outright the seizure, or `invasion', of farms by the MST, the movement of landless peasants. As Lula put it later, `The government's objective is to promote a peaceful agrarian reform.'

Resende, it must be noted, had been appointed on the recommendation of the MST and the Comissão Pastoral da Terra (CPT), the Catholic church's pastoral commission on land issues. Resende was replaced by the economist Rolf Hackbart, who had been serving as adviser to Aloí­zio Mercadante, the ruling PT's leader in the senate, and had previously acted as adviser on agricultural and land issues to the PT bloc in the lower chamber, when they were in the opposition (1991-2000).

The change was instantly applauded by the militant association of landowners, the União Democrática Ruralista (UDR). Its president, Luiz Antônio Nabhan Garcí­a, said, `[Resende's] departure was an important step towards lowering the radicalisation of the countryside. Resende was a radical.' But he clearly sees this as only a first step. `The government,' he added, `must put an end to political and ideological interference in an area which must be exclusively technical.' He then went on to demand the dismissal of all officials sympathetic to the MST in Incra's regional delegations.

Near the opposite end of the spectrum, Tomás Balduino, bishop of Goiás and president of the CPT, said that the change signalled the victory of those who want a `less democratic' agrarian reform: `It is the reform the IMF wants; the other one, the one intended to serve millions of landless peasants, has been aborted [...] Tension in the countryside will worsen because the social organisations will no longer feel that they are the government's partners in the agrarian reform project.'

The MST moved more cautiously, especially after Hackbart — no stranger to them — promised that there would be no changes in Incra's regional delegations. The leaders of the MST said that they would only issue a formal statement on Resende's replacement later this week, after a meeting with Hackbart. Occupying the middle ground, Contag, the confederation of agricultural workers, has described Resende's replacement as `inopportune' and warned that it could stall the agrarian reform process.

Hackbart's line is that the Incra needs `strengthening', particularly on the financial side: `All agrarian reform projects need resources; someone has to finance the agrarian reform.'

It would appear that Mexican voters do not believe that Andrés Manuel López Obrador, of the opposition Partido de la Revolución Democrática (PRD) and Marta Sahagún, President Fox's wife, are in earnest about not running for the presidency in 2006 [WR-03-34]. An opinion survey conducted by Indemerc and released last week shows both of them still among the top three attractors of voting preferences. 

López Obrador still enjoys a substantial lead, with 27% of preferences. Second comes PRI leader Roberto Madrazo, with 12% - followed closely by Sahagún, with 10%. When set against his two closest rivals, in whichever combination, López Obrador scores twice as high as them. This said, 33.9% of the respondents said they would vote for the PRI, 30.5% for the PRD, and just under 30% for the PAN.

So what do they see in their choices? Those who picked López Obrador did so because he delivers on his promises (36%), is honest (32%) and works hard (25%). Madrazo is picked for his honesty (26%), hard work (19%) and qualifications (19%). Sahagún, because she is honest (22%) and helps the poor (16%). What do they want solved? Top of the list is unemployment (32%), followed by personal insecurity (21%) and corruption (12%).

Special federal commissioner to coordinate efforts to solve the killing of dozens of women in the state of Chihuahua.

Only weeks after a major anticrime offensive was launched in Ciudad Juárez, in response to the uproar caused by the area's inordinately high rate of murders of women (258 in the past decade), President Vicente Fox has felt compelled to upgrade the issue, appointing a special commissioner in charge of federal involvement in the matter. The trigger: the discovery of yet another female cadaver.

Of the 258 recorded cases, only 99 are officially considered solved. The lower chamber of congress had already set up a special monitoring commission, and the chief prosecutor's office (PGR) has established a multi-disciplinary group to examine all possible explanations of the crimes, including gangs of policemen or former policemen, satanic sects, organ `harvesting' and people trafficking.

The authorities of Ciudad Juárez and the state of Chihuahua have launched, with federal assistance, an `integral security programme' which involves the deployment of 1,200 municipal police, 300 officers of the federal `preventive police' (PFP), 200 of the state's judicial police, and an undisclosed number of PGR agents. The scheme, apart from focusing on the investigation, also includes a big prevention drive.