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On 23 November, congress approved the government's budget of US$53.5bn for 2007. The president of the finance committee, Rodrigo Cabezas, pointed out that 45% of the spending would go on health, education, housing and law and order.

Cabezas pointed out that the government was now devoting 7% of government spending to education, which meant that it was meeting the norm set by the UN agency, Unesco. Even so, the government is still paying a huge price for its borrowing binge: 17% of the budget is still going on paying debt, both foreign and domestic.

The 2007 budget is equivalent to 32.7% of GDP.

The government is basing its budget for 2007 on growth of between 5% and 6% and a highly conservative forecast for crude oil: only US$29 a barrel. Currently Venezuelan oil is fetching US$49 a barrel. The average price for the first 10 months of the year has been US$58 a barrel. The export price of Venezuelan oil has fallen by almost a third in the past three months.

The government is also budgeting on inflation falling to 10% (it will be around 15%, again this year) and unemployment tumbling to 7%. Before the budget, the finance minister, Nelson Merentes, had expected inflation to fall to below 12% in 2007. This year inflation looks like exceeding 15%. The government had originally budgeted on inflation of 10% in 2006, but increased this target to 12% at the end of September.

The government is forecasting that oil production will be 3.5m bpd. This figure will, presumably, fall if Venezuela's efforts to persuade Opec to lower its quotas in order to push up oil prices are successful.

The government is also forecasting no change in the official exchange rate for the dollar: 2,150 Bolí­vares per dollar. The government's imposition of exchange controls and the surge in oil prices has meant that the central bank's reserves now stand at over US$36bn. This is the highest in the country's history. On top of this the Fondo de Inversión para la Estabilización Macroeconómica (Fiem) has assets of a further US20bn.

This economic firepower means that the economy is well placed to withstand any collapse in oil prices, even though the government is so strongly committed to social welfare programmes. The government claims that it is working to reduce what it calls the "social debt".

For this year the government is now forecasting that growth will be over 10%. The planning minister, Jorge Giordani, made this forecast on 20 November. He noted that growth in the third quarter had been 10.2%, according to official figures from the Banco Central de Venezuela. This was the 12th consecutive quarter of year-on-year growth. In 2005 the economy grew by 9.4%; in 2004 it surged by 17.3%.

Previously, the government had been forecasting that the economy would grow 9% this year and by at least 6% in 2007.

Giordani stressed that recent growth is being driven by the non-oil sector. He noted that the private and non-oil sector accounted for 80.4% of the economy's output in the third quarter.

The central bank, in its report on the third quarter, painted a similar picture. It said that the strong growth was the result of strong consumption, investment and the expansion of credit to productive sectors. The central bank also said that the increase in public spending on social programmes had also contributed to the strong growth.

In the first half of the year the economy grew by 9.6%. Domingo Maza, the most influential director of the central bank, said that growth in 2006 would be between 7% and 8%.

The strength of the growth in the third quarter certainly surprised the finance minister, Nelson Merentes, who had been cautiously forecasting third quarter growth of at least 8%.

The financial sector is benefiting from the boom. In the third quarter, banks' profits rose by 22% (year-on-year) and bad loans were extraordinarily low at less than 2% of total loans. Only Chile's banks have made fewer dud loans.

Bonus: The government of President Hugo Chávez is bringing forward the Christmas bonus for public sector employees to November. This is just before voters decide whether to give President Hugo Chávez another six years. The country goes to the polls on 3 December. The bonus is the equivalent of three months' pay. The cost of this largesse is likely to be around US$3bn.

Inflation: In October inflation improved to 0.7%, less than half the 1.9% rate recorded in September. This brought the 10-month rate to 13.4%. The 12-month rate is 15.5%, already above the 2005 rate of 14.4%.

The election result in Guatemala, perhaps the most fragile democracy in the region, was unusual because the populist left-wing barely featured. Yet no political commentator has rushed to proclaim that the Left's failure means that support for President Hugo Chávez of Venezuela is ebbing. Embarrassingly for the anti-Chavistas, the two run-off candidates in Guatemala are a former general, accused of human rights abuses (Otto Pérez Molina), and a political hack, Alvaro Colom, who faces a slew of corruption allegations.

One sign of President Hugo Chávez 's political shrewdness was that he refused to get involved in any way with the Guatemalan election. This is a marked contrast from elections in Mexico; Ecuador; Bolivia; Argentina and Nicaragua. In all these elections, Chávez commented, criticised and praised.

The US, whose opposition to Chávez is derived from his support for Cuba (whose exiles have been decisive in determining the way Florida falls in presidential elections), has been trying to distinguish between populist and responsible left-wing democrats in Latin America. Populists, in the US's opinion, are Chavista and bad, while responsible left-wing democrats, such as Presidents Lula and Bachelet, are good. President Alan Garcí­a of Peru, who broke with the IMF in his first government, is now also a responsible left-winger.

The problem the US faces is that its key allies in the region are being pulled left-wards. In Colombia, President Alvaro Uribe is on the point of letting Chávez sort out a way of extracting hostages from the Fuerzas Armadas Revolucionarias de Colombia while in Mexico, President Felipe Calderón Hinojosa is extending price controls. That is hardly the economic policy of a free-marketeer: Calderón has imposed price controls on tortillas and at the end of September froze electricity, fuel and gas prices until, at least, the end of the year.

The real problem the US faces in Latin America is that neo-liberalism, let alone neo-conservatism, has failed. The lesson from Asia, and Europe, is that markets need some managing and control and that, although the trickle-down theory may look good on paper, in practice it inverts and becomes siphon-up.

The US can only weaken Chávez by puncturing the oil price, but if it does that, it risks destabilising Saudi Arabia, and Russia, which are much more geo-strategically important. Oil prices will weaken in the coming US recession, but they will not fall enough to threaten Chávez and Bolí­varian socialism.

On 8 July the government took over 195 companies belonging to the Isaí­as Group, including two TV channels. The move prompted the resignation of the economy minister, Fausto Ortiz. On 23 July, Robert Andrade, another one-time supporter of President Rafael Correa resigned after the constituent assembly decided to curb the independence of the central bank. Andrade was president of the central bank.

Ortiz was the second high profile figure (and Andrade the third) to resign over disagreements with the president in less than a month. Alberto Acosta, the former president of the constituent assembly started the trend when he resigned as president of the assembly on 23 June. President Correa, with some justice, feared that Acosta would not meet the 25 July deadline for approving the new constitution. Under the brisker management of the Fernando Cordero the assembly curbed debate and rushed through its review of the constitution and met the deadline.

Ortiz was replaced by Wilma Salgado, formerly head of the state Agency for the Guarantee of Deposits (Agencia de Garantí­a de Depósitos, or AGD), which is in charge of reclaiming the money the state lost during the banking crisis of 1998 and 1999. Unusually Ortiz did not attend Salgado's inauguration, underlining his displeasure at what had happened.

Foreign investors in Ecuadorean debt did not like the change. They had responded to Ortiz's careful courting and feared that Salgado might announce that the government would stop servicing the foreign debt. As debt payments far exceed new borrowings, the temptation for the government to ignore the claims of foreign creditors is growing.

Salgado had a chequered reputation at the AGD which, technically, handled the seizure of the 195 companies belonging to the Isaí­as brothers, (Roberto and William) including the national TV channels TC Televisión (in Guayaquil) and Gamavisión (in Quito). The Isaí­as brothers, currently in exile, are accused of cheating the government of US$661m when it tried to bail out the bank they owned, Filanbanco, which collapsed in 1998. 

The government argues that the expropriation of the Isaí­as' assets is a brave and historic attempt to reclaim at least part of what rightfully belongs to the Ecuadorean taxpayer. It is also a symbolic and political move, intended to show members of what Correa calls the traditional business oligarchies that they are no longer immune from punishment. Moreover, it is meant to prove to the voters ahead of the September referendum on the country's new constitution that Correa is determined to fulfil his promises of cracking down on corruption and of compensating those who lost their money when Filanbanco failed.

Salgado takes over an economy in reasonable shape. Ortiz had been forecasting 4.2% GDP growth in 2008 and inflation of under 10%. These targets got a boost when the June inflation figure came in: at 0.76% the figure was well below the 1.05% recorded in May. Policymakers lost little time in pointing out that the June figure was below even February's 0.94%, previously the lowest monthly figure so far this year. Even so, the 12 month inflation figure was 9.69%, up from 9.29% for the 12 months to the end of May.

The June figure underlines how challenging the target for 2008 is. The government claims that inflation in the country was a bit below the regional average. This is an impressive performance because unlike Colombia or Peru, Ecuador uses the dollar and so cannot blunt inflation by letting the exchange rate appreciate. The government expects that inflation should rise more slowly in the second half of the year.

The economy, on the other hand, seems to be back on track after a poor first quarter. The central bank had forecast 4.2% growth at the beginning of the year, but lowered this to 3.1% after a poor first quarter. The government argued that the 4.2% growth target would be attainable because the fiscal position was strong and this had allowed the government to boost public spending.

The government argued that this year the economy should reverse its habit of GDP growth that was lower than the previous year. This trend started in 2005, following 8% GDP growth in 2004. In 2005 the rate was 6%; this sunk to 3.9% in 2006 and 2.6% in 2007.

Constituent assembly: On 27 June the constituent assembly approved four constitutional articles which, the government claims, guarantee private property.
The right wing opposition claim that the four articles will allow private property to be expropriated on very slight grounds. The draft constitution will allow the authorities to confiscate property on the grounds of social development; environmental and collective welfare. On the other hand the new constitution also recognises intellectual property rights. The full constitution was approved on 24 July and now goes to a national referendum on 28 September.

• Central bank loses independence

Robert Andrade resigned as president of Ecuador's central bank on 23 July because the new constitution subordinates the bank to the government. The constitution proposes that the president should set monetary, exchange rate and bank lending policies. Andrade was replaced by former agriculture minister Carlos Vallejo, who was also a member of the central bank's five-member board.

The central bank cut interest rates again on 29 May amid more evidence that the economy is slowing. So far this year, the central bank has chopped the overnight lending rate to 5%, from a seven-year high of 10% last year.

The evidence of the slowing economy comes from retail sales. These fell 7.1% year-on-year in March, their biggest fall since 2000. The figure was also worse than the median estimate for a 3.8% decline.

Although industrial output unexpectedly rose 0.4% year-on-year in March, this was largely due to increases in oil and mining output and the effect of the later Easter this year. In 2008 Easter fell in March which flattered this year's March output figures.

Most independent economists expect the economy to contract by about 1% this year, before recovering in 2010. The big problem is that unlike many other countries in the region, the Colombian government does not have much scope for fiscal manoeuvre.

Although the economy is also relatively closed (less than 20% of GDP depends on exports), what happens in its two biggest export markets, the US and Venezuela, has a huge influence on the figures. On the other hand, the comparatively closed nature of the economy should mean that it will respond quickly to lower interest rates.

In the first quarter of 2009, Colombia's export revenues to Venezuela increased by 7% year-on-year. The strong performance by exports, means that the country ran a US$1.3bn trade surplus with Venezuela. Colombia's sales to Venezuela came to US$1.44bn, while its imports from Venezuela were worth US$143m, down 56% on the first quarter of 2008.

The president of the Cámara de Comercio Colombo-Venezolana, Magdalena Pardo, dismissed the first quarter figures as an aberration. She said that she expects exports to fall by 18% over the year. In 2008 Colombia's exports to Venezuela were worth US$6.1bn. Its imports from there came to US$1.1bn.

One of the big worries is what is happening to Colombian vehicle exports to Venezuela, which are now subject to quotas. The issue is doubly worrying because there appears to be a lot of vehicle smuggling from Colombia to Venezuela, to get around the quotas, and the smuggled new cars are then sold, the Venezuelan government alleges, with financing from banks with close links to the political opposition. On 21 May, 24 new cars were found on properties owned by Guillermo Zuloaga, the owner of the opposition-supporting TV station, Globovisión.

The Venezuelan import quota for new Colombian vehicles is 10,000 for 2009. In 2008, Colombia sold 22,500 vehicles to Venezuela, down from earlier peaks when Venezuela was shipping 60,000 new vehicles a year from Colombia.

Tulio Zuloaga Revollo, the president of the Colombian vehicle dealers' association, Asopartes, said that the problems in Venezuela had hit the industry hard. Nevertheless, he still expects the industry to sell 180,000 new vehicles this year. In the first four months domestic sales were down by 39%, he admitted, at 45,000 units. In the whole of 2008, the industry sold 219,000 vehicles. 

Coal: Colombia's export revenues were also boosted by a 43% jump in coal export revenues in the first two months of 2009, thanks to a 92% increase in export volumes. Coal exports came to US$1bn over the same period.

Inflation: In April inflation was 0.32%, down from March's 0.50%. This brought inflation for the first four months of the year to 2.26% and the rate for the past 12 months to 5.73%. In 2008 the rate was 7.67%.

The number of mobile telephones sold rose 15% year-on-year in 2009.

The Superintendencia de Telecomunicaciones (SIT) reported that there were 2.35m more mobile subscribers than in 2008. The SIT forecasts that increasing demand for music, texting and internet services will mean that demand for mobiles will continue to increase in the next few years.

At end-2009 there were 17,307,459 mobile telephone numbers in use in the country. This was up15.78% on end-2008. The overwhelming majority of subscriptions are pre-paid (16.4m). According to the Superintendencia de Administración Tributaria (SAT), the country imported 3.8m mobile handsets in 2009. The country's main network is Tigo, which has 6.64m subscribers. Claro has 6.45m and Movistar 4.2m

Corporate confidentiality: The economy ministry said that all 600 companies operating maquiladoras in the country were protected by commercial confidentiality agreements and therefore were not subject to any freedom of information requests. This means that the government has decided that the public will not be able to find out which foreign companies pay tax and how much. The terms of mining concessions will also remain confidential.

Inflation: In February the consumer price index rose 0.43% month-on-month, bringing the accumulated rate for the first two months of the year to 1.73% and the annual rate to 2.48%.

In mid-January the government changed the way it calculated the official export price for bananas. Instead of setting a price by the 18.2kg (or 40lb) box it will now charge by the pound.

The agriculture ministry (Magap) said that the new price for (top quality) bananas in 22XU boxes would be US$0.1325 a pound. As these banana boxes rarely contain exactly 40lbs, the price of a box will now fluctuate between US$5.5 and US$5.69. In 2010 the government fixed the price of 22XU boxes of bananas at US$5.4 each.

According to Magap, half the boxes exported weigh 43llbs and the other half weigh 41.5lbs.  The Magap claims that lots of producers lost out because they were paid a per box rate, but most boxes weighed more than their stated weight.

In 2010 the country, the world's biggest banana exporter, shipped 260m boxes of bananas. Just over 80m boxes were exported to the European Union, making that market the industry's biggest.

Banana exporters and producers are already complaining about the new arrangements. Eduardo Ledesma, director of the Asociación de Exportadores de Banano (AEBE), says that they will lead to squabbling between producers and exporters. He said that previously everyone had paid by the box and not quibbled. Now some exporters will pay the extra US quarter for the extra couple of pounds of fruit but some others may not.

William Ramón, director of Cámara de Productores de Banano del Guayas, said that the different box weights reflected the needs of the ultimate destination markets. He claimed that the new system would only benefit the big shipping companies, Dole, Chiquita y Standard, which pack all their bananas in 41.4lb boxes.

What the banana industry would prefer is for the government to become more involved in trying to push up the international price of bananas. The AEBE wants President Rafael Correa to reopen trade negotiations with the European Union (EU) so that Ecuadorean bananas face the same tariffs as Costa Rica and Colombian fruit. Currently Ecuadorean bananas face a tariff of â‚ ¬148 (US$196) a tonne. Colombian and Costa Rican fruit, thanks to free trade agreements with the EU, face a tariff of â‚ ¬145 a tonne.

Currently the Ecuadorean government is offering its banana industry a subsidy to balance the lower tariff: banana producers fear, however, that  the World Trade Organization might penalise them for the subsidy.

The AEBE further points out that the â‚ ¬3 difference will become â‚ ¬5 in 2012 as lower tariffs kick in for Colombia and Costa Rica. The EU banana tariff for Costa Rica and Colombia will drop further, to  â‚ ¬126 in 2015 and â‚ ¬109 in 2020.

China & Venezuelan oil deals: President Hugo Chávez claims that Venezuela is sitting on the biggest oil reserves in the world (based on a new figure of 253bn barrels of recoverable oil in the Orinoco tar belt). Coupled with Venezuela's conventional oil, this puts the country ahead of Saudi Arabia's reserves of 260bn barrels. Chávez is increasingly hoping that Chinese money (and perhaps its technology) will help Venezuela get the stuff out of the ground. Chinese projects are likely to come on stream in the second half of this decade.

The first Venezuelan refinery in China, located in Jieyang in the Guangdong province will cost US$8.7bn and will be one of the largest in China upon completion in 2013/2014. It is a joint venture between Pdvsa and PetroChina and will process 400,000 barrels per day (bpd) approximately 8% of China's current crude oil imports.  Last year the China National Petroleum Corporation and Pdvsa agreed a similar deal to produce the same volume of oil from the Juní­n 4 block in Venezuela's Orinoco crude oil belt.

On 1 December last, Venezuela's energy minister, Rafael Ramí­rez, said that Venezuela is now shipping some 362,000 bpd to China, making it China's third largest supplier. He also maintained that China would invest over US$40bn in oil and gas projects in Venezuela by 2016, boosting Venezuela's crude oil output by some 400,000bpd.

The Brazilian press is starting to report that companies are becoming more optimistic. Antônio Palocci, the finance minister, said that he too was seeing signs of a pick-up. He was speaking after a brief meeting with the Nobel prize winner and former World Bank chief economist, Joseph Stiglitz.

What is clear is that Brazilians are still giving President Lula da Silva and his government the benefit of the doubt. Lula's approval rating, despite the probable recession in the economy in the first six months of his administration, is running at 76.7%, down only minimally from the 83.6% rating after his first month. His current disapproval rating is 7.2%. The government's rating is lower, at 48.3%, down from 56.6%, and its disapproval rating is now 10%, up from 2% at the beginning of the year. The financial markets are also pretty pleased with Lula's government: the country risk rating went through the 700-basis-point level yesterday. This was the lowest since 17 July.

Palocci argues that the fall in interest rates and the government's efforts to boost micro-credit will pay off by boosting consumption and setting off the recovery. There are signs of this in corporate statements. Companies such as paper manufacturers say that orders began to pick up in July (by about 2% compared with June) and are stronger again this month. This anecdotal recovery is franked by statistics from the Federação das Indústrias do Estado de São Paulo. It reported that industrial sales were up by 4.9% in July compared with June. The Fiesp's industrial activity index for July was unchanged on June: this was the best month-on-month performance since April, when output increased by 1.45% month-on-month.

President Néstor Kirchner has sought to defuse the growing enthusiasm regarding Argentina's economy. A series of strong economic data has emerged in recent weeks, but the president asked people not 'to fall blindly in love' with such figures.

Argentina 'is gradually improving its figures regarding consumption and economic growth, which are still below ground, but the crisis did profound harm to Argentina's social fabric,' warned Kirchner. 'Our brothers and sisters in Argentina have been utterly broken and wounded by the terrible economic process that we have lived through over the last 15 years,' he added. Kirchner called on Argentina to take responsibility for rescuing the country and asked them to remember the lessons of the past.

Kirchner's words of caution followed a slew of positive figures including GDP growth of 6.9% in the January to July period, a rise in employment, and a robust trade performance in August. Yesterday the government announced that tax revenues rose 40.8% year-on-year in September. For the first nine months of the year revenues increased by 47.3%, to Arg$52.8bn (US$18bn).

Economy minister Roberto Lavagna said on Tuesday that GDP would grow by between 6.3% and 6.5% this year against an official forecast of 5.5%. Kirchner's comments are a reminder, however, that the Argentine economy contracted by 10.9% in 2002 and was in recession for the three years before that.

Argentina's provincial election programme moves to Chubut on Sunday. President Néstor Kirchner is backing the candidate from the Partido Justicialista in the gubernatorial vote, but he is apparently more concerned by the outcome of the congressional votes.

The peronist candidate Mario Das Neves, who was head of customs under former president Eduardo Duhalde, is currently trailing behind the present governor José Luis Lizurme of the Unión Cí­vica Radical. However, Das Neves will be hoping that Kirchner's visit of 31 October to support his candidacy might lead to a surprise swing towards the PJ. As it is, the president was hardly unequivocal over the governorship. Although he said that he supported Das Neves, Kirchner maintained that he was in favour of many of Lizurme's policies and said that he was 'friends with both of them'.

The fight for the three seats in congress and the three seats in the senate is far more heated, however. A good showing for the PJ in these votes will further increase its control on congress, but the Radicals will be desperate to prove that they are still an opposition force to be reckoned with. The competition between the two parties will intensify during the next couple of weeks. Elections are still to be held Salta on 16 November, and Corrientes, Entre Rí­os, Tierra del Fuego, and San Luis on 23 November.

The leader of the opposition Frente Sandinista de Liberación Nacional (FSLN), Daniel Ortega, has spoken for the first time since the conviction of former President Arnoldo Alemán on corruption charges. Ortega lost considerable face among party grassroots after his aborted alliance with Alemán's liberal party in an attempt to get the former president off the hook. The two men agreed to postpone next year's municipal elections until 2006 and change Nicaragua's presidential system to a parliamentary one until Washington applied considerable pressure to Nicaragua's judiciary.

Ortega, who flew to Libya to talk with his close friend Muammar Gaddafi, has accused President Enrique Bolaños of trying to get an amnesty for Alemán, who was sentenced to 20 years in prison earlier this month. Ortega says that Bolaños aims to get the liberal party to rejoin his ruling coalition by dangling the Alemán amnesty card in front of them.

This seems implausible given that Bolaños has devoted most of his tenure to pursuing Alemán for money-laundering on a grand scale and consciously alienated the liberals in so doing.

Ortega's remarks suggest that he is desperate to appease the Sandinista grassroots, who were infuriated by his attempts to contrive the release of Alemán, a man who is second only to former dictator Anastasio Somoza on the list of Sandinista political unpalatables.

President Lucio Gutiérrez has been entangled in a campaign-financing scandal. Legislator Carlos González alleged that Gutiérrez received financing for his electoral campaign in 2002 from Ecuadorean businessman Marco Velasco Freire, who was his former presidential advisor. Velasco has amassed a fortune; he owns 11 companies and 21 properties. He is being investigated for money-laundering. Gutiérrez denies that Velasco funded his campaign. 

It is not the first time that Gutiérrez has been accused of receiving tainted money in his election campaign. Last November, Ecuador's leading newspaper El Comercio, claimed that Gutiérrez's campaign was at least partly funded by a recently arrested drug trafficker, César Fernández, who was governor of the central coastal province of Manabí­ in the 1990s, and whose brother Luis frequently socialises with leading politicians of all parties.

As a result of a two-year investigation in cooperation with the DEA and the Mexican antinarcotics police, the Ecuadorean authorities arrested Fernández on 27 October. He is charged with being the Ecuadorean point man for an international ring with links to the Juárez cartel in Mexico and Colombian traffickers from Cali.

Six people, including a Spanish TV journalist, were killed yesterday when an anti-Aristide demonstration was fired upon in Port-au-Prince. Jean-Bertrand Aristide, the elected President, left the country on 29 February.

According to eyewitnesses, the foreign troops guarding the demonstration did nothing when pro-Aristide Chimeres opened fire on the unarmed protestors. At least 26 other people were wounded.

French and US troops then had to confront a furious demonstration demanding to know why the soldiers had not fired back at the Chimeres on the rooftops and why they had not disarmed them before the demonstration started.

President Carlos Mesa's decision to authorise temporary gas exports to Argentina, and thus add an estimated US$104m to the government's export revenues, annoyed radicals in the country. Yesterday 5,000 miners and their supporters marched through La Paz protesting against the decision chanting “Mesa, you Chilean, the gas is not for sale." The miners also chucked several sticks of dynamite at office and shop windows.

The protesters claim that the gas being pumped to Argentina may be exported on to Chile, which is facing an energy crisis following Argentina's decision to halt supplies of natural gas. Argentina's reviving economy means that it needs all the electricity it can generate and the bulk of the power comes from gas-fuelled plants. It is not clear exactly how much gas Bolivia will sell to Argentina; what is clear is that the state oil company, YPFB, will handle the deal. The two sides started to talk yesterday about the price Argentina should pay for the gas. It also seems that YPFB will buy the gas from national producers under a take-or-pay contract.

Mesa claims that none of the Bolivian gas will be pumped on to Chile. Exactly how Bolivia will enforce this restriction is unclear. Bolivia is trying to put pressure on Chile to restore its access to the Pacific, lost in the war of the Pacific and ratified by a 1904 peace treaty.

Mesa says that the deal with Argentina will be for only six months, until the government has held a referendum, scheduled for 18 July, on how its vast gas reserves should be exploited. It is possible, that if the referendum is approved, the Argentine deal could be extended for another six months.

The demonstrations are all too resonant of those which ended up forcing President Gonzalo Sánchez de Lozada (Goni) from office last October. The radicals, such as Jaime Solares, the president of the Central Obrera Boliviana, argue that Bolivia should not export its gas but use it as a feedstock to develop a petrochemicals industry. The argument is that by doing this, the country will move up from being a simple commodity exporter to an exporter of value-added products.

Solares himself is under pressure after a former dictator, Luis Garcí­a Mesa, claimed that Solares had been a police informant during the worst of the military repression in the early 1980s. Garcí­a Mesa, who ruled from 1980 to 1981, also claimed that Hugo Banzer, a dictator (1971 to1978) who turned democrat (and was elected President in 1997) founding the Acción Democrática Nacionalista, had ordered the assassination of a socialist politician, Marcelo Quiroga Santa Cruz. Quiroga was gunned down in the COB HQ on 17 July 1980, but his body was never found.

Garcí­a Mesa made these accusations in a telephone call from his cell in the high security jail at Chonchocoro to a radio station, Radio Panamericana. The accusations did not faze Solares who claimed that the allegations were a government trick.

Solares said that if Mesa does not change his policy on gas, he will go, just as President Goni went last October. Solares is threatening to call a general strike for 3 May and to block roads if Mesa does not do his bidding. This combination created the crisis which led to the downfall of President Goni last October.

The government, however, is hinting that it will continue with its policy of shipping gas out to North America. The newly appointed energy minister, Xavier Nogales, hinted yesterday that the government would prefer the gas to go out through Peru, though the issue would be settled by the referendum.

The country is swinging into a decisive fortnight. By Friday 4 June, the result of the double-checking of the signatures on the opposition petition should be completed. The US added to the sense of drama when the Washington Post published an article yesterday, citing an unnamed senior US State Department official, saying that there was no doubt that the opposition had gathered enough signatures to force the referendum.

Officially, the opposition is now 540,492 valid signatures short of the 2.4m it needs to trigger the referendum on whether the president, Hugo Chávez , should continue in office. The Consejo Nacional Electoral (CNE) has changed its official figures four times since it first published them. It now reckons that the opposition has 1,895,581 valid signatures and that there are 1,192,914 doubtful signatures on the petitions. Of these, 390,615 are clearly fraudulent and so are not eligible for double-checking.

From Friday 27 May until Sunday 30 May, people who say that they signed the referendum but allowed their details to be filled in on the form by someone else will be allowed to validate their support. They will do this at 2,900 double-checking centres across the country. To get to the 2.4m signatures it needs to secure the recall referendum, the opposition needs 45.3% of the doubtful signatures to be validated.

The actual process is likely to be chaotic since the CNE ruled, apparently against the advice of the international mediators, the Carter Center and the Organization of American States, that people who signed the opposition petition but who now want to withdraw their support can also do this at the double-checking centres. This decision means that both pro- and anti-Chávez supporters will be at the double-checking stations. The government supporting Comando Ayacucho reckons that it can get 50,000 people to withdraw their support for the opposition petition and probably stop 250,000 people validating their support.

If the CNE sticks to its schedule the referendum should be held on 8 August. This is only 11 days before, under the constitution, the chance of a recall referendum ends and the vice president, currently the hardline Chávista José Vicente Rangel, would take over for the final couple of years of Chávez 's term.

In his weekly broadcast on 23 May, President Chávez claimed that there would be more people trying to withdraw their support for the opposition petition than would be confirming their support for it. What is most likely is that there will be enough shenanigans to force the CNE off its tight schedule.

The CNE is trying to bolster its position: not only will Jimmy Carter himself and the secretary general of the OAS, César Gaviria, turn up to monitor events next weekend, but the presidents of the electoral commissions of Brazil, Mexico, Panama, Uruguay and Panama will also be in attendance.

The big unknown is how the US will react if there is no referendum. Given that the US is now deep into a pre-election period and President George W Bush looks only too ready to cut his losses in Iraq, the US government is unlikely to want to start a new foreign adventure. So it is hard to see what the State Department official was trying to achieve by discussing Venezuela with the Washington Post. It is also worth pointing out that both the Carter Center and the OAS have endorsed the CNE's figures on how many signatures on the opposition petition are valid.

The most likely outcome of double-checking is that the CNE will rule that the opposition has failed to reach the required 2.4m signatures, 20% of the electorate. This will mean that those Venezuelans who want Chávez out, 77.6%, according to the last opinion poll conducted by Datanálisis, will have to wait until the next scheduled presidential elections, in December 2005.

Development: The influential and controversial former army commander, General Lino Oviedo, returned to Paraguay on 29 June. He was arrested by members of the armed forces who had been sent to meet him and immediately escorted to Viñas Cué military prison on the outskirts of Asunción .

Significance: Oviedo had been in exile for five years. He faces a ten-year prison sentence for an attempted coup in 1996 and complicity in the assassination of former vice-president Luis Marí­a Argaña in 1999. Several commentators consider his sudden return to be deeply suspicious and rumours abound that he has struck a deal with President Nicanor Duarte to get him off the hook. Others argue that the government might try and repair his image by depicting him as the man who played a key role in ending the 35-year military dictatorship of General Alfredo Stroessner in 1989. The payoff? Oviedo would provide personal security for Duarte, who was recently the object of an alleged assassination plot.

Oviedo himself said that he had returned because Paraguay is now a democratic country. He said that with the renovation of the justice system - two-thirds of the supreme court justices were recently replaced- he expected to get a fair trial. Oviedo is determined to use a ruling by Brazil's supreme court in 2001 to help clear his name. The court refused to extradite him in 2001, citing insufficient evidence. Oviedo intends running for his political party, Unión Nacional de Ciudadanos Eticos (Unace), a splinter group from the ruling Colorado party, in the 2008 presidential elections. Supporters of Oviedo were prevented from seeing their man when he arrived at Asunción airport as tight security was placed around the airport with access denied to all save air passengers with tickets

Development: Colombia's president, Alvaro Uribe, on 4 August received strong backing from two senior members of the US government: the assistant secretary of state for western hemisphere affairs, Roger Noriega, and John P Walters, head of the US Office of National Drug Control Policy.

Significance: Noriega hailed the 'impressive results' Uribe has achieved in his fight against terrorist groups in Colombia and he confirmed that the US 'will continue with our efforts to support the government and the people of Colombia and also to mobilise international support for this country'. The only downside for Uribe was that Noriega said the US was still not convinced by the peace process with the Autodefensas Unidas de Colombia (AUC) and reiterated his government's belief that the paramilitaries in question should 'answer for the crimes they have committed'.

Walters, meanwhile, was impressed by Uribe's achievements in cracking down on the illegal-drugs trade. The US drug czar was on 4 August taken to the Sierra Nevada de Santa Marta region by the head of Colombia's national police, Jorge Daniel Castro, to see first hand the effects of recent crop fumigations by the government.

Such strong backing for Uribe is timely after it emerged recently that US intelligence had in 1991 linked the Colombian president to the notorious drug lord, Pablo Escobar. The White House was quick to dismiss the report as uncorroborated and untrue, but it continues to cause a stir in the US media.

Development: President Hugo Chávez said on 9 September that he would be interested in visiting the US soon. He said he wanted to improve relations with the US.

Significance: Chávez 's relations with the government of President George W Bush have been tense. Chávez believes that some people in US administration backed the attempted coup against him in April 2002. The US was also one of the last countries to recognise the scale of Chávez 's triumph in the recall referendum vote on 15 August which confirmed him in office.

Although relations between the two governments have been difficult, Venezuela has remained a key supplier of crude oil to the US: it is the third biggest supplier, after Canada and Mexico. For the first five months of the year, Venezuela has supplied more oil to the US than Saudi Arabia. According to figures from the American Petroleum Institute, Venezuela supplied an average of 1.55m bpd directly to the US: it also probably supplied a good proportion of the 289,000bpd of refined products which came through the Virgin Islands. Saudi Arabia's US oil sales are running at 1.4m bpd.

In March, President Chávez became so angry at what he saw as US interference in Venezuela that he threatened to switch Venezuela's oil exports to Cuba and thus make the US buy its oil from that island.

President Chávez first said that he wanted to go to Washington at a reception attended by 1,300 businessmen on the evening of 7 September. The formal confirmation of this statement was made on 9 September by the presidential office. It is doubtful, however, that Chávez could go to the US before the presidential elections in November.

Chávez has made no secret of the fact that he favours Senator John Kerry over Bush. Kerry, however, has been critical of Chávez , mindful of the hostility to the Venezuelan president in the electorally important district of southern Florida. This district is home to a significant number of Cuban exiles who hate Chávez for his support of the Cuban president, Fidel Castro.

Chávez also welcomed the most recent statements on Venezuela from the State Department. These committed the US to recognising the legitimacy of the Chávez government and to promoting areas of common interest. The US has sent a new ambassador to Caracas, William Brownfield, who is a senior professional diplomat (he was ambassador to Chile) and Latin American specialist. President Chávez said that he expected the new ambassador to help improve relations.

The prospect of improving relations between Chávez and the US is likely to disappoint the oligarchy which opposes Chávez and his government. The oligarchy is still bleating on about the result of the referendum claiming that Chávez cheated to win. The opposition has been promising, for most of this week, to deliver conclusive evidence of the fraud, but it has yet to deliver anything. The main spokesman for the oligarchy, the Coordinadora Democrática, is promising to deliver its formal complaint about the referendum to the electoral authorities today (10 September).

International election observers from the Carter Center and the Organization of American States reported that there was no fraud. The opposition is wittering on about faults in the programming of the electronic voting machines which allowed them to take information from two sources and to cap support for the opposition.

Development: The two political powerhouses in Nicaragua, the opposition Sandinistas and the Partido Liberal Constitucionalista (PLC), reached an agreement in the national assembly on 12 October to approve the controversial law governing the judiciary.

Significance: President Enrique Bolaños has spent much of the last year trying to drive the bill through congress but met fierce opposition from the two parties, who were reluctant to end their duopolistic control of the judiciary. Deputies from both parties agreed yesterday to the reform in general but details still need to be thrashed out. They approved the creation of a judicial council, which would be established to make judicial appointments based on achievement rather than party affiliation.

Miguel López, a deputy from the small Azul y Blanco faction loyal to Bolaños, said that the bill merely confirmed the dominance of the judiciary by the Sandinistas and the PLC. He is rightly sceptical: the bill does not point out who would sit on the all-important council. Last July, Sandinistas and Liberals repeated the time-honoured tradition of sharing out between them, to the exclusion of others, posts coming vacant in appeals courts throughout the country.

Separately, deputies will vote within the next few days on whether to remove Bolaños on the grounds that he failed to cooperate with the comptroller's office to divulge the origin of multimillion dollar financing for his presidential campaign in 2001.

Development: An international arrest warrant for former president Jean-Bertrand Aristide will be released soon, the interim government of Prime Minister Gérard Latortue announced on 15 November.

Significance: The timing of the government's announcement is significant because Aristide's profile has been raised considerably in recent weeks. At the Rio Group summit earlier this month, Brazil's foreign minister, Celso Amorim, suggested that Aristide should be involved in talks to resolve the political problems in Haiti. Brazil initially said it would send an envoy to South Africa to speak to Aristide but it appears to have decided against this.

Latortue said that Aristide was wanted on crimes of corruption. He also blamed Aristide for fomenting political violence in Haiti. Supporters of Aristide launched a violent uprising codenamed 'Operation Baghdad' on 30 September aimed at destabilising the Latortue government and bringing back Aristide. The violence has diminished in the last week. If Aristide were to return to Haiti in any capacity, it would flare up again.

Development: The vice-president, José Vicente Rangel, said on 19 December that Venezuela will pursue an agenda for talks with the US in 2005 in an effort to resolve political differences between the two countries.

Significance: Rangel was not very specific about what the talks, if they come to anything, would entail but he made it clear that they would be at an ambassadorial level. For this reason, they are unlikely to bring a halt to the verbal volleys flying around between the two countries as US criticism of Venezuela tends to come from the State Department. 

'Problems arise when various junior spokesmen in the US State Department make unsettling and untimely statements. I make a point of not responding to anything that these people say. I deal exclusively with the US ambassador to Venezuela, William Brownfield, here in Caracas,' Rangel said, adding that 'political problems are caused by the fact that certain parts of the US government are determined to get involved in Venezuela's domestic politics, which raises a sovereignty problem.' Rangel was targeting the spokesman for the US State Department, Richard Boucher, who on 15 December criticised the frequent visits of President Hugo Chávez to Cuba. 'We are troubled that a country with a democratic tradition like Venezuela would want to strengthen its ties to the only undemocratic regime and closed economy in the hemisphere,' Boucher said.