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The reputation of the minister of Brazil's presidency and likely presidential candidate in 2010, Dilma Rousseff, was damaged by a massive blackout that left 70 million Brazilians in the dark for several hours on the evening of 10-11 November. Rousseff made her reputation as an excellent administrator while heading the mines and energy ministry during most of President Lula da Silva's first mandate and, prior to that, as energy secretary in the southern state of Rio Grande do Sul during the tenure of Lula's Partido dos Trabalhadores (PT). So far the government has not been able to explain the reason for the blackout, allowing the opposition to take political advantage.

Ironically, the blackout cast light on the fragility of Brazil's electric system as the country prepares to host the 2014 Football World Cup and the 2016 Olympic Games in Rio de Janeiro - a fact that has been reported in several foreign newspapers. The Brazilian electric system remains unreliable despite government claims of massive investment in the system - not least through its Growth Acceleration Programme (PAC, in the Portuguese acronym), which is coordinated by Rousseff - since two big blackouts in 1999 and 2002 during the administration of Fernando Henrique Cardoso of the (now) opposition Partido da Social Democracia Brasileira (PSDB). A blackout of huge proportions has taken place on average every six years since 1985, a percentage well above the system's target of 95% reliability.

Embarrassingly for Rousseff, she had told a group of foreign correspondents only one month earlier as she presented the achievements of the PAC, that the “era of blackouts and [power] rationing of the Cardoso years are now behind us." The two blackouts, and the rationing that followed, particularly in 2002, contributed enormously to Cardoso's failure to get his chosen successor elected - not least because the PT did not shy away from using it politically in the electoral campaign despite the fact that reservoirs were at very low levels that year due to drought. This allowed Lula an extra advantage in the election, which subsequently led him to win the Brazilian presidency that same year.

Unsurprisingly, the opposition is now using the November blackout to highlight the perceived incompetence of the Lula administration. The blackout was the biggest in Brazilian history in terms of its extent, leaving 16 of Brazil's 27 states from the southernmost Rio Grande do Sul all the way to Rio Grande do Norte in the northeast of the country in the dark, including the states of São Paulo and Rio de Janeiro, corresponding to an area that produces 80% of Brazil's GDP. This weakened the PT's claims that the blackouts in 1999 and 2002 were bigger than the one in November, although the amount of electricity that failed to enter Brazil's grid on the first two occasions was indeed bigger than in November (70% in 1999 and 60% in 2002, compared with 40% in November).

Following the blackout, Rousseff disappeared for a couple of days, leaving the task of explaining the reasons for the blackout to the mines and energy minister, Edison Lobão. According to Lobão, the reason for the blackout was abnormal weather conditions, namely strong winds and lightening. When she finally reappeared, Rousseff declared “Unfortunately, we humans cannot control rain, wind and lightening." This declaration contradicted a previous one made in March in which Rousseff once again criticised the Cardoso administration: “Blackouts are not caused by what falls from the skies. They are caused by the lack of investment in transmission and generation." The Brazilian Institute of Space Research (Inpe) dismissed Lobão and Rousseff's explanations as wrong (see side bar).

• Inpe

The Brazilian Institute of Space Research (Inpe, in the Portuguese acronym), which is linked to the science and technology ministry, has rejected claims from the mines and energy minister and the minister of the presidency, Edison Lobão and Dilma Rousseff, respectively, that the massive blackout in early November was caused by bad weather. “Although there was a storm in the area where the blackout began […] the relatively low intensity of wind and lightening would be incapable of damaging transmission lines," it said in a statement. Their declarations were considered “imprudent" by the Inpe.

Just over two weeks after Colombia's constitutional court barred President Alvaro Uribe from standing for re-election in May, parties loyal to him won a decisive victory in congressional elections on 14 March, fulfilling his main priority - that “policies not people" should be re-elected. The big winner was Juan Manuel Santos, whose Partido de la U led the field in the senate, with 25% of the vote, strengthening his claim to be the true heir to Uribe's legacy. The Partido Conservador (PC) also fared well in the senate, but the party is embroiled in an acrimonious internal dispute after a fiercely contested primary election failed to produce a clear victor. This threatens to undermine the unity of the pro-Uribe coalition in congress.

Election day was one of the most peaceful on record, although incidents of intimidation, disenfranchisement, and vote buying were reported by electoral observers from the Organization of American States (OAS). The most disturbing aspect of the day was the impressive performance of the Partido de Integración Nacional (PIN), which will be the fourth biggest party in the senate with nine seats. The PIN is comprised of relatives of politicians jailed for links with paramilitary groups - the parapolitical scandal the congressional elections were meant to efface. Teresa Garcí­a, for instance, won a senate seat in the northern department of Sucre, the stronghold of her brother Alvaro Garcí­a, sentenced to 40 years in jail for collusion with paramilitaries. On the plus side, parties now subsumed into the PIN won 12 seats in 2006, so the results were a slight improvement.

Teresa Garcí­a said the PIN would support the candidate who hued most closely to Uribe's policies. This is likely to be Santos. The Partido de la U, which won 28 senate seats, eight more than in 2006, is perceived by the electorate as the premier pro-Uribe force, and Santos was keen to drive this point home. “The party of President Uribe won!" he exclaimed jubilantly to supporters. He refused to be drawn on whether he would accept support from the PIN, but he might not be able to spurn its offer if the PC fragments.

The PC won 22 seats, four more than in 2006. In theory this means that the PC and Partido de la U could almost command a majority in the 102-seat senate between them, and could easily stitch one up with the support of smaller parties. In practice, it might not be that simple. The PC party primary between Noemí­ Saní­n and Andrés Felipe Arias could tear the party asunder. With just over 50% of the votes counted, the two candidates are separated by a whisker. Saní­n has called for the intervention of OAS observers to ensure transparency because of the “inexplicable delays" in the release of the final results. The outcome is pivotal for the future of the Uribista coalition. Although both candidates profess their adherence to Uribe's 'democratic security policy', Saní­n is adamant she will run for president should she win the primary while it is widely assumed Arias would forge an alliance with Santos. Whatever the outcome, the PC could split, complicating matters in congress.

It was not just Saní­n who criticised the electoral body, Registradurí­a Nacional, which has not released any results since the day after the elections, leaving the composition of the 166-seat lower chamber of congress shrouded in mystery as only incomplete regional bulletins have been issued. The interior ministry issued a statement chiding the Registradurí­a for the unusually slow count, which it claimed was “generating serious political tensions", and raising concerns about the credibility of the process. President Uribe said it was “very sad that while the armed forces have demonstrated their efficiency as guardians of democracy, the Registradurí­a is guilty of serious failings." He also ordered the public prosecutor to investigate the head of the Registradurí­a, Carlos Ariel Sánchez, after allegations that he and others had been drinking on election day.

The OAS electoral mission said the verification and authentication system was inefficient, voting mechanisms were too complicated, and some staff inadequately trained. The national electoral council (CNE) decided to suspend the congressional vote count in Bogotá and unspecified “other regions", and the PC primary count, on 17 March because of “software problems".

Winners and losers in the opposition
The opposition Partido Liberal (PL) did commendably well in the elections, clinging on to the 18 senate seats it won in 2006, despite the woeful standing of its presidential candidate Rafael Pardo in the polls. Cambio Radical, which is broadly supportive of Uribe but objected to his decision to seek re-election, won eight seats, seven less than in 2006, leaving the party's presidential aspirant, Germán Vargas Lleras, to contemplate an alliance with the PL.

The left-wing opposition Polo Democrático Alternativo (PDA) was a big loser. It lost two seats in the senate to finish with eight, a result which left it with just three more seats than the fledgling Partido Verde (PV), formed by three former mayors of Bogotá (see sidebar). The poor result prompted the party's president, Jaime Dussán, who himself lost his seat, to resign. The PDA was punished for the uninspired stewardship of the mayor of Bogotá, Samuel Moreno, and internal divisions: the party's leadership, for instance, has failed to condemn unequivocally the Fuerzas Armadas Revolucionarias de Colombia (Farc) in the way that its presidential candidate, Gustavo Petro, has.

The oblique allegation by Uribe that foreign governments were trying to “impose" a candidate and policies on Colombians [WR-10-10] might well have affected the PDA. The secret police (DAS) also claimed a foreign government was funding the campaigns of two congressional candidates. Neither Uribe nor the DAS gave more details but it was enough for Petro to concede that “some" party candidates had sought logistical help from mayors in Venezuelan border towns to hold political rallies among Colombian expatriates. Petro insisted there was no proof of any foreign campaign financing. He said the PDA was the victim of mudslinging.

Composition of the senate (provisional results)
                                             2006   2010
Partido de la U                          20      28
Partido Conservador                  18     22
Partido Liberal                            18   18
Partido de Integración Nacional   12*  9
Cambio Radical                           15   8
Polo Democrático Alternativo       10   8
Partido Verde                                -    5
Others                                            9   4
Total                                          102  102
* Number of seats obtained by parties now subsumed into the PIN.

• Mockus and Fajardo
  Antanas Mockus won the primary election contest against two other former mayors of Bogotá for the new Partido Verde. He is unlikely to win enough support in the provinces to make much of an impact in the presidential elections but the party will have a decent presence in congress with five senate seats. By contrast, Compromiso Ciudadano por Colombia, the party of the former mayor of Medellí­n, Sergio Fajardo, who lies in third place in the presidential polls, looks like winning just one senate seat.

José Serra, the presidential candidate for the opposition Partido da Social Democracia Brasileira (PSDB), chose a little-known politician from the conservative Democratas (DEM) as his vice-president nominee after a damaging spat over the nomination threatened to destabilise the PSDB-DEM alliance.  Meanwhile, the latest opinion polls showed the government's presidential candidate, Dilma Rousseff, of the ruling Partido dos Trabalhadores (PT), pulling ahead in the race for Brazil's presidency.

The most recent poll by Vox Populi, published early this week, put support for Rousseff at 40%, to Serra's 35%. Marina Silva, of the Partido Verde (PV), continued in third place with 8%. The result confirmed a 23 June poll by one of Brazil's most respected pollsters, Ibope, which also showed Rousseff with a five-point lead in the first round against Serra and a seven-point margin in an eventual runoff vote [WR-10-25]. Rousseff's advantage in the runoff vote in the Vox Populi survey was four points.

With that level of support only a few days ahead of the start of the official campaign on 6 July, some punters are now placing bets on a first round victory for Rousseff. Positive economic indicators continue to roll in as President Lula da Silva bends electoral rules to pass on his staggering popularity rate of 85% to his anointed political heir. Lula was fined by the electoral court for the sixth time this year for campaigning for Rousseff irregularly, but indicated he would not change his behaviour to comply with electoral regulations, suggesting he might take a more active role in her campaign.

VP spat
Meanwhile, Serra's campaign was veering dangerously off course, with mounting criticism of the seeming ineptitude of his team following the latest poll results. To make matters worse, the PSDB leadership took the controversial step of appointing its leader in the senate, Alvaro Dias, to fill the vice-presidential slot on Serra's ticket, completely disregarding the ambitions of the DEM leadership.

The general consensus was that Serra was weighing up nominees from the DEM and several female candidates after it became clear that the popular PSDB former governor of Minas Gerais, Aécio Neves, would not join the wobbly Serra ticket, preferring instead to run for a seat in the senate, where he is guaranteed a certain victory. Neves was a consensus vice-presidential candidate, accepted by the DEM leadership due to his popularity. The DEM, however, made it clear right from the start that if Neves decided not to accept the vice-presidential slot, it wanted it for the party.

The DEM leadership warned that it would withdraw from the alliance with the PSDB - potentially costing Serra three minutes of crucial TV advertising time during the 45 days of free political campaign slots in August/September, leaving him with less than half the time Rousseff will have, which could potentially be a death sentence to his candidacy. Thus, Serra was forced to ditch Dias in favour of a DEM politician. Surprisingly, he chose the little-known lower chamber deputy Antonio Indio da Costa, from Rio de Janeiro (see side bar). “I confess this was as much as a surprise for you as it was for me," Costa told journalists. Many assumed Serra would opt for a candidate from the north or northeast of Brazil, where he is weakest and the PT and its allies are strongest. But Costa could help to gather support in Rio - Brazil's third-largest electoral college - where support for him was dwindling.

• VP

Antonio Indio da Costa is little-known in Brazil's national political scene, but he fulfils important attributes for José Serra: he is young and represents a new breed of politicians. Significantly, he was one of the politicians driving the recent change in the law to allow only politicians with a clean record to run. With that, Serra hopes to counterbalance any damage from the corruption scandal that engulfed Costa's party, the Democratas, which earlier this year cost the party its only state governor (in the federal district of Brasí­lia). Serra is said to want to focus his campaign on an anti-corruption patform, as he cannot attack the government on its economic record.

The jury is still out on whether the police uprising in Ecuador on 30 September was part of a planned coup d'état, but the Latin American Left across the region is getting jumpy again about future ruptures of the democratic order. None more so than in El Salvador. While Ecuador's Rafael Correa and Venezuela's President Hugo Chávez portrayed the police uprising as a coup to undermine the regional Revolution, El Salvador's President Mauricio Funes gave a more pragmatic response. He urged the Organization of American States (OAS) to revamp its democratic charter to counter any threats to democracy.

Funes was speaking the day after the left-wing Frente Farabundo Martí­ para la Liberación Nacional (FMLN) claimed that not only was Correa the victim of a coup but that the Right was plotting a coup in El Salvador. The allegation was made by Vice-President Salvador Sánchez Cerén during the 30th anniversary of the FMLN's formation on 10 October. Sánchez, a veteran guerrilla who views politics through the prism of the civil war, promised to defend the government against any destabilisation attempt.

Funes and his defence minister, retired Colonel David Munguí­a Payés, were quick to deny possessing “any information pointing to the possibility of a coup". Instead, Funes said the coup in Honduras in June 2009, and the uprising in Ecuador, underscored the need for the OAS to revise its Democratic Charter. He proposed the creation of “a system of alert" to recognise situations triggering instability and allowing the OAS to act pre-emptively, although many states are likely to see this as an infringement of their sovereignty. He also advocated the creation of a harsh “system of penalties" for governments that arise from the rupture of the democratic order.

Ironically, days later, the vice-president of the main right-wing opposition Alianza Republicana Nacionalista (Arena) sent letters to the UN and OAS secretaries general, Ban Ki-moon and José Miguel Insulza, calling for them to create commissions to investigate the serious allegations by Sánchez Cerén and FMLN party coordinator Medardo González. The letters were clearly designed to reject the insinuation that Arena is behind the alleged coup.

Scandals have a way of uniting the opposition. The left-wing Concertación has struggled to adapt to life in opposition, still less land any blows on President Sebastián Piñera. It now has an opportunity - and seems determined to seize it. Piñera has managed to avoid scandals within the ruling Coalición por el Cambio but he faces one just a few weeks before he completes his first year in office. It involves Jacqueline van Rysselberghe, a big hitter in the right-wing Unión Demócrata Independiente (UDI), the senior partner in Piñera's coalition.

Riven by infighting, especially after its approval of an education reform tabled by the government [WR-11-04], the Concertación has united to gun for Van Rysselberghe, the intendant (governor) of the VIII region of Bí­o Bí­o. Opposition Senator Alejandro Navarro, of the radical left-wing Movimiento Amplio Social (MAS), claimed that Van Rysselberghe had fabricated statistics on earthquake damage in her region in order to secure more money from the government's reconstruction fund last year. He released a video showing Van Rysselberghe addressing a meeting of local inhabitants of Aurora de Chile, a shantytown in Bí­o Bí­o, in which she called for them to leave their apartments, which would be razed to the ground and rebuilt even though they had not been damaged.

The interior minister, Rodrigo Hinzpeter, said that Van Rysselberghe's remarks in Villa Aurora were “inadequate", but that the allegations made by Navarro were inconclusive and that she retained the support of the government. Piñera also backed her publicly: it is in the president's gift to appoint, and dismiss, Chile's 15 intendants. The Concertación is arguing vociferously that Van Rysselberghe owes her salvation to the fact that the UDI twisted Piñera's arm. It insists that if she were more dispensable, Piñera would have fired her. The Concertación is particularly keen to see Van Rysselberghe dismissed because she was the most fiercely critical politician of the outgoing Michelle Bachelet (2006-2010) administration's slow response to the earthquake in February last year.

Where the Concertación is not entirely united is in how to proceed against Van Rysselberghe. Some feel that if it keeps attacking her, the bad press for Piñera will be reward enough. Piñera's popularity has been on the wane in recent months and this could well impact it further. The scandal has also raised tension between the UDI and its coalition partner Renovación Nacional (RN), which is accusing the UDI of sullying Piñera's image. The desire of many within the Concertación to pursue impeachment proceedings against Van Rysselberghe, however, would probably force the Coalición to unite rather than descend into infighting.

The Concertación would also risk opening a whole can of worms. Van Rysselberghe would certainly not be the first intendant to be economical with the truth to achieve more funds from the central government to strengthen her electoral support base. Clientelism has been a well-established practice for years, but as the columnist Patricio Navia quipped in the national daily La Tercera “When congressmen are caught speeding at 150kph it is not enough to say that others do the same." He argued, however, that “It would be regrettable if the government implants the precedent that local politicians can legitimately become social workers, who receive private benefits, sidestepping laws and regulations." Piñera has made some bold reforms - to education and to end copper-financing of the military; he is also pushing for party primary elections, making the vote voluntary and registration automatic, but he has not indicated that he has the stomach for more substantive, root-and-branch, political reform.

The saying goes that even the paranoid have enemies, and many Chileans have recently been proclaiming that most of the region is plotting against them. A number of events involving relations with its three closest neighbours, and other countries further away, have created this situation over recent months, and though senior government officials have been trying to defuse a situation they had largely helped create, many analysts, the media and opposition politicians have been helping fuel public apprehension. 

The main feature of the current mood has been a development which is close to the top of Chile's list of fears: the `internationalisation' of Bolivia's claim to an outlet to the Pacific, through territory wrested from it by Chile. The official Chilean position has long been that the matter was closed for good with the signing of the 1904 treaty of Peace and Friendship which was meant to have settled the territorial sequels of the 1879 War of the Pacific. According to the commander of the Chilean navy, `There is no outstanding border issue with Bolivia.' 

Bolivia, however, keeps the claim alive and has always tried to draw in support from other parties. From as early as the 1920s during the brief existence of the League of Nations, Chile has thwarted attempts to discuss the subject in international forums, including the Organization of American States (OAS) and the UN. It learned to live with occasional Bolivian gestures (such as the downgrading of diplomatic relations to consular level since 1962), and the fact that every Bolivian child and adult is constantly bombarded with the concept of the lost outlet which has to be regained. 

The drama surrounding Bolivia's gas export plans, which led to the early departure of President Gonzalo Sánchez de Lozada last October, focused attention once again on the issue of the outlet to the sea. The most widely supported demand of the protesters in Bolivia was for a bar on exporting the gas through a Chilean port. 

[For the record, there is also a lesser dispute with Bolivia about Chilean claims on the waters of the Silala river near the border, which could relieve the water shortages in Chile's arid north.] 

Support for Bolivian claim
In clever diplomatic moves, despite or maybe because of its internal tensions, Bolivia managed to get the backing of UN secretary-general Kofi Annan on a visit to the region, followed soon afterwards by that of Brazil's President Lula da Silva. Whereas these two couched their sympathy for the Bolivian cause in diplomatic language, President Hugo Chávez of Venezuela put it rather more forcefully, declaring his wish `to bathe at a Bolivian beach.' The Chilean reaction, which many saw as overkill, was to recall their ambassador to Caracas, and let it be known that they were expecting an apology. The Venezuelans in turn recalled their envoy from Santiago. The only thing Chile's eager but inexperienced foreign minister Soledad Alvear got in return, was a reiteration by Chávez of his bathing wish. 

This left Chilean diplomacy pondering whether to escalate the conflict further, or tone it down and send back the ambassador. President Lagos has even indicated his wish to meet his Venezuelan counterpart for discussions. Meanwhile, rumours have started spreading about the Venezuelan embassy in Santiago `fostering Bolivarian movements', apparently based on the fact that Venezuelan diplomatic staff have held meetings with (perfectly legal) political activists, such as Communists. For those familiar with the Santiago diplomatic party scene, it is unusual (with very few exceptions) for such people to be invited to functions, even by the more liberal Western embassies, so a departure from the norm was almost inevitably portrayed as a conspiracy.

Peru on the fence
Things became further complicated when the Bolivian military asked Peru to take sides in the conflict, recalling that an attempt at a solution in the late 1970s, during the Pinochet era, and involving proposals for an exchange of territory, foundered due to Peruvian opposition. Initial Peruvian reaction has been rather cautious, possibly due to fears that any open support for Bolivia might lead Ecuador to revive Amazonian claims against it. Chile's relations with Peru have not been all smiles either. Here, the conflict has been mainly played via the private sector. When Chile cancelled the licence granted to Aerocontinente, a start-up Peruvian airline (admittedly of dubious origin, accused even in its home country of being a money-laundering operation), the Peruvian authorities retaliated by forcing the closure of a thriving pasta plant in a Lima suburb. This was run by the Chilean Lucchetti group (part of the Luksic business empire). The official reason was that the plant had been built on a nature reserve, with illegal permits obtained through the good offices of President Fujimori's security adviser, Vladimiro Montesinos.

In late December, and despite apparently friendly mutual visits by senior military officials and ministers from both countries, part of the Peruvian press picked up on statements by Luis Ibérico, head of the congressional defence committee, to revive the matter of Chilean arms purchases. Though Chile has gone to great pains to emphasise that it is only renewing obsolete material, and not adding to its overall capacity, Peruvian figures such as Ibérico, and much of the press, have been referring to Chile as `arming itself to the teeth.' The congressman is proposing a tax on Peruvian mining and energy resources to pay for arms procurement, inspired by Chile's copper law (which provides the military with about U$250m a year from a 10% tax on the exports of the state mining group Codelco). It was not clear whether such a scheme would apply to all producers and in what conditions, though the promising Camisea gas project would probably be left out. The Peruvian navy has been pushing for the purchase of used Lupo class frigates from Italy. Government officials have been cautious in their pronouncements. In early December, the foreign ministry said that it was `aware of Chile's procurement plans', and the army commander added that though an arms race would be a `destabilising' factor, `it remains to be seen if that is actually what was happening in the case of Chile.' On the other hand, the defence minister was expected to resign during December as a protest against the lack of resources for his portfolio.

`Radical axis'
Though there have been no tensions as such with Brazil, rightwingers in Chile have been looking with some concern at the possible emergence of a `radical axis' of countries led by Lula's Brazil (who may be finding it expedient to divert attention from his government's orthodox economic policies, by adopting a militant foreign policy stance). With a close relationship with Venezuela's Chávez , to whom Brazilian credit lines are being extended, and the participation of Argentina's President Néstor Kirchner too, proposals such as inviting Cuba to join Mercosur (hinted at recently by senior officials in both Argentina and Brazil) are not welcome in Chile. The revival by Lula of a long-standing project to build locally a nuclear submarine, and the announcement that a postponed combat aircraft contract will be going ahead, are further reminders of a time, supposedly long gone by, where the military power balance between Brazil, Argentina and Chile was a finely tuned and monitored indicator of the prospects for stability in the Southern Cone.

Incident with Argentina
Years of painful efforts towards integration with Argentina also appeared to risk coming to grief some weeks ago as a result of a strange spying incident in the southernmost Chilean port of Punta Arenas. In what looked more like an episode worthy of Inspector Clouseau, three Chilean intelligence agents were surprised by the local Argentine vice-consul on consulate premises early on a Sunday morning. There is still much conjecture as to whether it was a case of unbelievable incompetence (the intruders were carrying their real identity papers and had no lookout to warn them of the diplomat's sudden arrival) by people who had wanted to impress their bosses as the year-end staff reviews were getting close, or an attempt to embarrass superiors. The regional military commander and intelligence chief were dismissed, and despite earlier Chilean efforts to present the operation as a counter-intelligence move against `high activity by Argentine agents in this strategically important zone', the matter has subsequently been played down on both sides. 

The two countries not only have programmes for joint military exercises (and a Chilean peace contingent is serving in Cyprus under Argentine command), but 70% of Chilean oil and gas consumption is now sourced in Argentina, making the maintenance of serene links of vital importance. On 1 December the Chilean branch of the Facultad Latinoamericana de Ciencias Sociales (Flacso), a regional think-tank with an active strategic studies programme, and well connected in Chile to the ministry of defence, hosted a discreet bilateral seminar. Attended by senior political and academic figures from both sides of the Andes, the Chilean participants were reportedly particularly eager to mend fences. The Argentine secretary for military affairs, Jaime Garreta, took advantage of the occasion to meet Chilean defence minister Michelle Bachelet, after which he said that his country `has no problem' with Chile's current military procurement programme.

Tally of friends
Does Chile have any close friends left in the region? Ecuador is a perennial ally, a byproduct of its own longstanding conflict with Peru, on the principle that `the enemies of our enemies are our friends.' However, the beleaguered administration of President Lucio Gutiérrez is not in a state to provide much help and backing to Chile on the diplomatic front. Mexico, though far away, has established an excellent rapport following their coordinated stances at the time of the UN Security Council discussions on Iraq. Mexico is also offering to help Chile finds its way round lobbying and doing business in the US, based on its own 10-year Nafta, now that Chile has signed its own FTA with the US. As for Colombia, there was a time when a rumour was put about that Chile might send troops for peacekeeping operations there, which raised eyebrows in many places. It turned out that the report had come from Red Táctica, a Washington-based firm run by a José Miguel Pizarro (a former Chilean army officer and US Marine, now a TV broadcaster), which offers defence- and security-related services. This company was involved in an attempt last October to recruit retired Chilean military personnel as security guards for duty in Iraq. As to the rest of the region, Paraguay and Uruguay not only carry little weight, but are very much in the Argentine-Brazil sphere of influence. The small and distant Central American republics are even less relevant.

Array of reactions
This situation of `hostile isolation' of Chile, has been the cause of much, often angry, comment, some soul-searching and government attempts to play the whole thing down. The incident with Venezuela was described by President Ricardo Lagos as `small clouds which do not obscure the horizon.' The defence minister has reiterated that there is no arms race, pointing out that the number of capital ships in the Chilean navy had fallen from ten a decade ago to just six at present. It may have been coincidental, but a scheduled 28 November announcement of a shortlist of three suppliers to help Chile build its own frigates did not materialise; instead there were only hints that the decision may be delayed by `weeks, maybe even months'. 

Interior minister José Miguel Insulza (promoted by Chile as the next secretary-general of the OAS), who made an impromptu trip to Peru on 22 November to discuss security issues, denied that the country was isolated. Intellectual and press commentators are less dismissive. Some, like senator Edgardo Boeninger, called for Chileans to `be less arrogant and not lecture other countries of the region.' The more sanguine journalists have described the anti-Chile moves as a reaction of `the coalition of the failed'. According to them, it is a blatant case of sour grapes: the neighbours cannot stand Chile's economic success and political stability, when they are all in the midst of crises; they apparently need a whipping boy to placate their own population and explain away their own economic failures. The latter argument is applied particularly to Bolivia. 

View from the other side
It has to be recognised that Chile has often behaved like the arrogant schoolboy who is obliged to mix with people beneath his station, for whom he feels contempt. Though a couple of commentators did point out that the laws of geography condemned Chile to be eternally placed in Latin America, however out of place it might feel there, the country has behaved like an outsider most of the time. It withdrew from the Andean Pact (precursor of the Andean Community) at an early stage, and not only turned down an offer to be a founder member of the full Mercosur, but backed off later from a second attempt to upgrade its associate status to full membership. Until fairly recently, Chile was the only South American country which still ostensibly drew up its defence scenarios and military training programmes to deal with conflicts with neighbours. Chile's successful pursuit of a separate FTA with the US is viewed by some neighbours as yet another sign that it does not feel part of the region.

Neighbours with longish memories still remember a headline in Chile's leading newspaper, El Mercurio, which proclaimed, `Goodbye Latin America'. At the time of active investment outflows some years back, particularly towards Argentina, the arrogance and superior airs of Chilean expatriate executives had become almost insufferable in Buenos Aires business circles; a situation that even the Chilean press acknowledged openly. On one occasion, the CEO of a Chilean-owned power generating plant in Buenos Aires spoke at a Santiago seminar about their experiences. Uninhibited by the fact that the event was being held in the Argentine embassy, he described how the Chilean executives had not only increased the generating capacity of the plant, but `improved workers' physical and mental welfare' by providing them with `clean toilets' — and `lessons in Argentine history'! This is precisely the sort of attitude senator Boeninger advised against.

Chile is definitely in Latin America, and not just geographically. Its export mix, political history and social idiosyncrasies are truly Latin American. The region is its principal trading partner. Despite the low growth of two of the region's three main economies, figures for the first 10 months of 2003 show that 30% of its trade was with Latin America, compared with 24% each with Europe & Asia, and 20% with the US & Canada. It cannot afford to distance itself too much from its neighbours, nor to be too touchy about each of their pronouncements.

The Bolivian and Venezuelan chapters of this episode in Chile's regional relations have yet to be fully played out. Much of the running will have to be done in Santiago, where the government will have to navigate carefully between mollifying a sensitised Chilean public and giving equally sensitised neighbours no cause to increase what hostility they harbour. Independently of how well and how soon this episode is overcome, it has served — as did the recent spat between Ecuador and Colombia over the source of guerrilla weaponry — to illustrate how susceptible public moods towards neighbouring countries still are to the revival of grievances lying just below the surface.

Argentina may have an antiterrorism law in place by November, when the country will be hosting the Summit of the Americas. The text, which redefines as terrorist a number of offences already included in the penal code, has provoked a debate among jurists because of its perceived erosion of civil rights, particularly through the provision for the arrest of material witnesses.

The draft law (Ley de Prevención y Sanción de Acciones Delictivas Terroristas) has just cleared the senate's internal security and drug-trafficking committee and has moved on to the justice and penal affairs committee. It has changed considerably since it was first introduced three years ago by the interim government headed by President Eduardo Duhalde - which was strongly resisted because it assigned policing duties to the armed forces. 

The new legislation has incorporated elements from two other bills: one submitted by senator Miguel Pichetto, of the ruling Partido Justicialista (PJ), which has been described as a 'carbon copy' of the US Patriot Act, another by two senators of the opposition Unión Cí­vica Radical (UCR), Mario Losada and Marcela Lescano, which has been dismissed by committee president Sonia Escudero (PJ) as adding little to what already existed and erring on the side of rights guarantees for suspects.

Defining terrorist acts
The text avoids defining terrorism in general. Instead it defines as terrorist acts a number of offences considered terrorist in international conventions Argentina has signed. Thus, the list of terrorist offences includes: the hijacking of aircraft; illicit acts against the security of civil aviation; acts of violence in airports; acts against the security of maritime navigation; against fixed [oil] platforms; against diplomatic agents and internationally protected persons; acts against the security of nuclear materials; the taking of hostages; and bombings.

Also included is the deliberate provision or collection of funds intended to be used in terrorist acts. This is likely to be applied to cases such as those discovered on the Paraguayan side of the Triple Border area, of fundraising for the charities run by Hezbollah, which is classified as a terrorist organisation by the US. The Paraguayan authorities have framed charges in these cases as money-laundering or tax evasion. 

The legislation establishes prison terms ranging from 10 to 20 years for acts of terrorism, extensible to life imprisonment in cases where the victims die, and from five to 15 years for the funding of terrorism. It stipulates that the statute of limitations will not apply to acts of terrorism and that the penalties will not be commutable.
Facilitating investigation & prosecution

The provisions which have prompted the most heated debates are those intended to make it easier to investigate and prosecute those who commit terrorist offences. The bill doubles the normal time suspects can be held incommunicado for questioning. It allows payments to informants and provides for special treatment for 'repentant' terrorists (a form of plea-bargaining, already in use in Colombia) and for covert agents. It also allows the withholding of the identity of key witnesses. Investigating magistrates are empowered to order the 'preventive' freezing of bank accounts and other assets deemed likely to be used to further the commission of terrorist acts.

The article that has attracted most criticism is the one which allows the investigating magistrate to order the arrest of a key witness to an act of terrorism (a provision similar to that which exists in US law regarding 'material witnesses'). Several jurists have said this violates the constitution, inasmuch as it is tantamount to arrest without cause. Senator Escudero argues that the use of this provision has been severely circumscribed so as to minimise the curtailment of rights.

The article in question stipulates that the investigating magistrate must establish that the testimony is essential to the investigation, and that the period of detention may not exceed the time indispensable to record and check the testimony 'and in no case may exceed 72 hours'. At present any person may be held for up to 10 hours for the purpose of identity and background checks.

Much has been made in the local media of the claim that approval of the antiterrorism law is being urged by the US. This, in fact, is true in general: the US has been pressing all countries in the region to enact antiterrorism legislation in line with international commitments. There is no evidence that the US has expressed any opinion on this particular text. Nor has there been any evidence of pressure to have the law in place by the November summit (though there has been some squabbling over security arrangements for President George Bush Jr).

Terrorism prevention unit
The bill now before the senate provides for the creation of a new antiterrorism prevention authority, the Unidad de Prevención de Actos de Terrorismo. It is envisaged as a multi-agency body to be coordinated by the interior ministry with representatives of the domestic security secretariat, the intelligence secretariat, the foreign ministry, the financial information unit (which monitors transactions for signs of money-laundering), the customs and migrations directorates, and the national registry of firearms. The legislation mandates this new unit to formulate a 'national plan for the prevention of criminal terrorist acts' which will lay down the federal policies in the matter.

• Tightening defence coordination with Brazil. Argentina and Brazil will be moving a step closer to introducing a 'defence dimension' to Mercosur when they sign a bilateral framework agreement for cooperation on defence matters on 3 October. The decision was taken in early August at a second-tier ministerial meeting in Buenos Aires in which the foreign and defence ministries of both countries took part. On their agenda was a review of the performance of their respective contingents deployed in Haiti with the UN stabilisation force and issues related to cooperation on the peaceful use of nuclear energy and on space activities.
  
  The October agreement will include an upgrading of the existing mechanisms for consultation, coordination and cooperation on defence matters, and both countries will analyse how their national defence policies can dovetail with the demands of regional security. It will be recalled that last year President Néstor Kirchner had seen the Southern Cone contingents serving with Minustah as progressing into a permanent multilateral task force of the 'ABC' countries (Argentina, Brazil and Chile) available for UN peacekeeping missions, and from that into 'the embryo of a common regional defence system', but later downplayed expectations in this regard [SSR-05-01].

PANAMA | New 'citizen security' law approved. On 8 May the Panamanian congress approved by overwhelming majority a 'citizen security' law which stiffens penalties for a range of criminal offences and lowers the age of criminal responsibility. Aggravated homicide will now be punished with up to 20 years' imprisonment; culpable homicide, aggravated kidnapping and terrorism with up to 10. The maximum penalty for rape, drug trafficking and kidnapping will be nine years, and for aggravated robbery and gunrunning, six.

Children as young as 12 will be held criminally liable for crimes such as culpable homicide, rape, drug trafficking and gunrunning.

CARIBBEAN | Taiwan wins one, loses one. On 1 May in St Lucia, Taiwanese foreign minister James Huang and his local counterpart, Rufus Bosquet, resumed diplomatic relations between the two countries after a 10-year hiatus. St Lucia first established diplomatic relations with Taiwan in 1984, when John Compton was prime minister. In 1997, under Kenny Anthony, St Lucia recognised China and severed links with Taiwan. After his re-election in late 2006, Compton set himself to re-establishing the link with Taiwan. Predictably, China has denounced the decision as 'a flagrant violation of the declaration on the establishment of diplomatic relations between China and St Lucia' '

DOMINICAN REPUBLIC | Army back to Haitian border. Between 6 and 13 May the Dominican army deployed about 800 soldiers in the four provinces accounting for most of the border with Haiti: Dajabón in the north, Elí­as Piña and Independencia in the centre and Pedernales in the south. As explained by General Juan Antonio Campusano, their task would be to establish 'operational bases' with the purpose of 'controlling the area more precisely'.

• More gang leaders captured in Haiti.

The combined UN-government effort to break up Haiti's armed gangs is continuing to yield results. On 8 May, Minustah reported the capture of Blade Nasson, boss the of gang known as Ti Ayiti ('Little Haiti') which operated out of the Soleil 17 district of Cité Soleil; the sprawling slum which lies of the northern outskirts of Port-au-Prince. He became the sixth gang leader to be arrested by the UN stabilisation force: after the early capture of William Baptiste and Evens Jeune, Minustah had caught Bélony Pierre, 'Bibi' and Alain Cadet ('Pinochet'). Still on the wanted list are the notorious Amaral Duclona, 'Toutou' and 'Billy'.

Two recent thefts of large quantities of explosives in northern Mexico have given rise to much speculation about the possibility that Mexico's drug cartels may be about to turn to bombings as a new strategy in their war with the government — or that guerrillas may be stockpiling in order to launch a bombing campaign similar in magnitude to the EPR's attacks on oil installations in 2007. There is a third possibility that has not attracted as much attention: that the explosives were intended to be sold on to buyers abroad — most probably Colombia's Fuerzas Armadas Revolucionarias de Colombia (Farc) guerrillas.

On 14 February a group of armed men broke into the installations of Austin Bacis, a firm that produces and sells explosives, in the aptly named locality of Dinamita, close to Gómez Palacio in the north-central state of Durango. They made away with 122 kilos of explosives  and 230 electronic detonators. The explosives had been deposited there for safekeeping by a mining company that was  facing a strike.

Three days later armed men broke into the premises of the mining company Tribisa, in the municipality of Gómez Palacio, and stole more than 20 kilos of explosives. In neither of these cases was it specified what type of explosives had been stolen.

In September last year an army unit arrested in Ario de Rosales, in the south-central state of Michoacán, two suspected members of the drug-trafficking outfit known as La Familia. They were found in possession of six tubes of C-4 plastic explosive, assault rifles, ammunition and fake uniforms of the Agencia Federal de Investigación (AFI).

All told, between 1 January and 5 November 2008 the Mexican authorities seized 569,196 explosive devices and 2,620 kilos of explosive materials.

Tracking explosives in Mexico
These episodes, while eyecatching, were hardly the first instances of explosives falling into the wrong hands or, indeed, of the use of explosives to conduct bombing attacks.

In November 2007 an army special forces unit seized near Cosalá, in the northwestern coastal state of Sinaloa, close to the boundary with Durango, a van carrying five packages of Tovex explosive, 78 detonators and 40 metres of fuse, as well as communications equipment and a training manual of the Kaibiles, the Guatemalan special forces (members of which had been reportedly hired by Los Zetas, the outfit of 'enforcers' that has taken over much of the Gulf cartel).

Tovex, in combination with Anfo (acronym for ammonium nitrate and fuel oil) has long been the preferred explosive of Mexican guerrilla groups, particularly the Ejército Popular Revolucionario (EPR), its splinter, the Fuerzas Armadas Revolucionarias del Pueblo (Farp) and the Comando Jaramillista Morelense 23 de Mayo (CJM-23).

It was used in bombings in Mexico City in August 2001, in Valle de Cuernavaca in May 2004, in Oaxaca in October 2006 (by the Organización Revolucionaria Armada del Pueblo de Oaxaca (Orapo), and in attempted bombings in Mexico city in November 2006. All of these were small-scale events.

There were two known cases of thefts of Tovex, from a mining firm in San Luis Potosí­ in 2003 and form a construction firm in Xoxocotlán, Oaxaca, in 2006. There is also an accessible black market for explosives, as a journalist from El Universal was able to demonstrate by buying 25 kilos of Tovex and another 25 of Mexamon in the wake of the EPR bombings of Pemex installations of July and September 2007. This highly damaging attack on the country's oil industry was the only instance of large-scale sabotage by bombing.

On that occasion the federal chief prosecutor's office (PGR) issued confusing statements about the explosives used. It was first described as similar to the explosives previously used by Mexican armed groups, but later as probably having been Semtex of Czech provenance — a unique development in Mexico.

The Colombian angle
The drug cartels may have been found in possession of explosives but these have not been, so far, their weapons of choice. Guerrilla groups have engaged in bombings, but with the exception of the EPR's attacks on Pemex installations in 2007, have not done so frequently and have tended to set off low-powered devices. Against this backdrop, if the recent thefts of explosives do mean that someone is stockpiling them for use, this would represent a significant departure for either the cartels or the guerrilla groups.

There is another possible explanation: that the explosives are not intended for use in Mexico but in Colombia. In early 2008 the Colombian national police and the PGR were able to determine that rocket-propelled grenade launchers seized in Farc-controlled territory were of the same provenance as launchers seized in Mexico in late 2007 from members of the Gulf cartel.

In January this year the Colombian police announced that they had uncovered an alliance between the Farc guerrillas and Los Rastrojos, a drug-trafficking outfit formerly associated with the Norte del Valle cartel, to export cocaine in exchange for weapons, explosives and communication equipment.

Yield of the military-police anticartel operations In the first 10 months of 2008, apart from the explosives mentioned above, security forces seized 1,744 rifles, 1,388 handguns, 6,575 ammunition clips, 426,742 assorted rounds of ammunition, 60 telescopic sights, 18 grenade launchers, 16 silencers, 814 shells, 35 cannons and 134,368 rockets. Since President Felipe Calderón took office on 1 December 2006, the combined military-police operations launched against the drug cartels have led to 53,000 arrests and the seizure of 28,000 weapons, 3m rounds of ammunition, more than 70 tonnes of cocaine and 3,700t of marijuana. Sceptics say that it remains to be seen how many of the 53,000 detainees are successfully prosecuted. Economy minister Gerardo Ruiz said on 18 February that the government's strategy had shifted from targeting the upper echelons of the cartels to disrupting their logistics and thus undermining the business of drug trafficking. He noted that since December 2006 the government had seized more drugs and more drugs money that in all previous administrations. This, he said, had already translated into a 70% increase in the prices of drugs in the US because of the squeeze on supply. The US government has reported periods of short supply and rising prices, but as yet there is no hard evidence that this is a sustained phenomenon.

 

After almost three months, the hunger strike staged by jailed Mapuche militants has ended. They have achieved their main objective: that none of them should be tried under the Pinochet-era anti-terrorist law.

On 30 September the lower chamber of congress approved a series of amendments to the anti-terrorist law inherited from the Pinochet era. The most immediately significant modification is the redefinition of what constitutes a terrorist offence — specifically the elimination of the assumption that any offence committed with explosive or incendiary devices, weapons of great destructive power, toxic substances or others that can cause great carnage is to be viewed as having the intent to cause fear among the population, that is, the core criterion of a terrorist offence. Other changes include a reduction of penalties for conspiracy and the threat or attempt to commit terrorist acts; an increase of penalties for the financing of terrorism, and in the procedural area, lifting the bar on cross-examining anonymous witnesses.

Representatives of the opposition Concertación alliance said that the changes were insufficient, and that what was needed was a thorough overhaul of the Pinochet legislation. The government, however, proved that it was sufficient to persuade the jailed Mapuche protesters to abandon their hunger strike [SSR-10-09]. This it achieved by interpreting that, with the new legislation, it was not possible to be certain that the acts committed by the jailed Mapuche militants were indeed terrorist offences.

As a result, it set in motion a process of reclassifying the cases against them, which began to translate into the withdrawal of charges filed under the old anti-terrorist law. All but 10 of the hunger strikers abandoned their protest on 1 October. The remainder waited until the government had begun the reclassification process, and called off the strike a week later.

It is worth noting that the government went ahead with this solution even after the chief national prosecutor, Sabas Chahuán, warned on 5 October that halting the proceedings initiated under the old law 'would be illegal, unconstitutional and perhaps even a criminal offence.' He argued that, under the law governing court proceedings, the initial phase of filing charges had been completed and that prosecutors are now obliged to sustain the charges.

The supreme court is already involved in another Mapuche-related controversy. On 29 October, acting on a request filed by the Colombian government under the bilateral extradition treaty in force since 1928, the court ordered the arrest of the Chilean national Manuel Francisco Olate Céspedes. Colombia wants him extradited to answer charges of financing terrorism, administering resources related to terrorist activities and conspiracy to commit crimes. Colombian investigators say there is proof that Olate is the person named as 'Roque' in messages found in the computer files of the late Farc leader 'Raúl Reyes'. Among other things he is said to have arranged the military training of Mapuche militants and other Chileans by the Farc. The Colombian government has three months in which to submit evidence substantiating its extradition request. Olate's lawyers maintain that the Colombian charges are a 'montage'.

p>In 2004, the Colombian government overhauled the rules governing its oil and gas industry in an effort to encourage foreign investment. Colombia's tax and royalty rates are now among the lowest in the region. Some of this comparative improvement, however, is due to increases in tax and royalty rates in its neighbours, particularly in Ecuador and Venezuela.

What is interesting is that Canadian companies have been among the most responsive to the changes in Colombia. The state-oil company, Ecopetrol (now also quoted in New York) is the country's largest oil producer, but a host of small Canadian companies such as Pacific Rubiales Energy Corp., the country's largest independent; Petrominerales Ltd., a spinoff from Calgary's Petrobank Energy and Resources Ltd.; and Gran Tierra Energy Inc., also based in Calgary, have invested heavily in Colombia. Pacific Rubiales is managed by a group of Venezuelan ex-pats, former senior Pdvsa executives. It is headquartered in Toronto and its shares trade on the Toronto Stock Exchange (TSX).
 
The TSX has the largest number of oil and gas listings of any exchange in the world. Oil and gas firms account for 22% of the TSX Venture Exchange, by market capitalisation, and 20% of the senior TSX exchange.

Colombia is self-sufficient in natural gas and currently exports to Venezuela. Colombian natural gas exports to Venezuela will rise to 250m cubic feet per day (cf/d) by March 2010. Ecopetrol is in partnership with US firm Chevron in shipping natural gas to Venezuela.

In late October 2009, Ecopetrol and Chevron reduced exports to Venezuela to about 70m cf/d, down from about 220m cf/d. The reduction in shipments has coincided with a diplomatic clash between the two countries. Ecopetrol maintained however that the drop in sales to Venezuela was needed to meet rising demand in Colombia.

Colombia had proven natural gas reserves of 3.7 trillion cubic feet (tcf) in 2009. The country produced and consumed 255bn (bncf) in 2006. Colombia has natural gas reserves spread across 18 basins, seven of which have active production. The bulk of Colombia's natural gas reserves are located in the Llanos basin, although the Guajira basin accounts for most of current production. According to a Colombian natural gas industry group, the country has sufficient production and reserves to meet domestic demand through at least 2018.

There are some 2,000 miles of natural gas trunk pipelines. The three main lines include Ballena-Barrancabermeja, linking Chevron's Ballena field on the northeast coast to Barrancabermeja in central Colombia; the Barrancabermeja-Nevia-Bogota line, which integrates the Colombian capital into the transmission network, and the Mariquita-Cali line through the western, Andean foothills. There are other small stretches of pipeline operated by private firms, including Pdvsa. In 2008, natural gas distributor Transoriente announced that it would build a new natural gas pipeline to connect the Gibraltar field with the national network, with a capacity of 30m cf/d.

Employment in maquiladora plants is continuing to pick up. Over the first half of 2004, the number of people working in maquiladora plants rose by 2.1%. In June 2004 there were 1.12m people working in maquiladoras. This was 6.7% more than at the end of June 2004.

The pick-up in maquiladora business has been faster than most private sector economists had expected. A poll by Infosel found that they expected maquiladora employment to increase by 4.1% year-on-year. What is interesting is that the biggest demand is, once again, for unskilled labour. According to figures from the official statistical agency, Inegi, the number of unskilled labourers working in maquiladoras was 7.9% higher in June 2004 than it was in June 2003. There was a 2.3% increase in skilled staff and a 2.2% increase in administrative staff.

The pick-up in maquiladora business is largely due to a recovery in nine of the 12 maquiladora sectors. These nine sectors account for 80% of maquiladora employment. The most buoyant sectors were services (up 26% year-on-year) and chemicals (up 19%). Other manufacturing (a catch-all) was up by 11.6% while the two electronics and electrical sectors were up by between 10% and 11% each. 

Less impressive recoveries were enjoyed by furniture and other wood manufacturing (up 5.7%); construction and repairing of transport equipment (up 4%) and selecting, preparing, packing and canning food (up 3%). The declining industries were: shoes and leather (down 6.8%); toys and sports equipment (down 3.8%) and clothing assembly (down 3.2%).

Looked at by state, the figures are badly distorted by Zacatecas, where a new factory for building and repairing transport equipment was opened. This plant increased maquiladora employment in the state by 81%. What is interesting about this is that the state is a major source of migrants to the US: one of the ideas behind maquiladoras and Nafta is that the US should try to help Mexico create jobs in Mexico. The argument is that this is cheaper than spending money on trying to prevent economic migrants crossing from Mexico to the US in search of jobs.

The key maquiladora states, along the border with the US, such as Nuevo León (up 14%), Baja California (up 12%) and Sonora (up 10%) all saw significant increases in jobs over the 12 months to June. Interestingly Chihuahua, where law and order is a major concern, and Tamaulipas lagged behind the other border states, seeing a 7% increases in job numbers. 

On the downside, the Estado de México saw its number of maquiladora jobs more than halve after several textile factories closed and some of the motor industry companies saw less demand for their products and thus forced short-time working on their plants. Wages are maquiladoras biggest contribution to the local economy: wages account for 45% of maquiladoras' value added; other expenses (rent, telephone, leasing of machinery, electricity and other logistical services) account for 31%; profits 13% and inputs of raw and semi-finished goods another 11%.

The two big sectors in terms of value-added exports are making parts for electrical and electronic goods (which accounted for 23% of total maquiladora exports in June) and the motor industry (aka transport equipment) which accounted for 22% of maquiladora exports in June. Textiles and clothing is the third biggest sector with 14%; other manufacturing is 12% and assembling electrical and electronic products 11%. These five areas account for 82% of the country's total maquiladora exports.

Although the number of paid hours worked by maquiladora employees was 11% higher in June 2004 than in June 2003, real wages were actually 0.1% down, year-on-year. This indicates that the labour market in key maquiladora zones is still pretty slack. Indeed pay of unskilled workers has actually fallen over the past year, while pay for skilled staff is up by only about 2% in real terms. 

Over a shorter period things look considerably brighter. In the first six months, the number of people employed in maquiladoras increased by 2.1% while the number of hours worked was up by 5.4%, compared with the same period of 2003. Wages and other benefits were up by only 1.4%, however. 

• VF Jeanswear, a company that makes Lee and Wrangler jeans announced at the beginning of September that it would shut its two plants in El Paso, Texas and move production to Mexico. VF, which is based in Greensboro, North Carolina, claims to be the world's largest apparel company. It will shut its jeans factory in El Paso, throwing 640 people out of work and close its jeans washing plant which will cause another 56 job losses. The company is also cutting staffing to the bone at its only remaining US plant, in Fabens, southern Texas. In 2001, VF employed 5,000 people in and around El Paso: when the layoffs are completed it will employ only 550. Of these 380 will be at the Fabens plant and another 150 will work at the Rojas distribution centre. VF is reckoned to pay around US$10 per hour to its Texas workers: workers in Mexico will do much the same sort of job for a fifth of the cost.
• The government claims to be close to shutting down Asa Barantz who runs the biggest smuggled-textiles business in the country. He was arrested in Toluca on 2 September. Coincidentally, the Agencia Federal de Investigación raided a store, Dos Banderas, close to the colonial centre of Mexico City and seized M$3m (US$250,000) worth of clothing. Most of the clothing was children's sportswear. The AFI said that none of the staff at the store knew who supplied the goods: few of the staff had been employed for more than a month. The AFI said that the owner of the store, almost certainly Barantz, was facing a fine of between M$15m and M$20m for tax (more accurately, tariff) evasion because the labels showing where the products had been manufactured had been removed. The products appear to come from China.

President-elect Felipe Calderón Hinojosa accepted an invitation on 19 October from President George W Bush to visit him in Washington on 9 November. Calderón will be in Washington two days after the mid-term elections and three weeks before he takes office on 1 December. The list of issues that the White House said that the two leaders would discuss did not include immigration. On 26 October President Bush signed into law a bill mandating the construction of two walls along about a third of the US-Mexico border, despite objections from Mexico.

Calderón's first trip as president-elect was to Central and South America. The first fruit of that brief trip was an offer, on 23 October, by Argentina to sign a strategic alliance agreement next year. The Argentine government said that it wanted to put behind it the tensions created by President Vicente Fox's attendance at the Americas Summit in Argentina in 2005. Fox was insulted by President Hugo Chávez of Venezuela and took umbrage at Argentina. President Néstor Kirchner has invited Calderón to attend the South American summit on 9 December.

On this trip Calderón went first to Guatemala, before going on to El Salvador, Honduras and Costa Rica. From there he went on to Colombia, Peru, Chile and Argentina. His visit to Brazil was awkwardly timed, coming only two days before the first round of the Brazilian elections on 7 October. Calderón and his advisers clearly assumed that President Lula da Silva would be home and hosed by then: in fact he was forced into an unexpected second round, on 29 October, which he won easily.  

Partly as a consequence of Lula's anomalous position, Calderón talked mostly about neutral subjects such as biodiesel and alternative fuels. Calderón believes that Mexican sugar production can be used to produce ethanol which can then be exported to the US. Calderón also met the president of Petrobras, the state energy company, which has world-leading expertise in deep sea oil production. Mexico's state oil company, Petróleos Mexicanos, needs technological help if it is to develop its deepwater oilfields in the Gulf of Mexico.  

Calderón's foreign policy adviser Arturo Sarukhán said that Calderón has two main foreign policy objectives. Both were to repair damage done by the Fox administration. The first was to recover Mexico's leadership position in Latin American affairs. Sarukhán argued that if Mexico did not speak up for Latin America, Brazil would and by doing so would become the region's leader.The second was to restore Mexico's ability to lobby the US successfully. Sarukhán, who is in charge of foreign policy issues in Calderón's transition team, and therefore a front runner for the job of foreign minister in the next government, discussed the prospects for Mexican foreign policy at a seminar at the Instituto Tecnológico Autónomo de México on 20 October  

On Asia, Sarukhán, who worked with Fox's first foreign minister, Jorge Castañeda, in the first two years of Fox's administration, Sarukhán argued that it was not enough for Mexico just to clinch trade agreements with Asian countries. He argued that there needed to be some real commercial cooperation: currently, he said, there is absolutely nothing of this sort.  

Calderón visited Canada from 25 to 27 October. Canada's newish prime minister, Stephen Harper, clearly got on with Calderón. Harper said that Calderón was a man of principles with a very realistic political and economic vision for Mexico. Harper, like Calderón, is on the right, politically.

The country's two biggest parties in the lower house of congress, the Partido Acción Nacional (PAN) and the leftwing alliance led by the Partido de la Revolución Democrática (PRD), are feuding as they prepare for mid term elections in July. The PRD's feuds, which revolve around its controversial radical leader, Andrés Manuel López Obrador, have been more public but the PAN's feuds are just as intense.

The PAN is fiercely divided over who should be its candidate for the governorship of Nuevo León and whether the party should go into an alliance with Elba Esther Gordillo, the powerful leader of the teachers union and founder of the Partido Nueva Alianza (PNA), which has a handful of seats in the federal congress, for the election in Nuevo León. The PAN has yet to decide how it will pick its candidate for the Nuevo León governorship.

The PAN is also divided over the result of the primary election to pick its candidate for the governorship of San Luis Potosí­ (SLP). The party hierarchy wants activists to rally around Alejandro Zapata Perogordo, but a faction of the party loyal to a senator, Eugenio Govea, claims that the election, and Zapata's primary win in mid December, was rigged. What infuriated Govea's supporters is that Germán Martí­nez Cázares, the PAN's national president, endorsed Zapata even though the party had yet to declare an official winner of the primary contest.

Querétaro and SLP are probably the PAN's best chances of victory in this year's six gubernatorial elections. The party's big problem, however, will be to do as well as it did in 2006 in the congressional elections. In the last mid term elections, the PAN lost a quarter of its federal deputies. It currently has 206 deputies.

The party has not yet decided, much to activists' disquiet, how it will choose candidates for congress. On 13 January Martí­nez Cázares said that the PAN's national executive had decided that at least half the candidates would be chosen “directly". He implied that this meant by election, but the form of such elections is far from clear. It seems that all the party's candidates for congress's 200 proportionally elected seats will be chosen this way. The other 300 members of congress represent constituencies and are elected through a first-past-the-post system.

The Left is in more public disarray. It still looks likely that the radicals, led by Andrés Manuel López Obrador, will split from the realists, led by Jesús Ortega, the new president of the main leftwing PRD. On 15 December, López Obrador gave notice (through his brother) that he was intending to quit the PRD.

This decision, if confirmed, will lead to a realignment of the Left in Mexico. A weaker radical Left will probably help the old traditional ruling party, the PRI, which has won all but one of the important elections in Mexico since Felipe Calderón Hinojosa retained the presidency for the rightwing PAN in 2006.

The PRI and the PRD are both members of the Socialist International. In the 1990s the PRI was dominated by technocrats who seemed embarrassed by the party's leftwing origins. The current PRI leadership is more populist and, in tune with the times, less certain that a policy of allowing markets to flourish delivers the best results economically and socially.

López Obrador, who was a hugely successful, populist, mayor of Mexico City, is the most prominent (and polarising) leftwinger in the country. Without him the PRD, which has done poorly in recent elections, will become a very different party. López Obrador has made his career out of opposition. He was almost certainly cheated of the governorship of Tabasco by electoral fraud in 1994 but the campaign he waged against that injustice propelled him first to the PRD party presidency and then to the mayorship of Mexico City.

López Obrador was the Left's candidate for the presidency in 2006 and was backed not only by the PRD but also by two smaller parties, Convergencia and the Partido del Trabajo (which together make up the Frente Amplio Progresista [FA]). López Obrador was narrowly and, he says, unfairly, defeated in the presidential elections. He has subsequently refused to accept the result and the fact that Felipe Calderon is president. López Obrador calls himself Mexico's legitimate president and campaigns around the country against the government's economic policies, notably its attempt to reform the state oil monopoly, Petróleos Mexicanos (Pemex). Arguably, López Obrador's campaign neutered the government's original reform proposals.

The announcement that López Obrador and the radical FAP would split from the PRD came from López Obrador's brother, Pí­o. Ostensibly, López Obrador is threatening to go because the PRD has resumed formal relations with the federal government. López Obrador and his supporters regard the federal government as illegitimate because, they claim, it won the 2006 elections through fraud. There is no unequivocal evidence of fraud, though, equally, there was no complete recount of the votes cast in the presidential contest. 

López Obrador is really going because his radical faction of the party was defeated in controversial elections to elect a new party president in March 2008. The elections were held in March, but the party could not agree on who had won. Eventually, the national elections' tribunal ruled that Jesús Ortega had defeated a López Obradorista, Alejandro Encinas. The radicals did not accept this verdict and claim that Ortega and his faction are conniving with the government. The radicals argue that the state should not decide who should be the PRD president.

Ortega had tried three times before to become PRD party president, but was defeated successively by López Obrador, Amalí­a Garcí­a and Rosario Robles.

On 14 December the PRD's national congress resolved not to go into electoral alliances with other political parties. This would mean the end of the FAP, which has provided López Obrador with a platform.

Ortega and his faction argue, plausibly, that the smaller parties have done much better from the alliances than the PRD. The other implication of this decision is that the PRD hierarchy, now controlled by López Obrador's rivals, would have complete control over the selection of candidates.

The big question is which of the PRD's other leading politicians will follow López Obrador out of the party. Ricardo Monreal, a former PRD governor of Zacatecas and a senator, has already gone. Marcelo Ebrard, López Obrador's lieutenant, who is now mayor of Mexico City, has the biggest decision to make. Ebrard has already indicated that he wants to run for the presidency in 2012: it is far from clear that López Obrador would yield to this aspiration.

Ebrard's decision could determine what happens to the Left in Mexico. The PRD's bastion is Mexico City, but the party's managers and activists are, mostly, from Ortega's Nueva Izquierda faction. A split in the PRD in Mexico City could mean that a candidate from either the PAN or the PRI could be the next mayor of Mexico City. Mexican elections are single-round affairs: the winner does not have to get a majority of the votes cast

Pí­o López Obrador said that his brother would make the split from the PRD official at a rally in the main square in Mexico City on 25 January. López Obrador had been planning a national tour from January 2009.

Although it still seems certain that López Obrador will sever ties with the PRD, both sides immediately had second thoughts. On 16 December López Obrador supporters backtracked on claims that he was about to resign from the PRD. On 17 December Ortega said that he would meet López Obrador.

The dominant Nueva Izquierda (NI) faction of the PRD has been careful not to shut the door completely on López Obrador: one of the NI's prominent members carefully noted that what Pí­o had actually said concerned the future of the PT and Convergencia more than whether López Obrador would actually leave the PRD.

On 5 January the Ortega faction indicated that it was prepared to nominate supporters of López Obrador as candidates for winnable seats in the forthcoming mid-term congressional elections.  The first indications are that López Obrador will spurn the latest peace offering.

What López Obrador seems to be planning is to launch another extra-parliamentary challenge to the government. This strategy was successful in 2008 in neutering the government's proposals for a fundamental reform of Pemex.

Cisen: On 4 January the Centro de Investigación y Seguridad Nacional (Cisen) announced that it would spend at least M$500,000 (US$37,000) in 2009 on public relations. The PR spending is a result of the Cisen's likely role in vetting candidates for the forthcoming congressional elections. The Instituto Federal Electoral and Mexico's main political parties want to use Cisen to ensure that drug gangsters or their allies are not elected to executive or legislative positions. Hitherto the Cisen has been low profile. Since 2001 it has issued only 24 press communiqués.

Ebrard: On 12 January the government of Mexico City, headed by Marcelo Ebrard announced its own economic stimulus package. Unusually for a leftwing populist the main thrust of the plan to preserve jobs is to cut spending. Ebrard's 10-point plan aims to save M$700m (US$50m), which will be used to protect jobs and keep the incomes of the low paid up.

Mexican elections in 2009

5 July
Mid term congressional elections for all 500 seats in lower house

Campeche - elections for governor, state legislature and 11 mayors
Colima - elections for governor, state legislature and 10 mayors
Nuevo León - elections for governor, state legislature and 51 mayors
Querétaro - elections for governor, state legislature and 18 mayors
San Luis Potosí­ - elections for governor, state legislature and 58 mayors
Sonora - elections for governor, state legislature and 72 mayors
Distrito Federal - elections for Legislative Assembly and 16 borough presidents
Guanajuato - elections for state legislature and 46 mayors
Jalisco - elections for state legislature and 125 mayors
Estado de  México - elections for state legislature and 125 mayors
Morelos - elections for state legislature and 33 mayors

18 October
Coahuila - elections for 38 mayors
Tabasco - elections for state legislature and 17 mayors

NB On 1 February   Quintana Roo - Special municipal election for Tulum which is a completely new municipality.

• Amalia Solorzano, the widow of President Lázaro Cárdenas, who nationalised oil companies in Mexico, died on 12 December 2008. Solórzano is famous for donating her jewellery to pay compensation to the oil companies, which were nationalised in 1938. President Cárdenas himself died in 1970. Their son is Cuauhtémoc Cárdenas, the founder of the PRD.

• Mexico City mayor Marcelo Ebrard himself will take a a 10% cut in his salary as part of an economic rescue package for the city. Another 1,300 senior city officials will also see a similar pay cut. Ebrard currently earns M$76,000 (US$5,450) a month. He said that the money saved on wages would go into a fund to provide medicine and food for 1.8m poor people.
  

On 7 February MVS Radio sacked its star presenter, Carmen Aristegui, after she refused to apologise for referring to President Felipe Calderón's alleged alcohol abuse problems. Her removal produced a media storm and her reinstatement on 21 February.

The rumours about Calderón's drink problem, which have been swirling around Mexico City for the past 18 months, erupted into the public domain on 3 February, when deputies from the left-wing Partido del Trabajo (PT) put up a banner in congress which read: “Would you let a drunk drive a car? No, Really? So why do you let one run the country?" The banner bore an unflattering picture of Calderón.

The PT's stunt at the opening of the congressional term prompted a walkout by Calderón's ruling Partido Acción Nacional (PAN) deputies. The PT is aligned with Andrés Manuel López Obrador, a radical left-wing leader who still does not accept that Calderón defeated him in the 2006 presidential election. López Obrador now wants to prevent any alliance between the PAN and left-wing parties, headed by the Partido de la Revolución Democrática, but also including the PT and Convergencia, in this year's state elections and next year's presidential election.

MVS said that it had terminated Aristegui's contract because she had referred to Calderón's drink problem as though it was a fact rather than a rumour or allegation. CNN en Español, a US broadcaster, stood by Aristegui and refused to drop her nightly TV show. All Aristegui had said in her MVS morning radio show was that the PT's banner merited a formal response from the presidential spokesman.

This response came on 9 February, when Calderón's private secretary, Roberto Gil Zuarth, said that Calderón was in good health, usually starting work at 6am and working through until 10pm.

At the special Caricom summit, held on 8-9 November in Port of Spain, progress towards the Caricom Single Market and Economy (CSME) was reported to be on target for implementation by end 2005. Trinidad & Tobago, Barbados, and Jamaica are likely to be ready by the beginning of the year. However, Trinidad's Prime Minister Patrick Manning appeared to suggest that his country's continued assistance to its neighbours was dependent on greater political integration in the southern Caribbean.

A statement issued at the end of the two-day summit said: 'Those states committed to meeting the 2004 timeline are on track for achieving this. Those on target for 2005 will be able to do so with some technical assistance and facilitation by the Caricom Secretariat […] A realistic assessment of the implementation of the CSME by member states indicates that, overall, the core measures relating to the establishment of the single market would be in place by December 2005.'

The statement also pointed to some modest increase in its immediate ambitions, saying: 'The Conference agreed that it was time to expand the categories of Caricom nationals who have the right to free movement with the Community beyond the five stated professional categories - graduates, media workers, artistes, musicians, and sportspersons.' A submission on this will be made to the heads of government in time for their July 2005 meeting.

The statement also emphasized that the creation of a single market was only a stepping stone on the way to a single economy. It said: 'The heads of government […] share the view that movement from the single market to the single economy constitutes an advance beyond market arrangements to the establishment for competitive production in the Region. 

To this end, heads of government agree to an indicative timeline of 2008 for the Single Economy and have mandated the preparation of a regional development strategy in time for adoption at their inter-sessional meeting in February 2005.'

All this seemed well and good, but in his opening remarks on 8 November, Trinidad's Prime Minister Patrick Manning added a note of controversy. He laid out his stall by outlining Trinidad's contribution to socio-economic development in the region. Amongst other things, he pointed out that Trinidad:

• had set up a US$6m relief package to help six states that had suffered extensive damage from Hurricane Ivan.
• had been allowing countries and companies in the region to borrow on the domestic market (US$500m last year).
• was to contribute US$50m for poverty eradication to be administered by the Caribbean Development Bank.
• was looking at supplying natural gas via two pipelines to Barbados, Martinique, St Lucia, Guadeloupe, Dominica, Antigua, St Kitts, Grenada, and St Vincent. A separate arrangement was being negotiated with Jamaica.
• intended to expand a radar system that provides security for Trinidad to cover Grenada and St Vincent. Manning said: 'As Trinidad & Tobago takes steps to protect its own border, we cannot remain oblivious to the need for proper border protection and drug interdiction efforts in the entire Eastern Caribbean, an issue that is beginning to loom larger and larger on the economic and social landscape of the region'.

But having made his point about Trinidad's contribution to regional development and security, Manning added that Port of Spain could only 'continue to assist in the context of some agreement among Caricom countries' for further integration. 

This is not the first time Manning has argued for deeper political integration in the southern Caribbean. In 1995 he raised the idea of a union involving Trinidad, Barbados, and Guyana. This trouble is, though, that relations between Trinidad and its southern Caribbean neighbours are not without their complications, not least because of an acrimonious fishing dispute with Barbados in which Guyana is to some degree a partner to Barbados. 

The issue became more complicated when Barbados referred the dispute to arbitration under the United Nations Convention of the Law of the Seas (UNCLOS) in February this year. By referring the dispute to arbitration, Barbados is also seeking a ruling on a 1990 maritime treaty between Trinidad and Venezuela which Barbados says 'purports unilaterally to appropriate to Venezuela and Trinidad & Tobago an enormous part of Barbados's and Guyana's maritime territory, as well as one third of Guyana's land territory.' As part of its drive to settle this issue, Barbados signed an Exclusive Economic Zone (EEZ) Cooperation Treaty with Guyana in December 2003.

Notwithstanding this, Barbados's Prime Minister Owen Arthur gave his own support for further integration, saying: 'There is no good reason why countries in the region should not deepen the political cooperation among themselves, and I fundamentally feel that there is tremendous scope in the region for us to carry forward the process of political cooperation in a way to help governments rationalize the provision of services to their citizens.' He called for a 'deepening of the process of cooperation beyond the economic sphere'.

But Arthur's support for further integration was clearly not intended to be on the terms suggested by Manning. He took a dig at Manning for suggesting that Trinidad's continuing assistance to its neighbours was dependent of closer political ties in the southern Caribbean. He said: 'I don't think he [Manning] would feel nor any Caribbean country would feel that you could have a process of financial colonization and that people are being enticed to join a union in return for financial contribution.'

He added: 'I don't feel that Trinidad would imagine it would want to take on all the responsibilities of financing the development of other Caribbean islands merely to say that it is involved in a political relationship; that would be very unwise and very expensive.'

• Trinidad & Tobago reported economic growth of 12.8% in the fiscal year ending in October. GDP growth was driven by liquid natural gas (LNG) exports. Trinidad is in the process of expanding its LNG production: the first offshore natural gas drilling platform designed and constructed in the Caribbean will be up and running by March 2005 and will be fully operational by January 2006. The 900-ton, four-level platform, which will be installed 30 miles off the southeast coast, will extract some crude, but its main purpose will be to extract natural gas for the Atlantic LNG plants in Trinidad. Trinidad, which has proven natural gas reserves of 30 trillion cubic feet, recently became the leading supplier of LNG to the US, supplying 75% of imports in 2003.

In an unfortunate irony President Oscar Berger chose one of the most turbulent months of political violence and protest actions of his presidency in which to unveil his new "special public-security support force" drawn from among former members of the military and reservists which, if it proves successful, will end up being incorporated into the Policí­a Nacional Civil (PNC).

The opposition Unidad Nacional de la Esperanza (UNE) has been on the receiving end of much of the political violence which could foretell a campaign of murder and intimidation in next year's election campaigns. A congressional deputy for the UNE, Mario Ronaldo Pivaral, was shot dead on 6 April in the south of Guatemala City. He had been investigating the alleged mishandling of public funds in the education ministry. The last deputy to be shot in Guatemala was Carlos Hipólito Miralda Roca (also a member of the UNE) on 28 September 2005. On 11 April Eleaza Tabalan, a party coordinator for the leftwing Encuentro por Guatemala party, was also shot dead. 

Both these killings came within a fortnight of the murder of Rodolfo Castellanos, a prominent lawyer and adviser to the small Partido Patriota (PP), on 30 March and the assassination of a peasant leader, Antonio Ixbalán Calí­, and his wife on 5 April. All the killings were carried out by professional assassins in broad daylight.

The leader of the UNE, Alvaro Colom, said that both he and his wife had also been threatened. He blamed the government for the breakdown in law and order and asked for security to be provided for UNE legislators. The government said this would be far too expensive and offered to provide security for UNE party headquarters instead. The PP also held the government responsible. The PP's presidential candidate, the retired general Otto Pérez Molina - a former ally turned adversary of Berger - is campaigning on a law and order platform for the 2007 presidential elections.

Protests fail to take off

As if Berger were not facing enough problems with the escalation in political violence, peasants and trade unions decided to stage protests across Guatemala on 20 April. The peasants, largely Indians, accused the government of ignoring their demands for land reform; they were backed by school teachers who demonstrated for higher wages. However, the Coordinadora Nacional Indí­gena y Campesina (Conic) did not get the national uprising with widespread participation that it wanted. 

Conic had planned to continue the protests on 21 April but after lengthy talks with the vice-president, Eduardo Stein, agreed to meet the government around the negotiating table rather than clash with police on the streets. Fourteen people were injured and 30 arrested in the southern department of Escuintla and western department of Quetzaltenango. About 2,000 protesters marched past the US embassy in Guatemala City to condemn the free trade agreement with the US before making their way towards the government palace.

New force takes to streets

The political violence and protests coincided with the completion of the training of the new special public-security support force. The defence minister, Francisco Bermúdez, announced in February the creation of the 2,400-strong force, drawn from among former members of the military and reservists, which will be sent into crime hotspots. The members of the new force were recruited on 1 March and underwent a 40-day crash course in policing.

Local economists are fretting about the prospects for hitting the government's growth target for 2007. The government is aiming for a rate of between 4.5% and 5.5%. Growth in 2006 was a whisker over 4%, the best performance for 10 years.

Government officials are concerned about what might happen politically and socially if the growth rate wanes. They concede that the decent performance in 2006 blunted the edge of some of the criticism of successive centre-right governments who had imposed orthodox neo-liberal policies on the economy. They admit that even maintaining growth at its current rate will require heroic efforts. 

The apparent slowdown in the US economy in the first part of this year will hurt the Salvadorean economy. So will the pick up in the international oil price. On the other hand, the pick-up in tourism should benefit the economy. Whether tourism can withstand the increasing signs of social unrest and the upswing in crime is far from clear. 

Inflation : Inflation in April was 0.07% which brings the rate for the first four months to 1.6%. The economy ministry claimed that the rate was the lowest for this period for four years. 

 

A recent offer by President Daniel Ortega to hold talks with left-wing guerrilla group, the Fuerzas Armadas Revolucionarias de Colombia (Farc) led to a revival of problems between Nicaragua and Colombia. Tensions have been simmering since March, when Ortega briefly broke off ties with the Andean country in light of its armed incursion into Ecuador on 1 March. Nevertheless Ortega's anti-Colombia - and by extension, anti-US - rhetoric conceals efforts to cosy up to other instruments of US “imperialism", namely the IMF and World Bank.

On 17 July Ortega responded in the affirmative to a letter from the Farc secretariat in which they requested talks to contribute to the peace process in Colombia. The letter also thanked him for granting asylum to two guerrilla fighters who survived the controversial raid by the Colombian military on a Farc camp inside Ecuador on 1 March. Ortega publicly replied to his Farc 'brothers' that he was willing to talk and enter dialogue “to contribute to peace" in Colombia - a country which, he said, was “the principal factor of instability in Latin America".

The offer of help from Nicaragua's president was met with horror by the Colombian government: foreign minister Jamie Bermúdez sent a protest note to Managua strenuously objecting to Ortega's interference in Colombia's domestic affairs. He added that Colombia would present a complaint before the Organization of American States (OAS) against Ortega, in particular his use of the epithet “my Farc brothers", which he said violated the spirit and letter of the Inter-American Convention against Terrorism.

Tensions intensified after Nicaraguan national (anti-government) newspaper La Prensa reported on 23 July that six senior Farc members had arrived in Managua on 17 July in a Cessna aircraft owned by Venezuela's state energy company, Pdvsa. The article claimed that the guerrillas met Ortega and then stayed for the celebrations on 19 July to mark the 29th anniversary of the Sandinista revolution. The story was denied both by Venezuela's vice-president, Ramón Carrizales, and by Ortega, who accused the publication of “treason".

Ortega then went on to attack the editors of La Prensa for “serving the interests of the Colombian oligarchy" by fabricating information that the Colombian authorities would “immediately take as true", pointing out that Colombia has used the story to report Nicaragua to Interpol and the OAS. The president expressed fears that the story would influence the maritime dispute between the two countries, which is currently before the International Court of Justice at The Hague (see sidebar).

Colombian officials did not wait for confirmation of the story before launching a blistering attack on Ortega, still aggrieved by his recent show of support for the Farc. Colombia's ambassador to the OAS, Camilo Ospina, made a verbal protest before the permanent council on 24 July, accusing Ortega of harbouring a “hostile attitude" towards Colombia through his “direct support" of the “terrorist group".

Urging Ortega to “help bury the Farc, not be buried with the Farc", Ospina accused him of “violating international laws" in order to deflect attention away from his government's domestic problems - accusations echoed by opposition politicians in Nicaragua. Dissident Sandinista Ví­ctor Hugo Tinoco added that Ortega was seeking a spat with Colombia “in a narcissistic effort to be the centre of attention in international politics."

With Colombia-Nicaragua relations remaining difficult, Ortega's overtures towards the Farc will have been frowned upon by the Bush administration, which has close ties to the Andean country. Indeed, Ortega's provocative anti-Colombian rhetoric was echoed in more traditional railing against the US during the 19 July ceremony. Meanwhile, Nicaragua's recent efforts to shore up ties with Iran (see sidebar) are similarly likely to be viewed with concern by the US.

Nevertheless, there are signs that US-Nicaragua relations are not as bad as Ortega would like to make out. According to the government, relations with the IMF (another much-touted enemy and instrument of “US imperialism") have been “normalised" after “years of tension". This prompted independent economist Adolfo Acevedo to ironically dub IMF representative in Managua, Humberto Arbulú, as “unofficial spokesman" for the Ortega administration.

In a similar vein, a deal was struck with the World Bank to provide US$40m in loans to improve rural water supply and support small and medium sized businesses in Nicaragua, as well as US$20m in budgetary support. The latter will include US$17m for social programmes, and US$2.5m for forestry projects in the Región Autónoma Atlántico Norte.

Trivelli's departure US-Nicaragua relations will be affected by the changeover of US ambassadors to Nicaragua; on 6 August Paul Trivelli left the country after completing his three year mission during which he said he had laid down the basis for a “satisfactory working relationship" with the Ortega government. Having attracted widespread criticism for his meddling in the build-up to the 2006 election [RC-06-04], Trivelli toned down his act after Ortega took office. Nevertheless, he proved less restrained in his farewell address. Speaking before the Nicaraguan-American Chamber of Commerce (Amcham), he issued a clear warning about the threat of “populist government policies" and, without naming names, expressed concern over the attitude of some “members of the political class" who act as if they are above criticism and dismiss anyone who questions them as lacking in “moral authority." Whether Trivelli's departure will result in an improvement in US-Nicaragua relations remains to be seen, however - especially given that he is to be replaced by Robert Callahan. Callahan was former assistant to John Negroponte, who was instrumental in coordinating the Contras during Nicaragua's civil war in the 1980s. The announcement of Callahan's appointment in early February was met with widespread consternation [RC-08-02].

• Maritime dispute

The International Court of Justice (ICJ) at The Hague ruled in December that San Andrés, Providencia and Santa Catalina - three islands Nicaragua claimed as its own - were Colombian under a 1928 treaty. Colombia trumpeted this as a victory. However, according to the ICJ verdict, the maritime boundary set by that treaty (the 82nd meridian) referred only to the archipelago and was not, as claimed by Colombia, an overall maritime boundary. The court also announced that it would continue to study the case, in order to eventually determine a future boundary.

• Iran

Nicaragua's foreign ministry recently announced that Iran has agreed to provide US$2m to fund a hospital, the latest sign of strengthening ties between the two countries. In 2007 bilateral agreements were signed for the construction of several health centres in Nicaragua; four hydroelectric power stations; and two piers in the eastern port of Corinto. More recently, in March 2008, Iran agreed to provide a US$231m loan to construct a dam and hydroelectric generating plant. A three-day meeting is scheduled to take place in Managua in October, to be attended by delegations from both countries.

In our review of the Jamaican economy last month, we noted that Prime Minister Bruce Golding's Jamaica Labour Party (JLP) government was so far remarkably unscathed by the economic crisis.  Despite GDP declining by 3.9% in the second quarter of 2009, in a recent poll only 24% of the public blamed the government.  This charitable view is likely to be tested to the extremes as the prime minister moves to shore up the public finances.

There are some positive straws in the wind. Finance Minister Audley Shaw is now predicting annual inflation of 10%-12% or lower this year, down from 16.8% in calendar 2008, due to exchange-rate stability and moderating international commodity prices. Year-on-year inflation in August fell sharply to 6.1%, in contrast to 26.5% in August 2008. This has also enabled the Bank of Jamaica to begin easing interest rates.  Shaw is now forecasting an overall real GDP decline of 3%-4% for the Jamaican economy in Fiscal Year (FY) 2009/10 (ending 31 March).

Remittances - which on some estimates may fall by as much as US$360m in 2009 from a total US$2.2bn in 2008 - have shown signs of improving. Inflows were up 8% year-on-year in August and likely to have risen again in September.

Less positively, fiscal deficit projections for FY 2009/2010 have been revised upwards to J$94.5bn, from J$75bn in 2008/09. That is the equivalent of 8.7% of GDP. Golding warned the parliament's standing finance committee on 30 September that it was now time “to make a paradigm shift", saying, inter alia, that the public sector wage bill “cannot be sustained". Insisting on the need to cut the wage bill, Golding stated; “Some departments and agencies will have to be eliminated". This retrenchment will be accompanied by “a full programme" of tax reforms in the next financial year.

There are 117,000 public-sector jobs in Jamaica, and with existing pledges for pay increases for teachers and nurses, some estimates suggest that the government will have to cut 10,000 jobs in order to keep its wage bill at current levels. Any such move would affect the government's popularity.  In the aforementioned poll, 70% of respondents were disappointed with the government's failure to create jobs and prevent unemployment. And this is something that the opposition will be sure to exploit, with the People's National Party (PNP) leader Portia Simpson Miller already depicting the government as “wicked and uncaring".

But Golding does seem ready for the battle. Speaking to the Jamaican Exporters Association on 8 October, he said that he personally would lead the restructuring process so as to overcome “entrenched empires that are going to resist fiercely". He added: “There is a culture that is deep rooted that is not going to be voluntarily transformed. It is going to have to be confronted and faced down and attacked..."

That it is not just money-saving that motivates Golding was also made clear in his 1 October speech.  He noted: "Much of our public sector is governed by a structure and culture that_is antiquated, inefficient and largely irrelevant today. Efficient operations require a flatter structure, devolution of authority with responsibility and authority conjoined. It requires that every department be conscious of corporate goals and plans_It means that at every level there must be set targets and clear work plans that must be monitored and assessed virtually on a daily basis_every department and every employee in that department must be subjected to rigorous performance evaluation and accountability. "