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The government of Argentina's most populous province, Buenos Aires, has been greatly embarrassed by the revelation that a number of serving provincial police officers had been involved in a high-profile kidnapping. This came on the heels of congratulatory statements by the state governor, Daniel Scioli, about the success of a drive to root out corruption and criminal activities from the force and the announcement of plans for yet another comprehensive restructuring.

Businessman Leonardo Bergara was kidnapped in December 2008. After his family had paid a US$23,000 ransom in late January he was found in a suburban house owned by José Pardini, who had been dismissed from the provincial police force in 1991. In early February investigators arrested Pardini and four serving police officers, one of then a sublieutenant, another a comisario in command of the large Berazategui district that lies south of Buenos Aires city.

Investigators remain convinced that they have not yet uncovered the full extent of the activities in which this ring was involved, nor identified all of its members. The conviction that some are still at large was strengthened when governor Scioli revealed, on 3 February, that he had received death threats that he said had 'probably' come from members of the police force linked to the kidnapping.

Scioli has been trying hard to play down the importance of this affair. He insists, 'The degree of cleansing we have carried out in the force over the past year is quite clear [...] it is a force with many members and there may be some who are resisting the change, but [the threat] will not stop me or intimidate me.' Some of his officials, however, have been telling the media that another big purge is in the offing, and that it may entail the replacement of the police chief, Daniel Salcedo.

The Buenos Aires provincial police force, 46,000 strong, is the biggest law-enforcement agency in Argentina. Its longheld reputation for corruption and involvement in criminal activities has earned it the sobriquet of 'la policí­a maldita' ('the accursed police').

In November last year, just before the Bergara kidnapping, Scioli had announced a sweeping reorganisation of the force, in which its 32 departments would be regrouped into four regions, each headed by a security superintendency, which would be charged with focusing primarily on prevention [SSR-08-11]. Heads have already started to roll. The first casualty was a departmental chief in charge of a district in the northern part of the Greater Buenos Aires, where in previous weeks a number of violent crimes had taken place, provoking a public outcry.

Periodical purges and restructuring plans have failed to root out the malaise. Since 1996 more than 4,500 members of the Buenos Aires provincial police have been dismissed in successive 'cleansing' drives. One of the biggest was launched in 2004 by then-governor Felipe Solá; it involved the investigation of about 24,000 officers (close to half the force) suspected of wrongdoing. Almost simultaneously, the government of the then-president Néstor Kirchner (2003-2007) launched a purge of the 13,000-strong federal police force, which had boasted a 'cleaner' image than their provincial counterparts: more than 100 comisarios and deputy comisarios were dismissed or ordered into retirement [SSR-04-05].

President Juan Manuel Santos has launched a new 'citizen security' policy in response to a surge in violent crime in major cities and to the changing nature of criminal activity. His defence minister argues that this has become a top priority because of the headway made by Santos's predecessor, Álvaro Uribe, with his 'democratic security' policy.

Last year there were 17,717 homicides in Colombia, equivalent to a rate of just under 41 per 100,000 inhabitants — and 78% of all homicides involved the use of firearms, a more than fourfold increase on 2008. So far this year in Medellí­n, 1,600 youths have been killed in fights between gangs.

Santos said in Cali on 4 October that the equivalent of US$2bn will be allocated to crime-fighting and a 'citizen security statute' will be submitted to congress, along with a series of reforms to the penal code, penal procedure and the norms applicable to minors.

The reforms will include the elimination of restrictions on night-time raids and searches (recently invoked to secure the release of a gang of gunrunners); the time limit on arrest, search and surveillance warrants; the extension of the time limit on pressing formal charges (to 60 days), the extension of the criterion of flagrante delito to include, for instance, crimes recorded on video; making membership of an armed band a crime; and establishing that minors should serve their full sentences rather than only until they reach adulthood.

Defence Minister Rodrigo Rivera said on 23 October that Colombia has been witnessing a major change in 'the economics of crime'. A decade ago the criminal groups had three main sources of income: drug trafficking, kidnapping and the theft of fuel. Since then, said Rivera, the [estimated potential] production of cocaine has fallen from 1,000 tonnes a year to 400t, of which 200t are intercepted; the number of kidnappings had fallen from 3,000 a year to about 100; and the annual earnings from the theft of fuels has fallen from US$ 200m to US$5m.

[According to statistics cited by a defence ministry official the number of kidnappings fell from 3,500 a decade ago to about 160 so far this year. Former armed forces commander Freddy Padilla, now ambassador to the United Nations Office on Drugs and Crime (UNODC) has measured the decline in drug production in terms of a 60% reduction in coca cultivation over the past decade.]

At present, according to Rivera, there is a dominant new phenomenon: criminal gangs associated with the drugs trade and other activities who live off extortion. Another new development is the growth of retail drug trafficking, which has led to fighting between gangs and crime among youths. Rivera says that since Santos took office in August, crime has fallen by 16% as a result of early anticrime measures, such as a pilot scheme in Medellí­n.

In early October a commission of civilian 'notables' wrote to President Santos informing him that close to 1,000 gang members in Medellí­n were seeking 'juridical and social guarantees' to lay down their arms.

Argentina's Pluspetrol announced on 21 November 2009 that it would spend US$600m over the next four years to develop its natural gas projects in Peru. Pluspetrol is a key member of the consortium that controls the massive Camisea gas field which, Pluspetrol claims, has 14.1 trillion feet (399bn cubic metres) of proven reserves.

A recent study by an independent energy consulting firm, however, estimated Camisea's reserves at only 8.8 trillion cubic feet (tcf). Pluspetrol said in early November 2009 that it would check its estimate by conducting further evaluations of the field. Daniel Guerra, head of institutional relations at Pluspetrol, said the US$600m would go toward drilling up to 11 exploration wells in and around Camisea.

On 6 November, President Alan Garcí­a announced that Brazil's state hydrocarbons firm Petrobras had struck a big gas field in Bloc 58, which adjoins the Camisea field. The Petrobras field apparently holds over 1 trillion cubic feet of gas. Petrobras is prospecting in the area with five wells. Only one has so far struck gas.

There is little doubt that Peru has lots of gas. What is in doubt is whether the government and the gas companies have got their sums right and left enough to meet domestic demand while simultaneously fulfilling their ambitious export targets. There is a growing realisation in Peru that the previous government of president Alejandro Toledo (2001-2006) made some crazy deals over the way the huge gas deposit at Camisea would be exploited.

It now seems clear that Camisea may not have enough gas both to meet the growing demand in Lima and to feed the LNG plant at Pampa Melchorita, near Pisco, which will send the gas up to North America. The government has already warned Pluspetrol, which leads the consortium that operates Lots 88 and 56 of the Camisea natural gas field, that it is reviewing the contract. Pluspetrol has committed to exporting 40% of Camisea gas. Analysts have said that if Pluspetrol's exports go to Mexico as planned starting in 2011, then there will be a shortfall in the Peruvian market, where demand is growing quickly.

Pluspetrol is at the upstream end of the Camisea project. The companies which control the LNG plant in Lima (which turns the Camisea gas into an exportable commodity) are: Hunt Oil (which has a 50% stake); Repsol (20%); SK of South Korea (2%) and Japan's Marubeni (10%). Hunt Oil (25.2%), Sk (17.6%) and Repsol (10%) have a controlling stake in Camisea, even though Pluspetrol is the main operator (and has a 27.2%) stake in Camisea. Pluspetrol's minority partners in the upstream end of the project are Tecpetrol (also from Argentina) and Sonatrach (Algeria's state-controlled gas company). Each has a 10% stake.

Pluspetrol has said it has reserves that will meet local demand and that it will go ahead with expansion and export plans. It maintains its Camisea fields have 14.1 trillion cubic feet (tcf) of reserves, with a useful life to 2047. This is much higher than the 8.79 tcf estimate from a consulting firm, Gaffney, Cline & Associates that analysts use as a figure for proven reserves.

Peru's problem is that it has allowed gas from Lots 88 and 56 to be exported. Originally, Lot 88 was destined just for the domestic market but a change in the law in 2005 allowed for its export. Peru has now got itself into a situation where it has proven gas reserves of 8.8tcf, but 8.7tcf of these reserves are committed to the export market.

What could happen is that Peru could start using the 2tcf Repsol YPF found in Lot 57 close to Camisea. Repsol is already a partner with Pluspetrol in the 15 year, US$15bn, deal to export gas to North America, particularly to Mexico. Under Repsol's contract with Mexico, Repsol charges Mexico 91% of the Henry Hub price, so around US$3.64 per 1,000 cubic feet.

Repsol in fact pays much less for the gas because it knocks off the cost of liquefying the gas and then transporting it to Mexico and the US. Some analysts believe that these charges reduce the price Camisea actually gets for the gas that is exported to North America to US$0.14 per 1,000 cubic feet. This would be by far the lowest price in the region. What makes the situation even more galling to the government is that the Camisea producers charge domestic Peruvian users far more than they charge export customers. The price for Peruvian power stations is US$1.51 per 1,000 cubic feet, while the price for industrial users is US$2.54 per 1,000 cubic feet. 

The LNG plant at Pampa Melchorita
Peru's LNG plant is located at Pampa Melchorita, on the Pacific coast near San Vicente de Cañete, 169km south of Lima. LNG is produced when natural gas is cooled to minus 163 Celsius ( °C). This is done by compressing the gas. LNG occupies approximately 1/600 of the equivalent volume of natural gas, which facilitates the storage and transport of bulk LNG using specialised ships.

The plant will have an active life of at least 30 years. The plant site has space allocated for a potential expansion by adding a second train. The liquefaction train uses the propane pre-cooled multi-component refrigerant liquefaction technology, which is a widely adopted technology. The plant has a nominal capacity of 4.4 million metric tonnes per year.

The transportation of natural gas for the liquefaction plant will be through the existing Camisea-Lima Pipeline Transportation System (PTS) up to kilometer post (kp) 211 at Huayahura. From this point, a 408 km long 34 inch diameter pipeline runs to the plant. This buried pipeline is built and operated by PERU LNG.  Approximately 300 of the 402km of the horizontal path of the PERU LNG pipeline is through the Andes mountains at altitudes ranging from 1,500 to more than 5,000 metres above mean sea level. The regional climate along the new pipeline path is extremely variable including hot, temperate, cold, and very cold climates; as well as conditions that are arid, semiarid, sub-humid, humid, and very humid.

• Gas powered vehicles: Around 10% of the country's vehicles already run on gas, according to Pedro Sánchez, the energy and mining minister. He estimates that 141,000 vehicles have been equipped to run on gas. Of these, 81,000 run Gas Natural Vehicular (GNV) and 60,000 run on Liquefied Petroleum Gas (LPG). From 2010 the government will start selling other cleaner fuels: led by diesel, which has only 50 parts per million (ppm) of sulphur and gasohol (which dilutes petrol with 8% ethanol). These new fuels will first be launched in Chiclayo and Piura. Sánchez said that if the price of oil continues to rise, the government will subsidise refineries to produce the fuels. Already the government is spending US$23m a week on subsiding fuels production. It tried to recover some of these extra costs by pushing up fuel prices, but this led to a strike by haulage companies.

The government sent its budget for 2005 to congress on 8 September. It expects growth next year to be only 3.8%, down from this year's likely 4.25%. The government is also being tough on spending, despite forecasting that oil prices would remain high and 2005 being the last year before a presidential election. It is aiming for a fiscal deficit of only 0.1% of GDP.  

The government set the budget for 2005 at M$1.74bn (US$151.6bn). The lower chamber of congress will have to approve the budget by the end of this year. According to the draft budget federal spending in 2005 will be 4.5% down on what was budgeted for this year. At a time when oil revenues are buoyant, and presidential and congressional elections are looming (they are due in 2006), the government's abstemiousness looks almost wilful. Whether congress will be able to restrain itself from backing some pet projects, and thus increasing spending, is doubtful.

The budget assumptions are that the economy will grow by 3.8% in 2005. This is an unambitious and disappointing target, given that the economy looks on course for 4%-plus growth this year. The main reason for the slowdown is that the US economy is forecast to grow by only 3.7% in 2005, down from 4.4% this year. The other macroeconomic targets are: inflation of 3% in 2005; a current account deficit of 2.1% of GDP (US$14.2bn) and an average oil export price of US$23 a barrel. The assumption for average oil export volume is 1.9m bpd. For 2004 the government assumed an average oil price of US$18.5 and exports of 1.85m bpd. The volume forecast is almost spot on, but the average price of Mexico's mix of crude oils is running at around US$29 per barrel. Overall, the budget calls for 6.3% cut in regular government spending; a 3.6% cut in welfare and other social spending and a 42% cut in the catch-all category of 'other federal spending'. The government claims that it is cutting bureaucratic spending by 12%.

President Vicente Fox said that the fiscal deficit target for 2005 will be 0.1% of GDP. In 2004 the government's target is a deficit of 0.3% of GDP, though congress allowed a budget with a deficit of 0.5% of GDP.  

Debt servicing payments in 2005 are scheduled to rise by almost 5% in 2005 to M$227.6bn (US$19.79bn), reflecting the switch in government borrowing from foreign to domestic capital markets. Ironically, the government may have been better advised to maintain its low-cost dollar debts rather than switch back into higher interest rate pesos.

In sending the budget to congress, the president pointed out that the bulk of the spending was cut three ways. He said that 25% would go on supporting the 19 federal government ministries. Another 35% would go on the big state-owned companies (such as Petróleos Mexicanos, the Comisión Federal de Electricidad, Luz y Fuerza del Centro and the two main social security funds, IMSS and ISSSTE. Balancing this, another 35% of the budget would be spent by states and municipalities.  

The government claims that despite the austerity of the budget, it is actually increasing welfare spending by 19%, as health, education, anti-poverty and rural development programmes are all getting more money. Anti-poverty programmes will have a budget of M$115bn (US$10bn) in 2005. This is 10% more than they got in 2004. The other big idea in the budget is the doubling of the money being spent by the federal government on law and order.

As the opinion polls predicted, César Raúl Ojeda Zubieta, Andrés Manuel López Obrador's candidate for governor of Tabasco elections, lost heavily in the election on 15 October. The apparently comprehensive result and the peacefulness of polling day suggest that Ojeda's and López Obrador's protests against the result will not be upheld. López Obrador and his supporters in the Por El Bien de Todos coalition claim that the Partido Revolucionario Institucional (PRI) bribed people to vote for its candidate, Andrés Granier.

The official result of the election was 440,250 votes for Granier against 358,492 for Ojeda. Granier said, on 22 October, that he would incorporate perredistas in his government. The PRI also won 10 of the state's 27 municipalities, which also held elections. The Por el Bien de Todos coalition won the other seven. López Obrador's Partido de la Revolución Democrática (PRD) alleged on 4 October that the PRI had stockpiled bicycles to bribe voters in the forthcoming election in Tabasco. The president of the PRI in Tabasco, Georgina Trujillo, admitted that the party had been giving out "humanitarian assistance" but denied that the gifts were electoral bribes. 

The PRD and López Obrador's Por el Bien de Todos alliance, realised well before polling day that they were fighting an uphill battle in Tabasco. On 2 October, López Obrador admitted that the campaign was underfunded, but he claimed that support for Ojeda was rising and that he was now ahead. On 5 October, the local electoral commission ordered the PRD to withdraw TV ads attacking Granier. The decisiveness of Ojeda's victory, by nine percentage points according to the official results (though the exit polls showed a 16 percentage point margin), shows how far López Obrador's support has fallen since his narrow defeat in the July presidential election. Tabasco is López Obrador's home state and was a bastion. In Tabasco in July López Obrador won 512,743 votes in the presidential election, well above the number cast for the PRI presidential candidate Roberto Madrazo (344, 526) and for the (now president-elect) Felipe Calderón Hinojosa who won barely 32,000.

The scale of the defeat in Tabasco means that López Obrador cannot afford his next political move, his self-inauguration on 20 November, to misfire. López Obrador needs crowds of supporters if his campaign against the President-elect Felipe Calderón, is not to degenerate into self-indulgent pique. Already elements in López Obrador's Partido de la Revolución Democrática are signalling that they are prepared to negotiate with Calderón and his team.

On 1 January national daily, El Universal, reported that 5,630 people had been killed by gangsters in Mexico in 2008. The government has not published an official figure, though one figure produced by the government appeared to suggest that in the first 11 months of 2008 5,376 people had been killed by gangsters. A third count, from another newspaper, Reforma, put the death toll for the whole of 2008 at 5,207. Where both newspapers concur is that the 2008 death toll is at least double the 2007 figure.

Chihuahua is the state with the highest number of gang killings (at least 1,650, according to the Mexico city daily, Reforma, but 2,006 according to El Universal, followed by Sinaloa (650 on Reforma's count) and Baja California (616). Only one of Mexico's 32 states, Tlaxcala, did not see a single gang killing in 2008.

What is striking is that, according to Reforma, only 148 people were killed by gangsters in Chihuahua in 2007.

The only mild comfort for the government is that the killing rate slackened off in November and December after hitting a peak of 791 in October. In November 729 people were killed by gangsters, a figure which dropped to 669 in December.

Even before the end of 2008, the country's top law enforcement ministers were at odds over exactly how many people had been killed by gangsters. On 8 December the Procurador General de la República (PGR), Eduardo Medina Mora, admitted that 5,376 people had been killed by “drug traffickers" in 2008 alone. Yet a day earlier, Genaro Garcí­a Luna, the embattled public security minister, said that a total of 6,943 people had been “executed" - almost all of them killed by gangsters - since President Felipe Calderón Hinojosa took office on 1 December 2006.

What made the PGR figure even more striking is that it is much higher than the unofficial score kept by the Mexico City press. The PGR's figure covered the period from 1 January to 2 December. El Universal, estimated that the death toll from 1 January to 3 December 2008 was 5,031 while Reforma reckoned that the toll from 1 January to 5 December 2008 at 4,780.

What is just as worrying for policymakers is that Medina Mora added, in a briefing to foreign correspondents, that he did not think that the killings had yet reached their peak. Medina Mora noted that in the comparable period of 2007 (1 January to 2 December), 2,477 people had been killed by gangsters in Mexico.

The PGR also argued that, contrary to Reforma's count, November was by far the worst month so far this year for gang killings. It reported that 943 people were killed in November alone by gangsters. December had been shaping up to be even worse, but the gangsters seem to have slackened off from 12 December (the Feast Day of Virgin of Guadalupe and the traditional start of Mexico's Christmas holidays which end with Epiphany on 6 January).

Where the PGR and Garcí­a Luna do agree, (but, we argue, are both in error) is that Mexico's annual murder rate is still comparatively low at 11 per 100,000 inhabitants. They say that Mexico's population is around 108.7m. They point out that the homicide rate in Guatemala and El Salvador is around 50 per 100,000 inhabitants; in Brazil, it is 40 per 100,000; and, in Colombia, 33 per 100,000. The homicide rate in the US is six per 100,000 inhabitants, while in Western Europe the rate is four per 100,000.

Yet according to data in President Calderón's Second Informe, published on 1 September 2008, there were 28,877 homicides in Mexico in calendar year 2007. This suggests that Mexico's homicide rate is, in fact, pretty close to Colombia's. In the Informe the government admits that the murder rate is 27.3 per 100,000 inhabitants, up from 26.3 per 100,000 in 2006.

Targeting, as well as massacring
The Mexican government argues that the upsurge in killings this year is largely due to increased feuding between factions of the country's three main drug gangs. There is certainly more killing of low-level gangsters in places such as Chihuahua, Sinaloa and Baja California, but there is also increasing evidence of gangs targeting and assassinating senior policemen.

On 8 December, Ví­ctor Hugo Moneda Rangel, one of Mexico City's top law enforcement officers, was gunned down as he arrived home. Two days later, Rogelio Calderón, a senior commander of the Policí­a Judicial in the Estado de México, was murdered while out on patrol in a squad car. He was responsible for coordinating state and federal forces against drug selling in the streets of Ecatepec, one of the suburbs of Mexico City.

These two killings suggest that the drug gangs are starting to move into Mexico City. Previously they have only killed policemen and law enforcement officials with national or regional responsibilities who happened to be based (and therefore killed) in Mexico City.  

The other big worry for the authorities is the gangs' corruption of the police. Edgar Olvera, the number two on the congressional public security committee, said on 8 December that the current purge of the police would leave the country with only 20% of the current national police strength of 375,000. Olvera was arguing that congress should approve the new public security law, which is designed to increase the quality of the police and pay them better.

Currently some police officers earn only between M$1,000 (US$74) and M$3,000 a month, and the majority get paid less than M$7,000. Some, according to Olvera, have to make ends meet by driving cabs or providing massages. Under the new law, the minimum police wage will be M$10,000 a month.

Kidnapping
Mexican public opinion, however, is much more concerned about kidnapping than the level of gang killings. An opinion poll in El Universal, published on 8 December, found that 70% of Mexicans supported the restoration of the death penalty (preferably by lethal injection) for kidnappers. The issue of capital punishment has come to the fore after the state congress in Coahuila, which is dominated by the opposition Partido Revolucionario Institucional, voted to ask the federal government for the state to be allowed to execute kidnappers who kill their victims. Nationally, the Partido Verde Ecologista de México supports the re-introduction of capital punishment for kidnappers and rapists.

In 2008, the Mexican media played up a couple of kidnappings (and subsequent murder) of two children. The first was that of Fernando Martí­, the son of a prominent businessman in August. The second was that of Silvia Vargas, the daughter of the former president of the Comisión Nacional de Deporte, Nelson Vargas. DNA tests confirmed that a body found in early December is that of Silvia, who was kidnapped over a year ago. Her disappearance and her family's anger at the police's sluggish response fuelled national indignation at the police just as the kidnapping and murder of Fernando Martí­ in August did.

Mexico has not executed anyone since 1961 and capital punishment was formally abolished by the federal congress in 2005.

Embattled
Genaro Garcí­a Luna, the public security minister, is facing a series of accusations and threats. The most serious comes from a former policeman, Javier Herrera Valles, who claims that Garcí­a Luna has let corruption flourish since he was appointed by President Felipe Calderón.

In early December two other threats to Garcí­a Luna emerged. The most eye-catching was a series of narcomantas (posters erected in public places by gangsters). On 8 December 27 narcomantas were erected in 12 cities in eight states. One huge (six metre) poster was even draped from the cathedral in Monterrey. The coordination of the operation to erect the narcomantas in highly public places suggests that whoever was behind them could pass themselves off as part of officialdom. Cynics suggest that Garcí­a Luna himself ordered the posters to shore up his position.  

Garcí­a Luna's other new threat, which may turn out to be the most serious, was the appointment of a serving general to the number-two position in Garcí­a Luna's own ministry, the Secretarí­a de Seguridad Pública (SSP). The snap judgment by Mexico's commentariat is that the appointment of General Javier del Real Magallanes as deputy minister for police strategy and intelligence shows that the army is taking more power for itself in the battle against organised crime. It may possibly, however, be an astute move by Garcí­a Luna to repair his relations with the military, which has an unquestioned reputation for probity in Mexico.  

The general was appointed on 5 December to replace Garcí­a Luna's associate, Facundo Rosas Rosas. Rosas has been shunted sideways to the less critical task of crime prevention. The defence minister, General Guillermo Galván Galván, is a longstanding sceptic about Garcí­a Luna, and Galván's supporters claim that Del Real Magallanes's appointment keeps Garcí­a Luna out of police intelligence and operations. Garcí­a Luna has been bidding to take control of the country's entire law enforcement operation which is currently split between his ministry, the Procurador General de la República (PGR), and states and municipalities.

The big problem for Garcí­a Luna is that Del Real is a serving general and so answers to the military chain of command. His superior is, obviously, Galván Galván rather than Garcí­a Luna.

It is no secret that General Galván had sought to persuade Calderón not to appoint Garcí­a Luna to the SSP, and had submitted evidence of acts of corruption and collusion with the drug gangs during the time Garcí­a Luna had been running the Agencia Federal de Investigación (AFI). The army is not the only organisation with doubts about Garcí­a Luna. The Catholic bishops' conference is perhaps the most prestigious.

Herrera
From Garcí­a Luna's point of view the allegations from Herrera Valles, a former head of regional deployment at the Policí­a Federal Preventiva, are perhaps the most dangerous because they are both sensational and appear to have some external validation.

Herrera claims that he was arrested by the PFP, which reports to the public security ministry, on allegedly trumped-up charges. Intriguingly, Ví­ctor Gerardo Garay Cadena, the then-commander of the PFP who sacked Herrera (presumably on Garcí­a Luna's orders), is now himself in prison, accused of being in the pay of the Beltrán Leyva brothers, who control a faction of the Sinaloa gang. On 10 December, Garay was also accused of profiting from robberies organised by gangs.

Garay's charge sheet suddenly lengthened on 13 December when the daily Reforma published a sensationalist article, based on a leaked report from the federal Procuraduria General de la República (PGR), that Garay, while   head of the Policia Federal Preventiva (PFP)   had taken part in an orgy when he raided a drug baron's mansion on 16 October 2008.

According to the report, Garay, who is now in preventive custody, led the raid on the drug baron's house, the Desierto de los Leones. Immediately after the police had secured the house, he lined up 30 of the girls found in the house in the in-house cinema and then picked out four of them; he then reportedly ordered the Jacuzzi to be warmed up and cocaine to be provided for the girls he had chosen to accompany him and the door locked.

Originally the government had made great play of the raid on the Desierto de los Leones. The gangster who owned it kept two panthers; two lions and a white tiger in the grounds.

The raid was supposed to lead to the arrest of Harold Poveda, a Colombian, who owned the Desierto de los Leones. Poveda was close to the Beltrán Leyva brothers. Poveda escaped during the raid on his house and Garay cancelled an order for a helicopter to be used to search for him because, Garay said, the weather was too cold. In fact, according to the PGR, Garay was in the Jacuzzi.    

The PGR leak to Reforma is damning. Garay demanded money from the gangsters he arrested and when one, Mauricio Fino, came up with only US$30,000 rather than the US$500,000 he had promised Garay, Garay made Fino ring Colombia to wire the missing US$470,000. Bizarrely, the money apparently turned up in a Winnie the Pooh bag hidden in a grey Ford Focus. The car was raided by the PFP and the money handed over to Garay's deputy, Edgard Bayardo.

Where the money went after that is unclear. Garay accused Bayardo of stealing it: Bayardo denied this and then told the PGR what Garay had been up to in the Desierto de los Leones. Other eyewitness, equally outraged at Garay's behaviour, confirmed Bayardo's accusations.

It is worth noting that several of the girls arrested (and abused as prostitutes) in the Desierto de los Leones raid have been released without charge. One Colombian woman who claimed that she was only at the house to show jewellery to Poveda's girlfriend on her birthday, had her story entirely checked out by the PGR.

Tijuana: A gang dressed in military fatigues attacked the offices of the state attorney general in Tijuana, Baja California on 17 December. The attack was beaten off before the gangsters could free prisoners arrested on 14 December but demonstrates how brazen the gangs have become. Three lawmen were injured in the attack.

Decapitations:   On 21 December the ministry of defence confirmed that eight of the 13 decapitated bodies found in Guerrero had been soldiers. The eight soldiers were killed (after apparently being tortured) between 9 and 21 December. The ministry of defence argued, in a statement, that the brutality of the attacks showed how desperate the gangsters are becoming.   Unofficial reports suggest that most of the soldiers were picked up by the gangsters while on leave from the 41st Infantry Batallion which is based at Chilpancingo.
The decapitated body of Simón Wenses Martí­nez, a former deputy head of the state police, was also found with the soldiers' bodies. The police also found a further four decapitated bodies: the police presume that these bodies were civilians.

• The death toll of 213 people for the week from 29 November to 5 December was the highest figure since President Felipe Calderón Hinojosa took office on 1 December 2006.

• On 23 December the reigning Miss Sinaloa, Laura Zúñiga, the daughter of a gangster from the Juárez gang was arrested with seven other men as she travelled in a convoy conveying weapons and cash to Guadalajara. Zúñiga is not the first beauty queen to be tempted by the glamour of gangsters: the year before Emma Coronel, a beauty queen in Durango married Joaquí­n “El Chapo" Guzmán, the leader of the Sinaloa gang, on her 18th birthday.

• According to a witness in a witness-protection programme, Arturo González Rodrí­guez, a former major in the presidential guard, was in the pay of the Beltrán Leyva faction of the Sinaloa gang. He gave the gang confidential information of the president's itinerary and on anti-gang operations.

On 23 February Andrés Manuel López Obrador, a radical left-winger, withdrew his (attempted and much trumpeted) resignation from the main left-wing party, the Partido de la Revolución Democrática (PRD). López Obrador's manoeuvrings are designed to do two things: first to prevent the PRD going into an alliance with the ruling Partido Acción Nacional (PAN) in the Estado de México, this year's most important gubernatorial election; and second, to weaken the grip a rival faction, known as Los Chuchos, has on the PRD party machine. What he has achieved, however, is to show how weak and divided the PRD is.

The PRD's current problems, however, do not mean that it has become as negligible a force as the opinion polls suggest. López Obrador himself still commands the support of a solid 10% of the electorate. Furthermore, his successor as mayor of Mexico City, Marcelo Ebrard, is a strong candidate for the presidency in 2012. Ebrard has been busy polishing his international profile, most recently at the World Economic Forum in Davos.

The big issue for Ebrard is winning the Left's (principally the PRD's but also the Partido del Trabajo's and Convergencia's) nomination for the presidency. If he does that, he will be in a strong position, because the main opposition party, the Partido Revolucionario Institucional (PRI), has a couple of candidates who are already at odds with each other while the ruling Partido Acción Nacional (PAN) appears to have no-one. Admittedly, at this point six years ago, the odds on Felipe Calderón (then a none- too-successful party president, federal deputy and sacked energy minister), winning the presidency would have been ridiculously long.

López Obrador's attempt to leave the PRD is a blatant effort to derail the negotiations between the PAN and the PRD over a joint candidate for governor in the July elections. As several political commentators in Mexico have pointed out, López Obrador has, in fact, been a semi-detached member of the PRD for most of the past five years. He has allied himself more with Convergencia and the PT than with the PRD, though the only place he campaigned directly against a PRD candidate was in the municipal election in Iztapalapa, a borough of Mexico City where the PAN-dominated electoral authorities interfered in the result of a PRD primary. 

In 2010 the alliance between the PRD and the PAN was successful in three states (Oaxaca, Puebla and Sinaloa, although in each state the victor was a former prií­sta) and again in Guerrero this year (again with the same caveat). To be fair, López Obrador, though stating his opposition to all four alliances, did not actively campaign against them or try to split the Left's vote in the election.

The PRD and the PAN's dance in the Estado is slowing down the whole political process. The PRI itself has not chosen a candidate to succeed Enrique Peña Nieto, the current governor and the frontrunner for the PRI's presidential nomination, and hence the presidency, in 2012. The PRI, or more accurately Peña Nieto, is delaying its decision because it wants to know what its candidate will be facing.

Formally, candidates do not have to register for the 3 July election in the Estado until 1 May. The PRI party president in the Estado, Ricardo Aguilar Castillo, says that the party will spend most of March in consultation with its members about its manifesto and then hold a very brief (28 March to 6 April) primary before a party convention at which its candidate for governor will be announced. This abbreviated timetable seems designed to ensure that Peña Nieto will decide who the candidate should be and that there will be no damaging split in the PRI in the Estado.

The PRD national committee, dominated by Los Chuchos, voted on 19 February to hold a vote in the Estado on the putative alliance with the PAN. The problem is that the PRD national committee cannot decide whether it should hold a state-wide poll on whom its candidate should be, what question it should ask or whom it should ask. Should it ask all voters? Or just PRD members? Or all members of the PRD, Convergencia and the PT? If the poll is of all voters it may well be distorted by prií­stas who will vote the line recommended by Peña Nieto, who opposes any alliance between the PRD and the PAN in the Estado.

The odds must be that the PRD will abandon the idea of an alliance with the PAN in the Estado. It may be that Ebrard, a convinced Alianista, recognises that such a result is inevitable in the Estado, so pushing for an alliance there is doomed. His new position of cordial relations with López Obrador means that he benefits if López Obrador's candidate in the Estado, Alejandro Encinas, does well. If Encinas comes a poor second (or even third), however, Ebrard's arguments that the PRD (and the Left in general) needs to broaden its appeal for the 2012 presidential election are also enhanced.

The PRD also, incidentally, needs to pick a new party president after Lázaro Cárdenas Batel, the former governor of Michoacán and the grandson of President Lázaro Cárdenas del Rí­o (1934-1940), who nationalised the oil industry, refused the job. The PRD is due to hold a party congress in March to pick its new president. The PRD's latest idea is to revise the part statutes so that Lázaro Cardenas's father, Cuauhtémoc, the PRD's founder, can become party president.

Sooner or later someone had to notice him. Former president Jean-Bertrand Aristide has been screaming from the wings ever since he was bundled out of power last February but the international community, with the exception of the Caribbean Community, has pretended not to hear him. After pro-Aristide loyalists launched a violent uprising dubbed 'Operation Baghdad' on 30 September calling for his return it became apparent that Aristide was not just going to go away. But it was not until the Rio Group summit on 5 November that Aristide's name came up in international circles again.

The president of neighbouring Dominican Republic, Leonel Fernández, was one of several Latin American heads of state to suggest that Aristide should be invited to attend talks. He said that Haiti was 'a narcostate in which poverty and human degradation reigned supreme', adding that 'there is a political leader, Jean Bertrand Aristide, who enjoys widespread support and should be involved in the process to find a democratic solution (to Haiti's problems).' 

At the conclusion of the meeting, the foreign minister of Brazil, Celso Amorim, issued a statement suggesting that a dialogue should be opened with Aristide because 'he has a lot to contribute' to resolve the political problems in Haiti. 

Until Amorim's announcement, Latin American countries had followed the lead of the US in trying to studiously ignore Aristide. His presence in South Africa, where he was offered political asylum shortly after he was ousted in February, was considered awkward. Unsurprisingly, the Latortue government claims that he is responsible for fomenting the violence in Haiti. Amorim did not elaborate on the role that Aristide would play in the coming months but he said that Brazil would send an envoy to speak to him.

Amorim's statement did not meet with widespread international approval. France made it clear that it does not consider dialogue with Aristide to be prudent. The minister for cooperation, development and Francophony, Xavier Darcos, said that France had a 'more nuanced' take on the situation in Haiti than Brazil although he said little to suggest that this went beyond objecting to Aristide being involved in talks and suggesting that the support for his party, Fanmi Lavalas, has been exaggerated. This is difficult to prove. Aristide's support amongst Haiti's ubiquitous poor has rarely been challenged. His roots as a Roman Catholic priest in poor urban areas ensured that many, however erroneously, felt he was in touch with them in a way that Prime Minister Gérard Latortue, who has spent much of his life abroad, is not.

But the French government has a point. Any attempt to involve Aristide in talks is a risky strategy. Pro-Aristide loyalists might see this as a sign that 'Operation Baghdad', which appears to have petered out slightly since the beginning of the month, has been successful and step up their protests. Brazil seems to have belatedly accepted this. Without retracting the statement that Aristide should be involved, the Brazilian government announced that it would not be sending an envoy to talk to Aristide after all. It did not make it clear who would speak to him.

Brazil is discovering that adopting Haiti as its pet project is fraught with difficulties. While the 19 presidents at the Rio summit agreed to promote dialogue between different political and social groups in Haiti, to sponsor reconstruction projects and to increase the military presence in Haiti, progress seems to be slow. Fed up of waiting for other countries to commit troops, Brazil has decided to swell the numbers in the UN stabilisation force, Minustah, by committing more of its own troops to help preserve stability on the island. (Ironically, while all the talk in Rio was about insecurity in Haiti, ships from the Brazilian navy lay off shore with their guns trained on the favelas). 

Caricom sticks to its guns
Shortly after the Rio Group meeting, the Caribbean Community, Caricom also held a meeting to discuss Haiti, on 9 November in Trinidad and Tobago. Buoyed by the Rio Group's decision to involve Aristide in some shape or form, which is a vindication of its own position, Caricom issued a 'consensus statement' refusing to recognise the interim government of Prime Minister Latortue. 

Caricom has consistently refused to buckle under international pressure, especially from the US, to recognise the Latortue government and its refusal to confer legitimacy on the Latortue government means that Haiti is, on paper at least, isolated in the Caribbean. However, Caricom was insistent that it had not turned its back on Haiti. The current chairman of Caricom, Grenada's Prime Minister Keith Mitchell, said that an agreement had been reached to provide assistance on a bilateral basis to Haiti and to 'work with other groups'. This would seem to give individual states considerable latitude to pursue their own agendas in Haiti while stopping short of providing official recognition of the interim regime.

Caricom is divided between those member states which want to engage Haiti - Barbados, Grenada, and Antigua and Barbuda - and those that reject the Latortue government on principle - Guyana, St Lucia, and St Vincent and the Grenadines. Haiti was suspended from the 15-member group after Aristide's removal from power.

Guyana's President Bharrat Jagdeo said that Caricom's 'consensus statement' on Haiti 'reflects the strong position some of us had taken against the interruption in the democratic order in Haiti and that Caricom, like the Organisation of American States, also have principles that do not allow for countries that disrupt the democratic process to participate in the organisation...' St Lucia's Prime Minister Kenny Anthony said that while he had no problems with any member state dealing with the current political problems in Haiti, 'dealing with those problems cannot be translated into a recognition of the Latortue regime by our Community'.

On 1 March the US State Department published its annual International Narcotic Control Strategy Report. The report concluded that many Caribbean countries are used as transit points for drugs (predominantly cocaine, heroin and marijuana) travelling from South America to the US and Europe. The Bahamas, the Dominican Republic, Haiti, Jamaica and Guyana were identified as "major" transit points and noted that the broad geographical area of the eastern and southern Caribbean as an area of concern. All, with the notable exception of Guyana, were commended on at least co-operating with US anti-narcotics efforts.

Guyana

The report pointed out that interdictions and seizures of drugs in Guyana decreased from 2004 to 2005, but that drugs flow easily through the country's remote uncontrolled borders and coastline. According to publicly reported arrests, authorities recovered only 43kg of cocaine in 2005. This represents a significant decrease from 2004 and 2003, when authorities recovered 269kg and 277kg of cocaine, respectively.

According to the US report, drug traffickers appear to be gaining a significant foothold in Guyana's timber industry. "In 2005, the Guyana Forestry Commission granted a State Forest Exploratory Permit for a large tract of land in Guyana's interior to Aurelius Inc., a company controlled by known drug trafficker Shaheed 'Roger' Khan. Such concessions in the remote interior may allow drug traffickers to establish autonomous outposts beyond the reach of Guyanese law enforcement," the report stated. 

The US Embassy in Guyana estimates that narcotics traffickers earn US$150m annually and possibly much more by trafficking cocaine through Guyana. This amount is equivalent to 20% or more of Guyana's reported gross domestic product. Drug traffickers are thought to use light aircraft to make airdrops in isolated areas and small boats to travel up Guyana's many navigable rivers to pick up supplies from Brazil, Venezuela and Suriname.

Inside the country, narcotics are normally transported to Georgetown by road, water or air and then sent on to the Caribbean, North America or Europe via commercial air carriers or cargo ships. "Go-fast" speed boats may also carry cocaine from Guyana's rivers to mother-ships in the Atlantic, the report said. It acknowledged the creation of the government's ambitious National Drug Strategy Master Plan in June 2005, but said that it had been undermined by the lack of adequate resources for law enforcement, poor co-ordination among law enforcement agencies and a weak judicial system. 

Jamaica

In contrast, the report praised the success of the counter-narcotic Operation Kingfish in Jamaica. According to the INCSR: "Operation Kingfish resulted in the successful seizure of 56 vehicles, seven boats, one aircraft, 131 firearms and two containers conveying drugs. Operation Kingfish alone was also responsible for the seizure of more than nine metric tons of cocaine, four pounds of hash oil and over 5,117 pounds of compressed marijuana." 

The head of Operation Kingfish, Assistant Commissioner Glenmore Hinds, said that he was encouraged by a report. "It has confirmed what we have been saying," he said. "This commendation will only encourage us as we continue to fulfil our mandate to dismantle criminal networks."

The INCSR raised concerns about money laundering in Jamaica, which it noted, was continuing because of a lack of effective legislation. In response, Hinds said: "There indeed are some inadequacies in some aspects of our legislation. Some of the things we have been lobbying for are, however, now before parliament."

The State Department's report also named Jamaica as the largest Caribbean producer and exporter of marijuana. 

The Eastern Caribbean

The report was fairly damning about the seven nations of the Eastern Caribbean; Antigua and Barbuda, Barbados, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. "Drug trafficking and related crimes - such as money laundering, drug use, arms trafficking, official corruption, violent crime, and intimidation have the potential to threaten the stability of the small, democratic countries of the Eastern Caribbean and, to varying degrees, have damaged civil society in some of these countries."

The report noted that most of the drugs came to the area by sea, in small "go-fast" vessels, larger fishing boats, yachts and freight carriers, although some South American traffickers deliver drug loads either on the beach or offload their cargo to smaller vessels at sea. 

"Some of the Eastern Caribbean DTOs (drug trafficking organisations) have also established contacts amongst themselves to facilitate drug distribution in the region. Local traffickers often pay for services with drugs and/or weapons to limit costs and to increase demand and markets. According to US law enforcement officials, the infrastructure built by DTOs operating in the region and other vulnerabilities that exist in the region make it ripe for exploitation by terrorist organizations," the INCSR stated. 

Trinidad and Tobago

Trinidad and Tobago fared slightly better, eliciting praise from the State Department report for continuing to co-operate with the US on counter-narcotics issues and allocating "significant resources to the fight against illegal drugs". Nevertheless, the report still pointed out that the country was a major transit point for drugs from South America to Europe and the US. The INCSR noted that Trinidad and Tobago has an advanced petrochemical sector, which requires the import and export of chemicals that can be diverted for the manufacturing of cocaine hydrochloride. Precursor chemicals originating from Trinidad and Tobago have been found in illegal drug labs in Colombia. 

No mention of the RSS

Interestingly, the report made absolutely no mention of the Regional Security System (RSS), a task force set up to deal collectively with regional threats. In December 2005, an Antiguan minister demanded the RSS should be promoting its work more to show it was working hard in the fight against drugs. The comment followed a statement by a US Drug Enforcement Agency official who questioned whether governments in the Caribbean would actually "do something" about drug trafficking in the region.

The mission statement of the RSS is: "To ensure the stability and well-being of Member States through mutual co-operation, in order to maximise regional security in preserving the social and economic development of our people." Although effectively set up in an attempt to legitimise the US invasion of Grenada in 1983, since the end of the Cold War its role has been uncertain, although many of its members have been calling for it to take a greater role in tackling drug trafficking in the region. Whatever work it may have done, it failed to merit even a mention in the INCSR.

The government signalled the start of another anti-corruption drive on 8 May with an article in Granma, the party daily newspaper, which drew attention to the way the banking system facilitates corruption.

The article was written by Sabó Herrera, the director of verification at the Fiscalí­a General de la República, who said that the banking system had blindspots. The central bank admitted that even advanced economies were vulnerable to people who were determined to act corruptly. However, Jorge Barrera, a vice president at the central bank, claimed that corruption in the Cuban banking system was well controlled. 

The audit and control ministry noted in April that accounting systems were deficient in Cuba. It called for a change in outlook. Lina Pedraza, the minister, was dismissed soon after making that call. She said that it was inexcusable that companies which had been audited two or three times in a year suddenly collapsed. 

Cuba watchers infer from the fury of the debate that there is a major scandal lurking in the background. This could be anything from dud loans made by banks to too much intercompany credit. 

Construction: The economic affairs committee of the Cuban parliament reported that the construction industry delivered an unsatisfactory performance in 2006 because of poor planning; preparation and execution of some projects. 

Traditionally one of the US' most steadfast allies in Central America, Honduras would appear to be shifting its allegiances after President Manuel Zelaya announced plans to join the Venezuelan-led trade and integration initiative, Alternativa Bolivariana de las Américas (Alba). Honduras signed up to Petrocaribe, Venezuela's oil-supply pact in February [RC-08-03]. Zelaya has also upped his anti-US rhetoric, in a manner reminiscent of US bête noire, President Hugo Chávez of Venezuela. The president's proposal to join Alba has yet to be ratified by congress and has proved divisive within the country.

On 30 July at a meeting in Tegucigalpa of Petrocaribe agricultural ministers (see sidebar), Zelaya announced that Honduras would be joining Alba. While most countries in Central America are members of Petrocaribe, with Costa Rica the latest to seek formal membership [RC-08-07], Honduras is only the second country in the region to seek membership of Alba, a more overtly political and anti-US initiative. The other full members are Bolivia, Cuba, Dominica, Nicaragua and Venezuela.

Arguing that Alba membership would help diversify Honduras' trade ties, just as belonging to Petrocaribe has helped to reduce the country's fuel import bill, Zelaya said that it was high time that Honduras addressed the US “on an equal footing […] because we seem like vassals".

Aside from generating fears in the US that other countries in the region will follow suit, Zelaya's announcement is a particular blow to the US administration of President George W. Bush. Honduras has traditionally been one of the most pro-US countries in Central America. The current deputy Secretary of State, John Negroponte, served as US ambassador to Tegucigalpa in the 1980s and controversially, organised support for the Nicaraguan Contras from Honduran bases.

Railing against the US
Aside from Zelaya's declaration of interest in joining Alba, signs of estrangement between the two countries have emerged in the diplomatic sphere. Days after accusing outgoing the US ambassador in Tegucigalpa, Charles Ford, of “barbarous" comments after he claimed to have learned “ways of intimidating people_to keep them quiet" during his three years in Honduras, Zeyala warned the US official at the end of July to “pay more respect" to Honduras. This followed Ford's claims to the local media that 30% of remittances sent back to Honduras by family members living in the US came from asset-laundering and drug-trafficking.

Ford had also commented on the high rate of poverty and corruption in Honduras, remarks which Zelaya dubbed “unfortunate", especially as he had just been awarded the Order of Morazán (the highest decoration of the Honduran government). The president added that Ford should confine himself to discussing the parlous state of the US economy rather than casting aspersions on Honduras. Significantly, Zelaya also echoed the Chávez line that the US is ultimately to blame for drug violence in the region because it is the main market for illicit drugs.

This diplomatic spat followed a clash between the two last March [RC-08-04], when the US blocked imports of Honduran cantaloupes, on the grounds that they were contaminated with salmonella. (Venezuela later offered to buy all of the melons intended for the US.)

A divisive issue
Zelaya has invited President Chávez , Cuba's President Raúl Castro, Nicaragua's President Daniel Ortega and Bolivia's President Evo Morales to Tegucigalpa on 25 August for an official Alba signing ceremony.

However, Alba membership must still be ratified by congress, which only narrowly approved membership of Petrocaribe, a far less controversial initiative which the government could legitimately argue made real economic sense. Alba however, is considered more fundamentally ideological, and business organisations and politicians alike have raised objections. Critics have questioned what additional benefits, if any, Honduras would enjoy from Alba membership, pointing out that it already gets discounted oil under Petrocaribe. There are also fears among the local business sector that Alba membership could jeopardize the country's relations with the US. The powerful Honduran council of private enterprise (Cohep) points out that trade with Alba members is negligible in comparison to total trade (including maquila exports) of around US$8.5bn with the US in 2007. Imports from Venezuela amounted to US$36.2m in 2007, according to the central bank.

The issue has caused divisions in the ruling Partido Liberal (PL), and has featured in the increasingly acrimonious internal struggle between Vice President, Elvin Santos, and the congress leader Roberto Micheletti, both frontrunners for the PL presidential nomination in the November 2009 presidential elections. On 8 August, Santos charged that Zelaya had bribed Micheletti loyalists in congress (US$52,500 each) in exchange for their supporting Alba, although he has failed to provide any evidence for this allegation.

The PL and the main opposition Partido Nacional (PN) are all but equally matched in the 128-seat congress, which means that Micheletti, who commands the support of some 20 PL deputies, will have the decisive say. He has made it clear that congress will not ratify Alba if it has a military dimension. Chávez proposed the creation of an Alba Defence Council back in March to form a collective defence strategy, but it has yet to take shape.

• Petroalimentos

The new council of Petrocaribe agriculture ministers recently set up a new fund to improve food security for the 18 members of the group. Venezuelan agriculture minister Elí­as Jaua said that Venezuela would contribute 50 cents for each barrel of crude it exports for more than US$100. Jaua said that at current prices, the fund would amass US$450m by the end of the year. President Zelaya said that the fund would be used exclusively for food development projects, providing “a new response to old problems".

Thanks to a fall in food and fuel prices, monthly inflation in September was just 0.11%. The rate was only positive rate because of the usual jump in the price of educational products at the start of the school year (6.35% this September). The central bank reported that accumulated inflation for the year to date was 4.3%, well down on the 10.76% in the same period of 2008. The annual rate was -1.57%: annual inflation has been negative since July this year. In September, the price of goods in the transport index fell 0.87% month-on-month; while the food, drink & tobacco index fell 0.48%. Together, these two categories account for the bulk of goods in the overall index. There is some questioning, locally, of the official inflation figure. Most Dominicans say that they do not believe inflation is actually falling, because prices are still rising.

Debt: In early October a former finance minister, Fernando Álvarez Bogaert, issued a warning about the high level of indebtedness. He claimed that the national debt is now over US$11bn, without including US$4.2bn in certificates issued by the central bank. Álvarez Bogaert, now an honorary professor at the Universidad Autónoma de Santo Domingo, argued that because unemployment in the country's two key export markets, the US and Spain, is so high, any economic recovery in 2010 would likely be modest.

On 14 February, Fidel Castro, Cuba's former president, hailed the success of the Egyptian people “and their valiant struggle for political rights and social justice" which had led to the “overthrow of the principal US ally in the Arab world". The irony of Castro's statement is that his opponents in Miami were speculating, simultaneously, that what had happened in Egypt poses a major threat to the Castro brothers' regime in Cuba.

The anti-Castroists' premise is that Cuba is the only country in the Latin America where there has not been a democratic alternation of power in the past 50 years. The anti-Castroists further argue that the Castros' regime is corrupt, authoritarian and effectively bankrupt, just like the regime of ex-President Hosni Mubarak in Egypt. However, the weakness of the anti-Castroists' argument is that the Castro brothers have never pretended that they were not authoritarian; unlike Egypt, Cuba does not yet have the internet and cell phone capacity for opposition politicians to organise major demonstrations or to publicise repression instantly.

Nonetheless, President Raúl Castro does seem to be flirting with liberalisation. On 10 February Cuba's communications capacity got a boost when the laying of the fibre optic cable from Venezuela was officially completed, although the cable will not come into full operational use until July. The government admits that this will enhance the country's internet capacity, (which had previously been satellite based) but it is far from clear whether the government will allow ordinary Cubans the freedom to watch and research whatever they want. The bulk of Cuba's 1.4m regular internet users only have web access from work; few have access from home, let alone on their mobile telephones as Egyptians do.

To be fair, the prominent Cuba-based blogger, Yoani Sánchez, did note on 8 February that the government had unblocked her "Generación Y" site and its associated website (www.desdecuba.com). She said that it was not clear whether this development represented a change of strategy by the government or merely a tactical move designed to deflect criticism during the week of the Feria Internacional de la Informática in Havana.

Another sign of liberalisation was the freeing of two more prominent dissidents on 12 February. The timing of their release is interesting because the opposition is preparing for two major events. The most immediate is the first anniversary of the death (on 23 February) of Orlando Zapata, after an 86-day hunger strike. Elizardo Sánchez, spokesman for the Comisión Cubana de Derechos Humanos, said that Zapata's “murder by the state" would be commemorated by many opposition and human rights organisations. The second event for which the opposition is preparing is the VI party congress in April which, President Castro hopes, will re-launch the Cuban Revolution. The main change appears to be an admission that the market has a use in setting economic priorities.

The two dissidents freed were Héctor Maseda and Angel Moya. Both are members of the dissident 'Grupo de los 75', who have been in prison since 2003. Maseda, 68, is married to Laura Pollán, one of the leaders of the Damas de Blanco (female relatives of imprisoned dissidents).  Moya, 46, a construction worker, is married to Berta Soeler, another prominent member of the Damas de Blanco. Their release, and the swelling of the regular Sunday demonstration by the Damas de Blanco with younger protesters, suggested that what has happened in Egypt has both shaken the Cuban government and encouraged its opponents. Maseda was released on a provisional licence: previously he had refused to accept his freedom on these terms. He changed his mind in order to remain within the law. Seven of the Grupo de los 75 are still in prison.

• “A nation on the take"

Fidel Castro in the most recent of his “Reflections", entitled “On the revolutionary rebellion in Egypt" and published in the official media, claimed that President Hosni Mubarak's policy was “to exploit and rob his own people". Separately, WikiLeaks cables from the US Special Interest Section in Havana stated that Cuba (in 2006, when the cable was sent, so two years before Rául replaced Fidel as president) was “a nation on the take" and quoted an unnamed Swiss businessman as saying “Just like everywhere in the world, a US$1m contract gets you US$100,000 in the bank".

On 21 May President Michelle Bachelet set out her plans for government to congress. The president's "roadmap" speech, which marked the first day of the new legislature, focused on four areas which would turn Chile into a "modern country" by the bicentenary of its independence, 2010. The four areas Bachelet identified were: pensions, education, innovation and entrepreneurship, and quality of life. She also set out how her government plans to take advantage of the record high prices of copper, Chile's most important export.

The hour-and-a-half speech was vague on details. As regards pensions, Bachelet said that "without secure pensions there is no chance of a peaceful old age", but she declined to spell out her government's policy. On education she was more specific, promising universal pre-school and declaring that her government had already created 20,000 new places for pre-school children. 

To stimulate entrepreneurship her government is setting up the Small and Medium Business scheme (pymes) which will offer tax breaks to smaller companies and which hopes to create 130,000 jobs this year. The government is also aiming to increase investment in R&D by 50%, to 1% of GDP by 2010, so that Chile exports not only metals and salmon, but technology such as software for mining and equipment for healthy fisheries. On the fourth point, quality of life, Bachelet plans to improve the standard of social housing and establish a ministry of citizen security to improve policing. The president also said her government planned to eliminate indigence by 2010. 

Copper

One of the most eagerly anticipated parts of her speech was what she intended to do with the windfall profits from the high copper price, which has brought the treasury an estimated extra US$9bn this year. Bachelet proposed setting up two funds - a pension fund and a social and economic stabilisation fund - in order to ensure the benefits from the high price were not transitory. She said that despite the high copper prices, her government would continue to obey the 1% fiscal surplus rule it had set itself. 

Of the huge profits from copper revenues in the first months of 2006 - the price has jumped 69% in 4 months - only US$130m is being earmarked for the spending increases. The finance minister, Andrés Velasco, has since announced there is plenty of funding to pay for Bachelet's expanded social programmes. He also noted there was a budget surplus of 2.3% of GDP in the first quarter of 2006, due largely to the copper boom.

Other measures announced in the speech included the provision of handouts of Ch$18,000 (US$35) to the country's poorest 1,200,000 families to help them offset the increasingly high price of fuel as winter approaches. Chile imports 90% of its oil. The president also promised to increase the number of government scholarships to allow gifted students to study abroad.

Outside congress there were violent disturbances as state police clashed with demonstrators demanding Bachelet fulfil a campaign promise to replace the Pinochet-era "binomial" electoral system, which pressures "lists" of candidates to fall into one of the country's two large coalitions, with a more proportionally representational process. The new president has also faced major demonstrations from students this month, who have been demanding, sometimes violently, travel passes, free university entrance exams and a nine-hour school day.

A renewed diplomatic drive by Chile appears to have dispelled the tension recently built up with Peru over their maritime boundary dispute [SC-07-08]. President Michelle Bachelet has opened new avenues of cooperation by announcing her support for an enhanced version of an initiative her Peruvian peer, Alan Garcí­a, had been claiming as his own: the so-called 'Pacific Arc' integration scheme. At the same time Chile has continued to press ahead with its rapprochement with Bolivia, with special attention to cooperation in the military arena.

On 31 August President Michelle Bachelet signalled the path Chile had chosen to take in order to break the ice with Peru. She said that she had agreed with Garcí­a to leave the maritime dispute off the agenda at the meeting scheduled to take place on the sidelines of the Apec summit in Sydney (8-9 September). The reason she gave was a restatement of Chile's position -that there is no issue pending with Peru, since the maritime boundary was established by treaty back in the 1950s. 

The Peruvian government, for its part, said that the issue had been left off the agenda because "it is already heading towards The Hague, and this process has dynamics of its own." This exchange was formulaic, not hostile. Bachelet ordered red-carpet treatment for Garcí­a during his brief stopover in Santiago, assigning a senior minister to accompany him for the duration.

Peruvian foreign minister José Antonio Garcí­a Belaúnde fulfilled his role by insisting on keeping secret his 3 September briefing of the congressional foreign relations committee regarding the strategy which the Garcí­a administration had adopted to deal with the maritime dispute with Chile. The only aspect of the strategy which he made public was the government's decision not to sign the UN Convention on the Law of the Sea (Unclos/Convemar) because "it is neither indispensable nor detrimental" to the suit Peru intends to bring against Chile before the International Court of Justice at The Hague.

The Pacific Arc initiative
In Sydney the two presidents announced their joint commitment to what was portrayed as a new integration initiative, the Arco del Pací­fico (Pacific Arc). This was billed, in 2006, as an impromptu proposal to form a Frente del Pací­fico (Pacific Front) with the "pro-market, pro-investment"- and implicitly anti-Chávez - countries of Latin America's Pacific seaboard: Peru, Chile, Colombia and Mexico.

In its newer format, the ostensibly informal Arco del Pací­fico fostered two successive forums of trade ministers (January 2007 in Santiago de Cali, Colombia, August 2007 in Lima) from Chile, Peru, Colombia, Ecuador, Mexico and Central America. By the time it reached Sydney the original idea had clearly grown. Bachelet emerged from her meeting with Garcí­a stating, "We have had a conversation, in line with [an earlier] one held with President [Felipe] Calderón, of a true initiative of the Pacific, in which several countries are working together to develop in a coordinated fashion, their economic and social policies." She said this initiative "includes other countries that are looking towards the Pacific [for which] greater integration would provide us with better responses and better solutions."

Thawing defence relations
On 6 September Peruvian defence minister Allan Wagner visited the field hospital installed by the Chilean government in Ica, following the devastating 15 August earthquake. He was accompanied by Chilean defence minister, José Goñi. Following the visit Wagner announced that before the years end -possibly in November- the two countries would resume the '2+2' meetings 

The last '2+2' meeting (more formally known as the permanent commission of political consultation and coordination), which brings together the foreign affairs and defence ministers, was held after a lengthy hiatus during the tail-end of the Toledo administration (2001-06), in October last year in Santiago. They were later discontinued as a result of the irritation caused in Santiago by Peru's claims to its maritime boundary.

A tentative agenda for the forthcoming meeting is already starting to take shape. One of the issues they will address is progress towards the standardisation of defence spending disclosure, a matter held over from previous encounters. Also included will be confidence-building measures arising from initiatives Chile has shown itself willing to pursue. 

The first of these, which will be the motive of a preparatory meeting in the Chilean city of Arica, is the de-mining of the border area. The second, an offshoot of the aid provided by Chile after the recent earthquake, is the possibility of future cooperation on responding to natural disasters, likely to include training of Peruvian military personnel in Chile. This area will also be examined in a preparatory meeting, possibly in Ica.

The third is the possibility of creating a bilateral peacekeeping force, along the lines of the one set up by Chile and Argentina, which has proven an effective tool to consolidate the confidence-building measures that have contributed to ending one of the longest-lasting interstate rivalries in South America. The big difference between the two situations is that the Chilean-Argentine initiative came after a major effort by Argentine president Carlos Menem (1989-99) to settle pending territorial disputes with Chile. Chile and Peru would be starting at the other end, having placed their current dispute over maritime boundaries on hold in order to pursue cooperation in other areas - a strategy used by Argentina under Menem to resume relations with Britain while the dispute over the Malvinas/Falkland Islands remained unsolved.

While older, the question of standardising the official disclosure of defence spending has been made highly topical by Peru's recent announcement reagrding a defence procurement package which, despite official protestations to the contrary, is clearly designed as a response to the public perception that Peru has been left behind by Chile's 'rearmament'.

Bolivia
The Bachelet government has also been pressing ahead with its rapprochement with Bolivia. On 2 September, Chilean defence minister José Goñi dropped in on his Bolivian peer, Walker San Miguel, on his way to a regional meeting of defence ministers in Haiti. The meeting, though brief, covered much ground. It reviewed projects such as the destruction of antipersonnel and antitank mines laid by Chile along its border with Bolivia, and the prospect of sending Bolivian soldiers to Santiago for special training in de-mining skills. They also discussed broader cooperation in the area of military training, exchanges of students and faculty between military academies, and training of Bolivian personnel in responses to natural disasters. Goñi also suggested that both governments should be allowed to appoint 'police attachés' to their consular representations.

By the following day San Miguel was announcing that Bolivia and Chile were moving fast towards a "total thaw" of their diplomatic relations, nowadays limited to the consular level. In an interview published by the Chilean newspaper La Segunda, he said that the issue of Bolivia's access to the Pacific was being kept "for now, at the bilateral level", adding, "In Chile, Bolivia and America as a whole we are talking nowadays about far more daring integration processes and ceasing to be separated by artificial borders." This may not be exactly what the Chileans have in mind, but they have kept up the momentum.

On 5 September, at the end of a two-day meeting in La Paz, the director of the South America department at Chile's foreign ministry, Juan Pablo Lira, and Bolivia's deputy foreign minister, Hugo Fernández, announced that both countries had agreed to cooperate in their antidrugs efforts along the common border. Chile offered to provide technical assistance in the area of prevention of drug addiction.

The diplomatic effort did not appear to be affected by a political sideshow that had been unfolding as the most recent visits to Bolivia were taking place. On 2 September the Chilean newspaper El Mercurio published a report revealing that between 1996 and 1997 the government of President Eduardo Frei-Ruiz Tagle had been negotiating secretly with that of Bolivian president Gonzalo Sánchez de Lozada. On the table was a Chilean offer to incorporate the port of Iquique to the free transit régime, providing Bolivia with another outlet to the Pacific, complete with port facilities under Bolivian control. The only thing lacking was what Bolivia has always been demanding: sovereignty over the outlet.

The Chilean opposition in congress promptly asked the government to report on whether there were secret negotiations presently underway. The motion did not prosper, but it did lead to the further revelation that there had been secret rounds of negotiations during the Lagos administration (2000-2006) with the second Sánchez de Lozada administration (2002-03), in which Bolivia was offered port facilities at Patillo to ship its gas to Mexico and the US.

• Fujimori 
  On 21 September the Chilean supreme court ruled, unanimously, that a former Peruvian president, Alberto Fujimori, should be extradited to Peru to face human rights and corruption charges. International human rights organisations hailed the Chilean supreme court's decision as an important step toward ending impunity in Latin America: Human Rights Watch, for instance, said that this was the first time a supreme court had agreed to return a former head of state to his home country.
  
• Coup's anniversary 
  Some 5,000 demonstrators took to the streets of Santiago on 9 September for the first anniversary of the 1973 coup since the death of dictator Augusto Pinochet. They were prevented from marching past the presidential palace by the police. There were violent clashes in the suburbs of Santiago on 11 September, the actual day of the coup. Days later retired officials from the armed forces who served under Pinochet have announced the formation of a new political party with which they plan to contest future elections, the Partido Militar Metropolitano. 
  
• Bachelet's low rating
  A opinion poll, by Adimark Gfk, found that only 39.1% of the people approved of President Michelle Bachelet, the lowest level ever. Her disapproval rating was steady at 42.7%. Bachelet's failure to stem her growing unpopularity is starting to alarm her followers, as ambitious politicians from the centre-left Concertación coalition fear that her shortcomings could cost them the next election in 2009. 
  

One year on from the introduction of a major anti illegal logging operation, the inherent difficulties of policing the vast Amazon region remain all too apparent. With reports suggesting that illegal logging activities have returned to areas previously targeted by the clampdown, the government of President Lula da Silva is experimenting with new landholding schemes to tackle the problem of illegal deforestation.    

Launched in February 2008, Operation 'Arc of Fire' achieved significant results in its first months of activity. Focusing on the Amazonian states of Pará, Mato Grosso and Rondônia and mobilizing over 600 government officials, the operation seized over 50,000m ³ of illegally felled wood and handed out US$25.9m in fines by mid April. President Lula pledged a fund of $118m to tackle the problem of illegal logging in Brazil, as concerns about the effect of deforestation on the environment (and on the country's reputation), heightened. 

The impact of Operation Arc of Fire on deforestation is unclear.  Latest figures from the National Space Research Institute (Inpe) suggested a marked slowing in the year-on-year rate of deforestation in late 2008. Between November 2008 and January 2009, 754,000km ² of land was cleared, compared to 2.53m km ² in the same period of 2007, a decline of 70% in annual terms. While that figure looks impressive, the Inpe noted increased cloud cover in the 2008 period. Lower global demand and falling prices for beef and soya may also have played an important part.

In the past Brasilia has adopted a policy of 'naming and shaming' those entities responsible for the most serious deforestation and promised to launch legal proceedings against them. The environment minster, Carlos Minc, has also pledged to boost the ranks of the federal police task force detailed to environmental crimes to 3,000 and, at the end of February, he signed a decree ending the need to gain authorization from state governors before sending federal agents to investigate environmental crimes. Authorisation will now be given by the Brazilian Institute of Envrionment and Renewable Natural Resources (Ibama) instead.

The federal government's relationship with state governors in the Amazon has been strained in the past and the new ruling will not be warmly received by Blairo Maggi, the governor of Mato Grosso and an outspoken critic of federal deforestation policy.

On a more conciliatory note, however, the government has shown a willingness to include state governors in efforts to recast land regulations in the region. A pilot project in the village of São Luis do Anauá, in Roroaima state, has transferred land titles on plots under 100 hectares (ha) to those that work them. Larger plots are sold using pricing mechanisms or kept by the state.  If the pilot scheme proves successful, the government plans to extend it to other areas of the Amazon over the next three years. The move represents a further erosion in the influence of the National Institute for Land Settlement and Agrarian Reform (Incra), which has been roundly criticized by governors and Minc alike.

The combination of 'stick' and 'carrot' - tough punishments for illegal loggers and greater opportunities for small scale farmers - is a necessary one if Brazil is to reach its deforestation goals. In November 2008, Brazil announced that it would slow its rate of deforestation to 5,500km ² per year by 2017, a decrease of 70%. Predictably, however, the biggest challenge is one of enforcement. The satellite photography used by Inpe is not sophisticated enough to detect all types of deforestation and its results are frequently inhibited by heavy cloud cover. Minc has claimed that he needs at least another 1,000 federal agents and 1,500 environmental inspectors to police the Amazon properly.

• State offenders

According to the latest Inpe figures, deforestation was highest in the state of Pará in the three months to January 2009 (318.7 km ²), followed by Mato Grosso (272.1km ²) and Maranhão (88.4km ²).  The government spent R$3.5bn (US$1.45bn) on deforestation in 2008, up from R$2.2bn (US$0.92bn) in 2007, according to official figures.

On 13 October, over 1bn people around the world saw TV pictures of the rescue of the first of the 33 miners trapped in a Chilean mine since 5 August. The huge media furore over the human interest story of the trapped miners has overshadowed what the saga shows about Chile. The energy and technical expertise that went into the rescue, which was achieved ahead of schedule, demonstrates why Chile is Latin America's best credit risk (A+, the same as China, Cyprus and Italy).

The sense of national unity generated in Chile by the saga is a tribute to President Sebastián Piñera and contrasts with the recriminations and political-point scoring which followed the earthquake that struck the country on 27 February, in the final days of the previous Concertación government. Piñera's subsequent European tour, immediately after the rescue, gave him a prominence and a reception that few other Chilean leaders have enjoyed.

It is worth noting that while the eyes of the world were focusing on the San José mine, the government clinched a deal on 12 October with the centre-left Concertación (which had ruled Chile from the end of the Pinochet regime in 1990 until Piñera's election this year) to increase mining royalties to generate cash to pay for the earthquake reconstruction. Currently, mining companies pay a royalty of between 4% and 5%. The reform lifts this to a levy of between 4% and 9% on operating margins of 35% to 70% between 2010 and 2012. From 2018, however, the royalty rises to between 5% and 14% on operating margins of between 35% and 100%. 

The royalty deal, and the government's successful negotiations (on 8 October) to end a long hunger strike by 35 Mapuches, demonstrate that Piñera's government, which only took office in March, has worked out how to harness political momentum. This makes a striking contrast to the early days of the last Concertación government led by (the eventually hugely popular) President Michelle Bachelet, which ran into a series of corruption and implementation problems, most notably over the Transantiago public transport scheme.

Piñera's increasing assurance and confidence domestically is translating into much more interesting role for Chile in the region. Like Bachelet, Piñera has had difficulties with President Hugo Chávez of Venezuela, but unlike Bachelet he has, essentially, agreed to differ with Chávez .

Nevertheless, Piñera has signed up for the Union of South American Nations (Unasur), which is one of Chávez 's pet projects. This is significant because Brazil, Colombia, Paraguay, Suriname and Uruguay have all yet to ratify their membership of Unasur. Admittedly, Colombia and Uruguay have said that they will, but until they do the new organisation has no legal standing.

It is also significant that Piñera was the first Latin American president to show personal solidarity with President Rafael Correa of Ecuador, after the alleged attempted coup against Correa on 30 September. Piñera visited Quito on 10 October, ahead of President Evo Morales of Bolivia, who went on 12 October. Morales then intended to fly down to Chile to greet the trapped Bolivian miner, Carlos Mamani, when he came to the surface at San José. Mamani was the fourth miner to be released and arrived at the surface hours before Morales got to Chile. This prompted some severe criticism of Morales from Mamani's family.

Piñera may be positioning Chile as a more representative face of Latin America than Brazil, the region's economic powerhouse. Piñera's first speech to the UN General Assembly in September touched on issues such as the region's multiple ethnicities, but did so in a much less confrontational way than the region's more radical presidents. Equally significantly, Piñera's government has, unlike Brazil, recognised the new, elected government in Honduras. This move, coupled with the strong denunciation of the Ecuadorean 'coup', underlines Piñera's credentials as a democratic pragmatist.

• Piñera's approval soars

On 2 November, a poll by Adimark found that Piñera's approval rating had climbed to 63% in October, 10 percentage points up on a September poll.

The government of President Evo Morales was successful in its bid to persuade the ten foreign energy companies to migrate to new contracts by the deadline of 28 October set when Morales announced the nationalisation of the gas industry on 1 May.

It had looked unlikely that the government would get the Brazilian energy giant, Petrobras, which controls the two biggest gas fields in Bolivia -San Antonio and San Alberto - to sign up to new contracts before the deadline, not least because the Brazilian government was preoccupied with President Lula da Silva's run-off presidential contest a day later. This was a big boost to Morales. Morales says that by 2010 Bolivia will be earning US$4bn in annual revenue from gas. This is clearly a figure plucked out of the ether as it is not entirely clear under what terms the new companies will be operating. The government has different contracts with different companies. The contracts cover exploration and development; separate contracts covering transportation, or establishing export volumes, are still to be negotiated. 

The government will collect 50% of profits in taxes and royalties. What happens to the remaining 50% is not crystal clear but it will be split between the state-owned company Yacimientos Petrolí­feros Fiscales Bolivianos (YPFB) and the respective foreign energy companies depending on factors such as level of production and whether the company has recovered its investment. Arguably the biggest challenge however will be supplying YPFB with the requisite resources and qualified staff to take over the decision-making process at every level of production.

There are two major outstanding issues: 

* Settling on an export price for gas exports to Brazil

*Negotiating a buy-back of shares in the five refining and transportation companies

There is no deadline for resolving these issues, which means they could drag on for some time and prove pretty acrimonious. Lula made it very clear in September that he was not prepared to be dragooned into paying over the odds for Bolivian gas. He might be influenced by the magnanimity of his Argentine peer Néstor Kirchner, who not only agreed to pay the Bolivian asking price for gas, US$5 per m BTU, when he paid a visit to Santa Cruz on 19 October but also offered fulsome support for the efforts of Morales and the Bolivian people to "battle against entrenched old interests", adding that "we come, dear Evo, with open arms, to express our solidarity." He even promised that Argentina would step in if foreign investors, or "rogues" as he called them, failed to honour their commitments.

The government is now trying to ensure that the state-owned company YPFB gains control of the five companies nationalised in May: the mixed government-private producers Transredes, Chaco and Andina, in which YPFB has between a 34% and a 48% stake and the privately owned Petrobras-Refinación and Compañí­a Logí­stica de Hidrocarburos. The government claims they are prepared to pay the value of the shares required to give it a controlling stake of 51% in each of the refineries. Shortly after the deadline was met, the president of YPFB, Juan Carlos Ortiz, said he was confident the deals would be sewn up within the next month. Chaco is controlled by British Petroleum; Andina, by the Spanish-Argentine company Repsol YPF; Transredes by Shell and Ashmore; Petrobras-Refinación is a subsidiary of Petrobras; and the Compañí­a Logí­stica de Hidrocarburos, a Spain-based company engaged in transportation and storage of hydrocarbons. 

Petrobras made clear that the agreement did not extend to its two refineries, located in Cochabamba and Santa Cruz, which it acquired in 1999. It wants to remain in control or sell out completely. The dispute with Petrobras led to the resignation of the previous Bolivian hydrocarbons minister, Andrés Soliz, on 15 September. The new broom, Carlos Villegas, is adopting a more conciliatory approach than his predecessor but the issue will need to be broached now. As regards the price of gas, Brazil is currently paying just US$4 m per BTU.

Mining nationalisation

The prospect for the mining industry is now unclear. Morales earmarked 31 October as the date to proceed with the nationalisation process. This date fell conveniently after the gas deadline and on the anniversary of the first nationalisation of the mines in 1952. However, while Morales said he wanted the nationalisation of the sector; his spokesman, Alex Contreras, sent out a rather different message. He said that the media was talking about nationalisation but the government was concerned only with the reactivation of the sector. "We need to make clear that we are not dealing with nationalisation of the mining industry, as has been announced in some areas of the media, but_ a new mining and metallurgy policy," he said.

Morales said that just because the resources were not currently there did not mean that the government had dropped its nationalisation plan. Contreras said the government would strengthen the state-owned mining company Comibol, with the immediate contracting of the 4,000 freelance miners from the Fencomin cooperative. This is intended to resolve the conflict between Comibol and Fencomin, which led to the bloody clash in Huanuni (RA-06-10). The government also wants to make new, although limited, investments. Vice-President Alvaro Garcí­a Linera said this would be to the tune of US$10m.

Experts in the industry argue that the government is not going to solve the problems in the mining sector by employing more miners. They say that more labour will be a drain on resources and the key is to make the mining process more efficient. Some have (somewhat brutally) suggested that the government employ the tactic of former president Ví­ctor Paz Estenssoro in 1961 when he cut the mining workforce from 38,000 to 24,000 and sent the unemployed miners to the Chapare, to the north of La Paz, and to Santa Cruz to become farmers.