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ECONOMIC GROWTH | Private economists see a slowdown. The consensus of private economists regularly surveyed by the central bank is that economic growth this year will only reach 1.73%, rather than the 2.02% they predicted in July. The good news is that they see the rate picking up towards the end of the year: they predict growth of 1.64% in the third quarter and 2.63% in the fourth. In their view, the acceleration will continue, though not very vigorously, into next year, when overall growth will be 3.54%.

EMPLOYMENT | Job losses mount in maquiladora sector. At the end of June, 1.08m people were employed in Mexico's 3,229 maquila plants. As the newspaper Reforma points out, this is more than a quarter of a million fewer than in November 2000, the month before the Fox administration took office. Most of the job losses were in the northern border states: Baja California (-74,485), Chihuahua (-70,811), Sonora (-38,623), Tamaulipas (-22,218) and Nuevo León (-18,105). 

The Consejo Nacional de la Industria Maquiladora de Exportación says this is mainly due to the relocation of assembly industries abroad; many to China, but also to other Latin American countries like Brazil, Costa Rica and Nicaragua.

BLACK ECONOMY | Informal sector produces more than farming. In 2001, Mexico's informal economy produced goods and services worth M$663bn (US$60.8bn), or just over three times as much as agriculture. The figure comes from a guesstimate made by the national statistical institute, Inegi, which also reckons that the profits of the informal sector are equivalent to 17.4% of those of the formal economy. The black economy's labour costs, says Inegi, amount to only 8.5% of total income, as against 20.6% in the formal economy.

The death toll associated with Brazil's land disputes (WR-03-34) rose to 45 last week, with the murder of Luciano Alves da Silva, an MST leader in the northeastern state of Alagoas who heads a local association of 300 families of landless peasants. Alves was gunned down by a hitman riding pillion on a motorcycle as he was walking home after dark. Days earlier, charges had been filed against Alves for having instigated roadblocks and hijackings on a rural road. For his part, Alves had publicly denounced threatening actions by `gunmen linked to landowners in the region.'

Acting on secret files declassified by Kirchner, judge Galeano gets former Iranian ambassador arrested in Britain.

President Néstor Kirchner may not have calculated all the ramifications of his decision, shortly after taking office, to appear as the facilitator of a solution to an internationally sensitive investigation that had been dragging on for years. The event being investigated was the 1994 bombing of a Jewish community centre, which killed 85 and injured hundreds — one of the only two instances in Latin America of international terrorist attacks (the other also having taken place in Argentina two years earlier).

Under President Carlos Menem the investigation had moved at a snail's pace, chiefly because the information held by Side, the state intelligence service, was not made available. Nonetheless, by March this year the investigating magistrate, Juan José Galeano, had gathered enough evidence to issue international arrest warrants against four Iranian nationals: Moshen Rabbani, leader of a suburban mosque given diplomatic cover shortly before the bombing; Barat Ali Ballesh Abadi, a diplomatic courier; Ali Fallahijan, Iran's intelligence and security chief; and Ali Akhdar Akhbar Pavaresh, a private citizen. Galeano also fired off a series of request for information from the Iranian government and judiciary — all ignored, as were the arrest warrants.

Pinochet-style development
In June, the recently installed President Kirchner issued a decree ordering Side's archives on the case to be opened. On 13 August, Galeano added another three names to his list of international arrest warrants, one of them being that of the former Iranian ambassador in Buenos Aires, Hadi Soleimanpour. Eight days later, Soleimanpour was arrested by British police in Durham, where he was pursuing postgraduate studies.

The Iranian government immediately announced that it was breaking off all cultural and economic relations with Argentina, decrying the arrest warrant as `politically motivated'. The Argentine government, while downplaying the effect this would have on Argentina's exports to Iran, adopted the line that the whole thing was a matter for the courts, in which the executive could not interfere. A similar line was adopted by the British government, also faced with threats of Iranian reprisals. In both cases, as in the analogous instance of former Chilean dictator Augusto Pinochet's arrest in Britain, this separation of jurisdictions is not absolute, as there are steps which require government participation.

By the end of August, though, there were signs that Kirchner would prefer to see the problem go away. Foreign minister Rafael Bielsa (perhaps drawing on the precedent of the Lockerbie trial) announced that Argentina was seeking the assistance of some country acceptable to itself and Iran and willing to host the trials of the alleged participants in the 1994 bombing. He suggested that Morocco might fit the bill. So far there have been no volunteers.

When a top-level Iranian diplomatic mission turned up in Buenos Aires in early September, the foreign ministry told them that the fate of former ambassador Soleimanpour was in the hands of the British courts and, eventually, the Argentine judiciary. Officials also told the visitors that Iran could help sort out the entire matter by complying with the requests for information filed by Galeano, perhaps also allowing interrogations to be carried out in their own country.

In a letter to relatives of the disappeared, he says that even repealing it would have no practical effect.

President Ricardo Lagos is decidedly not following the same path as his Argentine peer Néstor Kirchner. In a letter to the Agrupación de Familiares de Detenidos Desaparecidos (an association that represents the victims of the Pinochet dictatorship), he ruled out the possibility of congress declaring the nullity of the 1978 amnesty passed by the Pinochet régime to shield its officials from prosecution. `The constitution,' he wrote, `does not provide for the nullification of laws.' Even the repeal of the law by congress, he said, `would have no practical effect.'

As Lagos pointed out, a bill repealing the 1978 amnesty law has been sitting around in congress since 1992 - and that, he noted, is `a matter of parliamentary initiative.' He argued that in the quest for truth and justice, `the current legislation must be applied; that is, in my view, what seems most realistic.' Prosecutions are currently underway despite the amnesty law, as courts have held that it does not apply to `continuing' crimes, such as abduction. This applies to all cases of `disappearances' in which the victims or their remains are not produced.

The relatives of the disappeared say that the government's proposed solution to pending human rights cases `consecrates impunity' by offering immunity to those cooperating with investigations.

BRAZIL | Barely any growth at all this year. The institute for applied economic research, Ipea (an official body), has lowered its growth forecast for this year from 1.6% to 0.5%. Among the factors influencing this are a further shrinkage of domestic consumption (now expected to contract by 2.1%, instead of just 0.1%), and lower-than-expected export earnings (US$17.2bn instead of US$19.3bn). In June, Ipea had reduced its growth forecast from 2.8% to 1.6%.

ARGENTINA | Investment slump appears to have touched bottom. Industry & commerce secretary Alberto Dumont announced last week that the inflow of foreign direct investment (FDI) has not only stopped falling but has `recovered' this year. He did not back up the claim with figures, but noted that the auto industry continues to invest, and that increased exports of software and pharmaceutical products indicate that there are `alternative investment niches' available. The inflow this year, he says, `will not be as grandiose as in the 1990s, but will be more productive because it will go to processes that employ more people.' A private estimate puts the FDI inflow in the first half of this year at US$800m. In the whole of last year it totalled only US$1bn - down from US$3bn in 2001, US$11bn in 2000 and US$24bn in 1999.

PARAGUAY | Push to reverse the fiscal deficit. Finance minister Dionisio Borda has submitted to congress a budget designed to achieve a primary surplus of 1.4% of GDP in 2004 - after bringing the deficit down from 2.2% to 1% this year. The basic assumption is that GDP will grow by 2% and inflation will be held down to 10%. Borda plans to increase the tax burden from 8.7% of GDP (one of the lowest in the region) to 10.1%; he expects this, plus a crackdown on tax evasion and smuggling, to raise revenues by 25% to 30%. He also plans a `phased' 30% cut in the public-sector payroll.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		06.09.02	29.08.03	05.09.03
Argentina	peso	3.59	2.98	2.96
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.31	7.75	7.76
Brazil	real	3.16	2.97	2.90
Chile	peso	718.00	700.00	685.00
Colombia	peso	2,715.00	2,846.45	2,816.84
Costa Rica	colón	366.02	405.47	406.36
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	_	34.24	30.24
Ecuador	dollar	1.00	1.00	1.00
El Salvador	colón	8.75	8.75	8.75
Grenada	EC dollar	2.70	2.70	2.70
Guatemala	quetzal	7.82	7.94	7.95
Honduras	lempira	16.81	17.69	17.71
Mexico	nuevo peso	10.00	11.13	10.99
Nicaragua	córdoba oro	14.40	15.40	15.45
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,050.00	6,260.00	6,230.00
Peru	nuevo sol	3.63	3.48	3.49
Uruguay	nuevo peso	_	28.80	28.40
Venezuela	bolí­var	1,453.50	1,600.00	1,600.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	June	July	August	Last 12m	Jan-Dec 2002
Argentina	Indec	-0.10	0.40	0.00	4.90	41.00
Bolivia	INE	0.20	0.60	0.64	3.85	2.45
Brazil	FGV	-0.70	-0.20	_	24.14	26.41
Chile	INE	0.00	-0.10	0.20	2.90	2.80
Colombia	Dane	-0.05	-0.14	0.31	7.26	6.99
Costa Rica	DGEC	0.67	0.80	0.70	11.70	9.68
Ecuador	Inec	-0.21	0.03	0.06	7.32	9.36
El Salvador	Min.Ec.	-0.10	-0.40	0.30	1.70	2.80
Guatemala	BCG	0.22	0.27	_	4.65	6.33
Honduras	BCH	0.30	0.40	_	6.70	8.10
Mexico	Bco.Mx.	0.08	0.14	_	4.13	5.70
Nicaragua	BCN	-1.50	-0.08	_	5.43	3.87
Paraguay	BCP	-0.47	-0.70	-0.20	9.20	14.60
Peru	INE	-1.50	0.15	0.01	1.89	1.52
Uruguay	DGEC	-0.47	0.50	1.16	14.19	25.94
Venezuela	BCV	0.16	1.80	1.30	30.40	31.20
US	DOL	1.40	0.10	_	2.10	1.60
Previous: WR-03-04

The stockmarket in figures
Market	Index	29.08.03	05.09.03	Variation (%)
Buenos Aires	Merval	713.33	750.87	5.26
São Paulo	Bovespa	15174.49	15899.64	4.78
Santiago	IPSA	1369.62	1354.45	-1.11
Bogotá	IGBC	2081.65	2115.87	1.64
San José	BCT	11870.72	11811.41	-0.50
Quito & Guayaquil	Interinvest	69.51	69.52	0.01
Mexico	BMV	7591.42	7775.34	2.42
Lima	ISVBL	1896.82	1913.34	0.87
Caracas	BC	14497.20	14917.49	2.90
Source: Daily market reports.

Hopes of saving face with a regionwide agreement on `balanced' disarmament founder on Honduran unwillingness.

The government of President Bolaños is discovering that it will be hard indeed to comply with a US demand to shed weaponry without losing face. Last week its proposal for a `balanced' Central American disarmament process was turned down at a meeting of the subregion's foreign ministers — who opted simply for adopting, eventually, the aim of a `reasonable balance of forces'.

The main difficulty is Nicaragua's arsenal of about 2,000 surface-to-air missiles (SAMs), acknowledged earlier in the month by the commander of the Nicaraguan army, General Javier Carrión. The general said that details of this armament had been provided to the US in the wake of the September 2001 attacks on New York and Washington, `at their request and as a gesture of goodwill.' Foreign minister Norman Caldera followed up by offering publicly to destroy the missiles, as long as this were done without skewing the subregional military balance.

He was alluding to the fleet of F5s owned by neighbouring Honduras: Nicaragua says it SAMs are a defence against that. Honduras, for its part, insists that its military aircraft are `purely defensive', and refuses to decommission them.

Pressure from Washington
The US has been stepping up the pressure on Nicaragua since midyear. In June the State Department's deputy assistance secretary for western hemisphere affairs, Daniel Fisk, included specific allusions to the arsenal of SAMs and the opposing air fleet in his call for an overhaul of the Cental American military establishments.

He said, `Central America is the repository of [...] any number of outmoded weapons systems or weapons systems of little, if any, use against current threats. For instance, man-portable air defense systems, MANPADs, also known as surface-to-air missiles (SAMs), or jet fighter aircraft, are ineffective in combating transnational criminal organisations, be they drug traffickers or alien smugglers.'

`These armaments,' he added, ` were intended to fight off an invasion, or support one, to arm a faction within the state, or wage a guerrilla war or a counter-insurgency. The chances of any of those scenarios becoming reality are [...] not likely. I can confidently tell you that the United States would not tolerate them. It is much more likely that these arms might fall into the hands of terrorists or other enemies. Therefore, while they exist, they represent a threat to the peoples of Central America, as well as to the Western Hemisphere as a whole.'

Fisk's main message was, `The Central American states should explicitly declare what is evident to all: that there is no reasonable justification for military action by one Central American democracy against another. It is imperative that the Central American democracies recognise that the most pressing national security threats are not each other, but rather the non-state actors represented largely by criminal mafias. [They should enter] an agreement to restructure the region's security institutions and to coordinate their efforts to meet today s national security challenges [which would] entail redefining the roles and missions of Central America s security entities, including armed forces.'

Following up
The policy message was later delivered in person by the chairman of the US Joint Chiefs of Staff, General Richard Myers. Passing through Nicaragua on 12 August as part of a regional tour, he reiterated that SAMs were dangerous weapons that could fall into the hands of terrorists.

A few days later, US Defense Secretary Donald Rumsfeld told US troops stationed at the Soto Cano airbase in Honduras that they were part of a `truly global struggle' against terrorists, hostage-takers and drug traffickers,' then moved on to tell President Ricardo Maduro that the US favoured regional disarmament — though he added that this was a matter for the countries of the region, not the US, to decide.

PRD members to be polled on whether they support presidential reelection; Mejí­a appears wholly unconcerned, even with Fernández apparently increasing his lead.

The president of the ruling Partido Revolucionario Dominicano (PRD), Hatuey Decamps, is confident that a consensual solution to the party's nomination dilemma — bedevilled by President Hipólito Mejí­a's determination to run for reelection — will emerge this week. After a string of meetings, all of the President's rivals have decided to go ahead with a `plebiscite' among PRD members on the issue of reelection. A date is to be announced soon.

This `plebiscite' would not be a substitute for internal elections to nominate a candidate, but the hope of the seven aspirants is that rejection of reelection will persuade Mejí­a to withdraw. Conversely, admits Vice-President Milagros Ortiz Bosch, if reelection is approved `we will all be reelectionists'. Since Mejí­a has rejected the idea of polling the party members on reelection, and vowed to fight for the nomination into a second round of voting if needs be [WR-03-34], the exercise sounds somewhat pointless.

Fernández claims clear lead
The situation within the PRD is being mirrored by that of the Partido Reformista Social Cristiano (PRSC), threatened by a rift because defeated aspirant Jacinto Peynado continues to dispute Eduardo Estrella's nomination. Add to this the internal squabbling that is taking place within the central electoral board, and it is easy to understand why Miriam Santana, leader of the electoral watchdog Participación Ciudadana, says of the electoral scenario, `It is as if it were a three-legged table with two of the legs out of action. Only one of the three parties is in a stable condition, united and with its presidential candidate.'

That would be the opposition Partido de la Liberación Dominicana (PLD), whose candidate, former President Leonel Fernández, has been citing surveys that show him attracting 57% of voter preferences, as against 23% at best for the PRD and 18% for the PRSC. His campaign manager, Danilo Medina, predicts that Mejí­a is likely to use public resources to try to counteract the negative impact of the economic situation on his popularity. Mejí­a's rivals within the PRD say that in fact he has already started to do just that.

Luis Posada Carriles says he was lured to Panama by Cuban intelligence, denies intention to kill Castro.

After 15 years at large under the open tolerance of Central American governments, and two more in a Panamanian jail, the septuagenarian Luis Posada Carriles (self-confessed and convicted anti-Castro terrorist) is to stand trial in Panama. A court dismissed the latest round of dilatory moves by his defence and set the date for 12 November. The main charge initially preferred against him, that of attempting to murder Fidel Castro in Panama in 2000, has been dropped for lack of evidence, but Posadas and three others will be tried for criminal conspiracy, plotting against public security, illegal possession of explosives, and use of false documents.

His defence team argues that Posadas never went to Panama to kill Castro, but was lured there by a sting operation prepared by Cuban intelligence: he had been told, they say, that a highranking Cuban intelligence officer was willing to defect, but would only surrender to Posadas. They also say that the explosives found in a car Posadas had rented were `planted' by the Cubans. Certainly the Cubans were aware of Posadas's presence in Panama: it was Fidel Castro himself who provided his whereabouts to the Panamanian authorities.

A veteran of the CIA-directed Bay of Pigs invasion, Posadas had been convicted in Venezuela for bombing a Cuban airliner in 1976, killing 73, but he escaped from prison in 1985. He openly admitted having masterminded bombings against tourist targets in Cuba in 1997, which claimed one life. Panama has turned down extradition requests filed by Venezuela (which wants him back behind bars) and Cuba (which wants him for a string of offences).

CENTRAL AMERICA | Remittances tally refined. Expatriates from three Central American countries — El Salvador, Guatemala and Honduras — may be remitting home about US$4.8bn a year. The figure is suggested by a field survey conducted for the IDB by the Costa Rican firm Borge y Asociados. Overall, 23% of the people interviewed reported receiving remittances; the highest rate was recorded in El Salvador (28%), the lowest in Honduras (16%). The estimated volume of remittances followed the same pattern: US$2.2bn to El Salvador, US$1.8bn to Guatemala, US$800m to Honduras. An interesting detail is that Honduran recipients appear to be sent more money than their Guatemalan peers (US$1,333 each versus US$1,200).

HONDURAS | Growth above 3% predicted. The Honduran economy will grow this year by 3% to 3.3%, says President Ricardo Maduro (in a letter he wrote to media chiefs, in case they missed the official central bank handouts). This, he underlined, would put it ahead of hitherto fast-growing neighbours like El Salvador and the Dominican Republic. Export earnings are expected to rise by 6%, to US$726m, and remittances by expatriates are expected to bring in US$1bn.

PANAMA | QII figures suggest stronger recovery. Panama's GDP grew by more than 2.4% in the second quarter, prompting the government to raise its growth forecast for the year to 2.8%. Last year the economy grew by a mere 0.8%. The only two sectors faring poorly were commerce and finance — the latter contracting by 1.3%.

Dissident legislators of the ruling Partido dos Trabalhadores (PT) are threatening to break away and form a `truly socialist' party. The group includes three deputies (João Batista de Araújo, João Flores and Luciana Genro) and a senator, Heloí­sa Helena. They have all been formally reprimanded by the party for their vocal opposition to government policy, and have been threatened with expulsion for having voted against the government's pensions reform.

The new organisation has already been tentatively baptised Partido dos Trabalhadores Socialistas (PTS), but the promoters say they will not move to set it up until they have exhausted all efforts to fight expulsion. They are seeking to recruit to their cause another eight PT legislators suspended recently for having abstained from a pensions reform vote. If it happens, this will not be the first split in the PT: the Partido da Causa Operária broke away in 1991, and the Partido Socialista dos Trabalhadores Unificado in 1994.

After the Brazilian president's first mediation offers were slapped down, Colombia sounds approving as Farc and the UN get close enough to exchange emails.

Lula da Silva has pulled off a major diplomatic coup by persuading the Fuerzas Armadas Revolucionarias de Colombia (Farc) to take up his suggestion of talks about talks via the UN. On 15 September, when he meets Colombian President Alvaro Uribe in Cartagena, he will formally offer Brazil as a venue for these discussions - though both governments have been talking publicly about the matter for the past week.

Lula's relations with Colombia did not begin too promisingly, after the Brazilian president openly refused to go along with Uribe's request for the OAS to declare the Farc a `terrorist organisation' (WR-03-09). At the time, Lula said that any such step would hinder his future chances of mediating in the quest for a solution to Colombia's internal war. The Colombian government acidly remarked that nobody had asked Lula to mediate.

Lula was also the driving force behind the Rio Group's suggestion of a role for the UN in helping bring the Farc to the negotiating table. As in previous instances, the Farc rejected any UN involvement - which gave Uribe the opportunity to underline that an attached rider threatened other actions in the event of a Farc refusal.

Much quiet diplomacy has ensued since then, and by August the Farc was saying that it was willing to expound its `points of view' to the UN. One of its top leaders — Raúl Reyes (nom-de-guerre of Luis Edgar Devia) — began to exchange emails with UN secretary-general Kofi Annan's special envoy for Colombia, James LeMoyne. Now, Colombian peace commissioner Luis Carlos Restrepo has confirmed that the possibility of Brazil being a venue for a UN-Farc meeting `has been considered' by both sides. 

Raúl Reyes, it is worth recalling, acted as the chief spokesman for the Farc during the ill-fated three years of negotiations with the government of President Andrés Pastrana (1998-2002).

Tenuous as the progress has been in this new phase, it could count as an important breakthrough in the context of the all-out war launched by Uribe against the guerrillas. Uribe would like to see Brazil back his calls for multilateral involvement in his campaign to stamp out the armed organisations. So far, what Brazil has done is to increase cooperation on the intelligence front, and make a big show of redeploying its army along its Amazonian basin borders, with particular emphasis on preventing any kind of spillover from Colombia.

"[Lula] reveals a remarkable political maturity for someone who comes from being a union leader."

Ricardo Lagos, President of Chile.


"I never really liked being called a leftist."

Lula da Silva, President of Brazil.


"The US refuses to interfere in Venezuela's internal affairs, but we are not uninterested spectators."

Roger Noriega, Assistant US Secretary of State for Western Hemisphere Affairs.

Special Report: Indigenous peoples and power in Latin America However briefly, this year witnessed, in Ecuador, the first case of an indigenous party sharing power at cabinet level. This came just after Bolivia had seen, last year, the candidate of another indigenous party, Evo Morales, coming a very close second in the presidential elections. Slotted between the two events, in Mexico the Zapatista rebels, after almost a decade of holding their ground in Chiapas, launched a new strategy based on formally adopting autonomous indigenous rule in 30 municipalities, and urging indigenous communities elsewhere in the country to follow suit_ These are just a few of the issues discussed in the latest Special Report from Latin American Newsletters (LAN): Indigenous peoples and power in Latin America. The full 25-page report is available in English or Spanish, in electronic format (HTML/PDF), priced at US$130/ £90*. Latin American Special Reports are published bi-monthly and an annual subscription to the full set of six titles is available at the special price of US$484/ £345*. For more information, call LAN on +44 (0)20 7251 0012 or email [email protected]. *Discounted rates available to academics and NGOs -please enquire for details.

NEW! Latin American Monitoring Centre The Latin American Monitoring Centre is an exclusive online research facility available from Latin American Newsletters. This comprehensive central intelligence database offers clients 24/7 access to 33 constantly updated Country Reports. In addition to a General Information section on history, geography, demographics, and other essential background, each country report provides sections on Government/Politics; Economy; Foreign Relations, Security and Defence issues; Internal Security developments; and Related Articles; A useful Contacts section completes each report. The Monitoring Centre also provides an Election Watch facility and access to the Reference Library - an archive of all LAN articles published to date. To register for a no-obligation FREE TRIAL to the Latin American Monitoring Centre, please visit http://www.latinnews.com/default.asp?mode=offer or call Maria Isotalo on +44 (0)20 8874 9690.

LATIN AMERICAN REGIONAL REPORTS ANDEAN GROUP - NOW AVAILABLE We focus on Peru, where beleaguered President Alejandro Toledo is reeling from a double blow on the Camisea gas field and pipeline project and on tax reform. In Venezuela, we take an in-depth look at the economy and the electricity sector, as well as the latest political developments as the national electoral commission (CNE) takes shape. Elsewhere, in Ecuador, President Lucio Gutiérrez capitalises on the splits between the various indigenous groups; in Colombia, the Farc guerrillas attempt to regain the initiative and President Alvaro Uribe's campaign for re-election gains momentum, and in Bolivia, the NFR threatens to withdraw from the coalition and the government controversially declares that total coca eradication is impossible. For more information or to subscribe call +44 (0)20 7251 0012 or send an email to [email protected]

The CNE threw out the referendum request; even if a second chance is allowed, an adverse timeframe comes into play.

It is back to square one for the opposition Coordinadora Democrática (CD): the national electoral council (CNE), none too surprisingly, ruled inadmissible the signatures the CD had collected in support of its demand for a referendum to revoke President Hugo Chávez 's mandate. The decision was made on the strength of three votes in favour -- and none against, since the councillors picked by the opposition opted for abstaining.

The CNE's decision was based mainly, but not solely, on the fact that the signatures were collected `extemporaneously'; six months before the constitutional entitlement to a revocation referendum came into effect. The council also noted several formal deficiencies that also invalidated the submission, the most serious of which was that it was headed, not by the formal application for a referendum, but by a political manifesto. This, said the CNE, `violated' the agreement reached between government and opposition in the OAS-facilitated negotiations.

The CNE admitted that part of the problem was that there was no detailed regulation of procedures for referendums of this kind. It committed itself to drafting the necessary rules and putting them into effect on 17 September.

Can they try again?
The leaders of CD promptly announced that they had scheduled for 5 October a new mass collection of signatures. If the first one was dubbed the firmazo (the big sign-in), this one would be the refirmazo (a double pun meaning an even greater sign-in and the reaffirmation of the first one).

Whether they can actually do so has been cast in doubt. Lawyers in the pro-government camp have pointed out that according to the constitution, `during the term for which an official has been elected, no more than one request for the revocation of his mandate may be filed.' It is, of course, up to the CNE to interpret this, but the provision was obviously included to safeguard officials from living under the constant threat of a revocation referendum throughout the second half of their terms. And whatever the CNE decides, the dissatisfied party will be able to appeal all the way up to the supreme court.

In order to clear the air on this as soon as possible, Chávez 's own party, the Movimiento Quinta República (MVR), has filed a formal request for an interpretation from the constitutional panel of the supreme court. Should the court, now or later, find against the admissibility of a second opposition attempt, Chávez would be able to remain in office, unhindered, until 2007.

Tight & risky calendar
Should the CD have a second chance, it will find itself racing against the clock. Not matter how swiftly the refirmazo is carried out, verification (the task the CNE did not even begin on this occasion) is unlikely to take less than a month. Then, if all goes well, there should follow the call for a referendum, allowing enough time for both sides to campaign.

It is in the government's interest to delay proceedings at least until midyear, because by June it expects everyone, not least the opposition, to be distracted by the state and municipal elections scheduled for that month. The electoral board (subordinate to the CNE) has said it will ask the council to seek an extension of mayoral mandates until December, so that their renewal may coincide with that of the local councils. If that is accepted, there will be two nodes of political effervescence next year.

For the opposition, it is imperative to hold a successful referendum before 19 August 2004. Under the rules laid down in the constitution, if Chávez 's mandate is revoked before then, new presidential elections will have to be called within a month (which means that by then candidates will have had to be nominated, and electoral machinery readied).

If that deadline is missed, a successful revocation referendum would simply replace Chávez with Vice-President José Vicente Rangel — a prospect many in the opposition would find almost as intolerable as seeing Chávez stay on.

Castaño floats `logistical' argument, publicising an ambitious schedule for getting demobilisation underway by year-end.

Carlos Castaño, leader of the Autodefensas Unidas de Colombia (AUC), the biggest umbrella association of paramilitary groups, is pressing hard on the government to obtain the suspension of arrest warrants issued against paramilitary `commanders' and the granting of official safeconducts. The overt reason is that these people need freedom of movement if they are to attend to the formidable logistical challenge of demobilising the paramilitary fighters.

To drive home the point, Castaño went public with a detailed schedule of the organisations that will `enter fully into a process of demobilisation' towards the end of this year — 4,250 fighters in all, due to congregate in seven concentration areas. In doing so, he has provided a snapshot of the geographic reach and relative strengths of the various groups (see box).

First demobilisation centres

(Number of fighters, designated areas)

1,800 to La Gabarra, Norte de Santander.

1,200 to unspecified rural area in Córdoba.

1,200* to Valle del Cauca.

500** to Medellí­n, Antioquia.

300 to the `banana axis' in Urabá (NW).

300 to Montes de Marí­a, Sucre.

150 to La Mojana, Sucre & Bolí­var.

*Bloque Calima. **Bloque Nutibara.

Castaño said a further 3,000 fighters from three blocs (Mineros, Tolima and Cundinamarca) will be concentrating either in those areas or others in January-February next year. An additional three `blocs', he said, have not yet been scheduled: Centauros, del Llano and Elmer Cárdenas (the first two because of `logistical problems'; the latter because it has not yet agreed to the demobilisation deal). So far, the figures provided by Castaño add up to 7,250 paramilitary fighters: the deal with the government envisages the demobilisation of 13,000 by the end of 2005.

The government is not eager to grant the paramilitary leaders the freedom they want; its line is that it is studying the possibility of suspending arrest warrants, but only for those who are `absolutely indispensable for the development of the process.' Castaño insists that this should extend at least to the eight members of the paramilitary negotiating team.

Holdouts move closer
The largest of the paramilitary groups that had remained aloof from the negotiations between the government and the AUC, the Bloque Metro that operates in Antioquia, particularly in and around Medellí­n, has served notice that it too wants to demobilise. Metro's leader, known as Rodrigo or `00', has hinted publicly that he has already been observing a de facto ceasefire, which he is willing to `formalise' if the government agrees to deal with his 1,500-strong group. His one condition, though, is that he should be allowed to negotiate separately, because he does not want to sit down next to the AUC leaders `who are deceiving the state and society by talking about peace while they produce narcotics. [Another group, the Bloque Central Bolí­var, which had been negotiating separately, now wants to be included in a `single table'.]

Full-speed audit reveals losses far smaller than alleged; data manipulation suggests lower traffic to Colombia.

After a remarkably swift audit of military arsenals (it took two weeks), the high command argued that the theft of weapons and munitions, while undeniable, had been far less significant than claimed in the past couple of weeks [WR-03-34], and that though Ecuador had been regrettably caught up in gunrunning for the Colombian guerrillas, the traffic was also far less important than alleged.

According to General Octavio Romero, chief of the joint general staff, the grand total of materiel found missing from the arsenals since 1998 was 93 pistols, 130 rifles, 19 machineguns, 152 grenades, 177,377 rounds of ammunition, 40 kilos of explosives and 200 metres of fuse. He added that 37 officers, with ranks ranging from lieutenant to colonel, are being investigated as a result of these findings.

Crossborder traffic
Romero also said that, based on `real data' from Colombia, only 1.33% of the weapons that found their way into Colombian guerrilla arsenals had come from the Ecuadorean military. He did not explain the figure, but officials at the high command later said it was based on interception of arms shipments and seizures of arms by the Colombians: 444 rifles were intercepted crossing the Ecuadorean border, as against a total of 30,000 rifles seized from the guerrillas — which is not quite the same as Romero had claimed, and contradicts earlier Colombian data.

It is worth pointing out that the Quito newspaper Hoy, claiming to have seen a copy of the original statistics, reports that percentages of Ecuadorean provenance increase sharply when it come to ammunition (9.55%) and mortars (10%).

For Romero, the figures he cited are proof that claims of Ecuador being the conduit for 50% of the weaponry smuggled in to the Colombian guerrillas is grossly overblown. That claim, it should be noted, refers to weaponry of all provenance, not just from Ecuadorean military arsenals. The discovery two weeks ago of a large shipment of arms and ammunition arriving by sea to Ecuador is an illustration of this. This issue is unlikely to go away.

Capture of kingpin in Mexico brings forth details of connections with Montesinos and military brass.

The capture in Mexico of the Peruvian-Colombian drug trafficker Antonio Rí­os Lastra, and his deportation to Peru last week, have brought to light details of the links between the traffickers and former intelligence chief Vladimiro Montesinos, as well as with members of the military.

Statements made to the police by associates of Rí­os tell of him paying off General Nicolás Hermoza, then army commander, to rescue one of his aircraft intercepted by the military — not the sort of thing the government wants publicised when it is seeking the resumption of US-backed drug interception flights. He is said to have been given US$50,000 plus half of the US$1m in cash that the plane was carrying. They also cite instances of renting army helicopters at US$30,000 a flight, and of an arrangement whereby Rí­os paid Montesinos, with army officers as go-betweens, regular sums to ensure that he could operate without hindrance.

Rí­os Lastra's organisation is said to have ferried drugs out of Peru's jungle region from clandestine airstrips in areas under army control during the counterinsurgency campaign against the Sendero Luminoso guerrillas. Evidence from the Rí­os case will be added to that of other cases brought against Montesinos.

COLOMBIA | Court overturns extension of value-added tax. The extension of the value-added tax (IVA) to a number of goods included in the `basic family basket' has been thrown out by the constitutional court on the grounds that it violates the `right to equitable treatment' guaranteed by the constitution. Introduced in the tax reform approved last year by congress, the measure would have applied, from 2005, a 2% IVA to currently exempt products such as bread, fruit, milk, meat, medicines, public transport and schoolbooks. Court president Eduardo Montealegre said that, as all citizens are not equally able to pay, the tax breaches `the principles of equity and justice'.

This will deprive the public purse of an estimated Col$1bn (US$350m) a year. The government says it will ask congress to approve `a source of fresh funds to be devoted mainly to social investment.'

ECUADOR | Economy slips into recession. In the second quarter Ecuador's GDP shrank (by 0.7%) for the second quarter running, which puts the economy technically in recession. First-half GDP was down 0.6% on the second half of 2002. The central bank is now expecting the growth rate for this year as a whole to be 2.7%, instead of the initially predicted range of 3% to 3.5%.

PERU | IDB decides to back Camisea. The IDB announced on 10 September the approval of a make-or-break US$75m loan for the development of Peru's Camisea natural gas deposits, a scheme which had been fiercely opposed by environmentalists. The IDB loan provides the green light for another US$60m in financing from other sources. The consortia engaged in the project, headed by Pluspetrol of Argentina, have already invested US$1.1bn in developing the deposits and laying two pipelines over the Andes.

Even with the PAN and PRD ranged against it, the PRI managed to get `Pemexgate' postponed before resuming talks on reforms.

Not even the personal intervention of President Vicente Fox sufficed to convince the opposition Partido Revolucionario Institucional (PRI) to separate the defence of one of its own who faces trial on corruption charges from its commitment to work together with the government on the approval of major pieces of reform legislation. The PRI remained determined to secure its partisan interests first and, with the assistance of the smaller parties, achieved its purpose.

The row was over a session called by the president of the lower chamber of congress, Juan de Dios Castro, of the ruling Partido Acción Nacional (PAN), to vote on whether PRI senator Ricardo Aldana's parliamentary immunity should be lifted. This has been requested by the public prosecutor so that Aldana can be tried on a charge of having illegally funnelled some US$160m from the Pemex oilworkers' union (of which he is the treasurer) to the PRI's campaign chest — the so-called `Pemexgate' affair. The PRI said that convening that session breached an understanding with the PAN to postpone action on `Pemexgate' until after the reforms had been approved.

De Dios Castro and likeminded panistas were not alone in wanting to pursue the `Pemexgate' affair because they considered it had nothing to do with the reform legislation. Senator Jesús Ortega, of the leftist Partido de la Revolución Democrática (PRD), expressed a similar position, underlining the ethical angle. `I do not believe it correct,' he said, `that we should sacrifice the needs of the country for the sake of partisan interests [...] The people are expecting answers, and we cannot be so insensitive as to withhold them because of someone's particular situation.'

On 11 September the PRI forced a vote on the convocation of the special session, and with the support of the small parties mustered a majority of 245 votes (against the combined 238 of the PAN and the PRD) in favour of unconvening the session and sending the matter to the jurisdictional committee — where Aldana stands a better chance, since the PRI has eight of the 16 seats. 

Reforms back on track?
`Pemexgate', though not entirely shelved, has been effectively postponed, and it looks like the parties can return to crafting a consensus on the reforms. PRI secretary-general Elba Esther Gordillo, after claiming that her party had `won with the strength of reason', suggested that work on the reforms was back on track by saying that the outcome of last week's vote would `ultimately be for the good of the whole country.'

It did not go unnoticed that this was a rare occasion on which the PAN and PRD acted aligned together against the PRI. It could well be a one-off, though some will take note of the interpretation of the episode by the PRD's congressional coordinator, Pablo Gómez. The PRI, he said, had shown its determination to act as the `hegemonic group' in congress, by `orchestrating the vote.' Implicit was a call to prevent that from happening.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		13.09.02	05.09.03	12.09.03
Argentina	peso	3.59	2.96	2.93
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.32	7.76	7.76
Brazil	real	3.16	2.90	2.90
Chile	peso	724.00	685.00	673.00
Colombia	peso	2,730.93	2,816.84	2,830.09
Costa Rica	colón	367.50	406.36	407.02
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	_	30.24	32.83
Ecuador	dollar	1.00	1.00	1.00
El Salvador	colón	8.75	8.75	8.75
Grenada	EC dollar	2.70	2.70	2.70
Guatemala	quetzal	7.79	7.95	7.99
Honduras	lempira	16.82	17.71	17.73
Mexico	nuevo peso	10.05	10.99	11.07
Nicaragua	córdoba oro	14.41	15.45	15.45
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,300.00	6,230.00	6,170.00
Peru	nuevo sol	3.58	3.49	3.48
Uruguay	nuevo peso	29.75	28.40	28.40
Venezuela	bolí­var	1,480.00	1,600.00	1,600.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	June	July	August	Last 12m	Jan-Dec 2002
Argentina	Indec	-0.10	0.40	0.00	4.90	41.00
Bolivia	INE	0.20	0.60	0.64	3.85	2.45
Brazil	FGV	-0.70	-0.20	0.62	22.03	26.41
Chile	INE	0.00	-0.10	0.20	2.90	2.80
Colombia	Dane	-0.05	-0.14	0.31	7.26	6.99
Costa Rica	DGEC	0.67	0.80	0.70	11.70	9.68
Ecuador	Inec	-0.21	0.03	0.06	7.32	9.36
El Salvador	Min.Ec.	-0.10	-0.40	0.30	1.70	2.80
Guatemala	BCG	0.22	0.27	0.28	4.97	6.33
Honduras	BCH	0.30	0.40	0.90	7.90	8.10
Mexico	Bco.Mx.	0.08	0.14	-0.07	5.24	5.70
Nicaragua	BCN	-1.50	-0.08	0.30	4.04	3.87
Paraguay	BCP	-0.47	-0.70	-0.20	9.20	14.60
Peru	INE	-1.50	0.15	0.01	1.89	1.52
Uruguay	DGEC	-0.47	0.50	1.16	14.19	25.94
Venezuela	BCV	0.16	1.80	1.30	30.40	31.20
US	DOL	1.40	0.10	_	2.10	1.60
Previous: WR-03-35

The stockmarket in figures
Market	Index	05.09.03	12.09.03	Variation (%)
Buenos Aires	Merval	750.87	764.65	1.84
São Paulo	Bovespa	15899.64	16421.35	3.28
Santiago	IPSA	1354.45	1364.71	0.76
Bogotá	IGBC	2115.87	2149.08	1.57
San José	BCT	11811.41	11817.78	0.05
Quito & Guayaquil	Interinvest	69.52	68.47	-1.51
Mexico	BMV	7775.34	7712.75	-0.80
Lima	ISVBL	1913.34	1962.14	2.55
Caracas	BC	14917.49	16984.26	13.85
Source: Daily market reports.