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El levantamiento de cinco meses en el sureño estado de Oaxaca no se mostró como de naturaleza indí­gena: comenzó con una huelga de maestros y luego engendró una coalición de grupos sociales y polí­ticos que montaron lo que sólo puede describirse como una insurrección. Oaxaca cobija la mayor concentración de grupos étnicos en México, y al menos un tercio de su población es indí­gena. Además, 73% de las municipalidades del estado están gobernadas según "usos y costumbres" indí­genas -un estado de cosas que puede hacer más para determinar la cuestión de los derechos indí­genas que el modelo Zapatista de "municipalidades autónomas" en pequeña escala.

La población indí­gena de Oaxaca difí­cilmente sea homogénea: está dividida en 16 grupos etno-lingüisticos (29% del total nacional). El estado también es único en que tiene 570 municipalidades, poco menos de 25% del total nacional, para una población de 3,5m. En 1990, las autoridades del estado pusieron en marcha una serie de reformas que han sido retratadas por algunos como de vanguardia, en términos de avanzar hacia un mayor respeto por los derechos indí­genas. El primer paso, ese año, fue enmendar el Artí­culo 16 de la constitución estatal, reconociendo la naturaleza pluricultural del estado y agregar al Artí­culo 25 una provisión reconociendo "las tradiciones y prácticas democráticas de las comunidades indí­genas en la elección de sus autoridades municipales".

Cinco años más tarde la legislatura estatal enmendó el código electoral para consagrar el total respeto por la selección de autoridades municipales de acuerdo a los "usos y costumbres" tradicionales. Más enmiendas en 1997 y 1998 dieron forma final a un sistema en el cual 418 de las 570 municipalidades del estado optaron por gobernarse a sí­ mismas de acuerdo con sus "usos y costumbres". Lo que eso significa, en breve, es que las autoridades municipales no son electas por votación, sino nominadas por consenso: servir en un puesto público es un deber, y no es pagado. En verdad, en algunos casos conlleva la obligación de cubrir algunos gastos con dinero del propio bolsillo del funcionario.

Detrás del brillo progresista puesto en esas reformas habí­a cierta realidad polí­tica diferente. Por décadas, la única presencia polí­tica en el rural Oaxaca fue la del antiguo gobernante Partido Revolucionario Institucional (PRI). Fue sólo después que los partidos de oposición comenzaron a crecer ahí­ a fin de los '80 y principio de los '90 que esas reformas legales se introdujeron. Muchos analistas vieron en eso una movida para excluir a los partidos de oposición de las municipalidades, que, en todo caso, ya estaban gobernadas de acuerdo a los usos y costumbres, pues el PRI seguí­a ejerciendo su influencia sobre las autoridades municipales indí­genas a través de la coerción y el soborno. Además, hubo crecientes crí­ticas del hecho que, en muchos casos, los "usos y costumbres" locales eran de tipo excluyente y negaba a algunas categorí­as de personas los derechos que tení­an garantizados como ciudadanos mexicanos.

Inicialmente, el gobernante PRI pudo apuntarse una aguda reducción en el número de disputas pos-electorales como prueba que el sistema funcionaba. Sin embargo, eso no duró. En 2001, la elección produjo disputas en 122 de las 418 municipalidades con "usos y costumbres". En 2004 hubo disputas en 66 de ellas. En varios casos, llevaron a la intervención del gobierno estatal. Educa, una ONG educacional, ha informado sobre otra tendencia: que muchas municipalidades de "usos y costumbres" habí­an sido infiltradas por partidos polí­ticos.

Los indí­genas de Oaxaca no estuvieron ausentes en el levantamiento de 2006. Muchos de los maestros que provocaron el evento son indí­genas ellos mismos, y actuaron como cintas transportadoras de quejas y demandas de las comunidades donde enseñan. Los activistas indí­genas también estuvieron presentes en la Asamblea Popular de los Pueblos de Oaxaca (APPO), que convirtió la protesta en insurrección. Cuando, frente a la intervención federal que aplastarí­a el levantamiento, la APPO celebró un congreso (en realidad, una serie de "mesas" de discusión), los representantes de las comunidades indí­genas llegaban a cerca de 40% de los participantes.

Un cronista del levantamiento de Oaxaca, Diego Enrique Osorno, advirtió, en el aniversario del comienzo del levantamiento, que la tensión no se habí­a disipado y podrí­a ser usada por grupos guerrilleros para provocar un levantamiento armado. Dijo que tres grupos de guerrilla estuvieron marginalmente involucrados en el levantamiento: el Partido Democrático Popular Revolucionario-Ejército Popular Revolucionario (PDPR-EPR), Tendencia Democrática Revolucionaria-Ejército del Pueblo (TDR-EP) y Fuerzas Armadas Revolucionarias del Pueblo (FARP). Cuya participación más ostensible, como informó Osorno entonces, fue una serie de apelaciones dirigidos directamente a la rama local del SNTE, el sindicato de maestros. Osorno ha señalado que la simpatí­a por los grupos de guerrilla ha sido fuerte desde hace tiempo entre los maestros, en particular los que están en áreas rurales, donde son testigos de primera mano de la situación en la cual viven las comunidades campesinas e indí­genas.

Oaxaca forma parte del triángulo de extrema pobreza de México, junto con Chiapas (escenario del levantamiento Zapatista) y Guerrero: 29,5% de sus municipalidades han sido clasificadas como en estado de alta marginalidad; 46,5% en estado de muy alta marginalidad. De las 100 municipalidades de México con la más alta tasa de desnutrición, 45 están en las áreas indí­genas de Oaxaca.

Grupos etno-lingüí­sticos de México y marginalidad Grupos de 50.000 o más Grupos ethno-linguistic Miembros (000) % que vive en las 200 municipalidades más marginadas Náhuatl Mixteca2 Zapoteca2 Otomí­ Totonaca Tzotzil2 Tzeltal2 Mazateca2 Chol2 Chinanteca2 Mixe2 Tlapaneca2 Tarahumara Zoque Popoluca Chatino Amuzgo Tojolabal2 Total indigenous10, Total population 2,446.0 726.6 777.3 646.9 411.3 407.0 384.1 305.8 221.0 201.2 168.9 140.2 121.8 86.6 62.3 60.0 57.7 54.5 220.9 97,483.7 13.9 28.6 10.3 5.8 28.4 42.3 39.2 38.0 32.5 8.7 13.9 74.3 58.8 28.8 39.1 45.8 42.8 2.8 17.0 2.4 Fuente: CONAPO, 2002

Ranchers claim that there are decent prospects for increasing offal exports. Mexico and El Salvador both import over US$1m worth a year of Nicaraguan offal. The great prospect for the market is Japan, which imported US$403,000 worth of offal in 2001. Nicaragua has been exporting offal to Japan since 1975: it only started exporting offal to Mexico in 1999, following the clinching of the FTA with Mexico.  

Agribusinessmen point out that although total offal exports are still under US$5m, they are equivalent to cheese exports and fish fillet exports, both of which bring in US$4m a year. The country's total exports are around US$800m. The big four offal markets are El Salvador (US$1.5m), Mexico (US$1m), Guatemala (US$600,000), and Japan (US$400,000). World demand for offal is rising by 10% a year. In countries such as Taiwan, calves' liver is a particular delicacy. Calves' liver is the highest priced piece of offal at around US$5 a pound. Tongue trades at around US$1.25, oxtail at US$1.25 per pound and tripe at US$0.20 per pound.  

Paraguay has now slipped into the group of countries in which average per capita incomes are less than US$1,000 a year. The economy has not grown since 1999. As the population has continued to rise, the GDP per capita is now down to two-thirds of what it was in 1999.

The problem for the current government is that the previous government's misguided efforts to shore up the economy have created more problems. Debt, which did not use to be a problem, is now equivalent to 50% of GDP.Living standards are deteriorating as more people join the labour force but fail to find jobs. Since 1999 the labour force has grown by 11% and unemployment has grown by four percentage points. 

• The government expects to be able to re-start beef sales to Chile in August. The inspectors from Chile have passed the meat as free from foot and mouth disease. Chile is the country's main beef market, but closed its market to Paraguay in October 2002. 

The country had been exporting about 60,000t of beef to Chile each year. The business was worth around US$80m a year. The main reason for the re-opening is that Paraguay now vaccinates virtually all its stock against foot and mouth. The country has 9.5m head of cattle. 

• Growers in the provinces of Cordillera and San Pedro have started banana exports to Argentina and Uruguay. They expect the business to produce about US$1m this year. Growers are trucking the bananas to their markets on the River Plate.

Booming gas exports concealed the damage being done to the economy by the almost constant roadblocks in the first quarter. These roadblocks have severely disrupted trade. Yet the official statistics agency reported that exports in the first two months of the year were up by 6% on the same period of 2004. 

In the first two months of 2005 exports came to US$324m, US$19m up on the same period of 2004. The main reason for the rise was a surge in the value of gas exports: these increased from US$99m in the first two months of 2004 to US$145m in the same period of 2005. On the other hand exports of metals were down from US$50m in the first two months of 2004 to US$43m in the same period of 2005. Textile exports were down from US$145m to US$124m. In 2004 the country's exports came to US$2.16bn, a record. 

Gas royalties
The row over the level of gas royalties and taxes is coming to a climax. The lower chamber of congress, to the disgust of the government, approved a hydrocarbons law which will, effectively, take the royalty rate on gas up to 50%. The measure is now before the senate. President Carlos Mesa has criticised the changes made by deputies but has yet to threaten to veto the new law. The leader of the opposition, Evo Morales, who has been organising roadblocks across the country to back his demand for a 50% royalty, is not happy with congress's compromise. This caps the royalty at 18% but introduces a flat, well-head tax rate at 32% (which is effectively the same as a royalty). The royalty/tax argument springs from some equivocal drafting of a question in last year's referendum. Morales and his supporters argue that oil companies can reduce their tax rates by charging costs against taxes. Royalties on the other hand are paid gross. 

International oil companies, which signed 76 new exploration and development agreements eight years ago, argue that these agreements protect them from any increases in royalties. These deals were signed during the first administration of President Gonzalo Sánchez de Lozada who was forced into exile in October 2003, 14 months after he took office for the second time. The current government agrees with international oil companies on this point but not on their claim that the Sánchez de Lozada agreements, effectively, gave them ownership of any gas they found. 

Bolivia's reserves of natural gas amount to 54.9 trillion cubic feet. They are the second biggest in the western hemisphere, after Venezuela's reserves. Opposition lawyers have now filed petitions to get the 76 agreements set aside on the grounds that they breach the constitution by transferring ownership of the gas covered by the agreements to the international energy companies.

Morales's party, the Movimiento al Socialismo, is attacking the international oil companies on another front. It claims that Chaco, an oil company controlled by British Petroleum, has smuggled 26,000 barrels of reconstituted oil, out of the country. The energy minister, Guillermo Torres, told congress in early April that BP did not have permission to export the oil in February 2005. The head of the customs office, Rodrigo Agreda, said that BP had paid US$1m to avoid being charged with smuggling. BP's problem is that the oil went to Chile, Bolivia's historic foe. 

Inflation: This was 0.16% in March, the official Instituto Nacional de Estadí­sticas reported. This brings the rate for the first quarter to 1.58% and the lagging 12-month rate to 5.71%.

FDI: Foreign direct investment, which had averaged US$240m in the five years between 1993 and 1998, fell to an average of US$50m a year thereafter, according to official statistics from the INE and deputy ministry for public investment and external finance. In GDP terms, FDI has fallen from 32% in 1993 to 1% in 2001 and 2002.

Neither the President-elect, Michelle Bachelet, nor local economists, expect her government to make major changes to economic policy. She stressed that she will continue with President Ricardo Lagos's mix of economic policies. Bachelet easily won the second round of the elections on 15 January.

Lagos's policies have delivered, at least at the macro-economic level. Inflation is down, the government's fiscal position is strong (a fiscal surplus of 4.5% of GDP, thanks to record copper prices) and the country has the best sovereign risk rating in the region. Investors in Chilean bonds want only a premium of 0.76% to hold Chilean debt rather than US debt.

What Bachelet will do, so long as copper revenues remain buoyant, is boost social security spending. She said that her government will increase pensions and improve healthcare and education.

The economy is in good nick, thanks to the still-surging copper price. In November the central bank found that the economy was growing at its fastest rate for five months; 6.1%. The rate of growth in October had been 4.9%.

Poverty: The country has been the most successful in the region in reducing poverty over the past 20 years. In 1987, 45% of the population officially lived in poverty. By 2003, this figure was down to 19%. The decline in extreme poverty is even more impressive: from 17% in 1987, before the referendum on whether Pinochet should continue with his dictatorship, to 4.5% in 2003. What is interesting in Chile is that while absolute poverty has fallen, the country's income distribution has become even sharper. In Chile the poorest 10% survive on less than 2% of the economy's total income. In Mexico, where absolute poverty has not fallen as much, the poorest 10% command 3% of the economy's total income. In Chile the richest 10% have 39% of the economy' income, while in Mexico they have only 31%.

Inflation: The rate for 2005 was 3.7%. In 2004 the rate was 2.4%. The 2005 rate was within the central bank's target of a rate between 2% and 4%. Consumer prices fell by 0.3% in December after falling by 0.2% in November as the peso strengthened, easing the inflationary pressure created by the rising international oil price. The central bank forecasts that inflation in 2006 will be 2.7%.

Trade: The country ran a trade surplus of US$8.77bn in 2005. Exports came to US$38.59bn.

Exports in the first nine months were up by 17.6%, year-on-year, at US$6.14bn. Over half the country's exports are manufactured goods: they came to US$3.95bn, up 19% on the same period of 2005.

The country's biggest single export is integrated circuits: sales of these products came to US$875m in the first nine months. Exports of modular electronic circuits came to US$466m. Textile exports came to US$359m.

The agricultural industry is also having a decent year. In the first nine months, according to the Promotora de Comercio Exterior, it increased exports by 17% to US$1.33bn. Banana exports were the biggest export earner, at US$451m, followed by pineapples at US$316m and coffee at US$201m. Melon exports were worth US$81m.

The fishing industry is not having such a good time. Its exports were down by 7% at US$126m. The US is the country's biggest export market taking 40% of total exports. A long way behind come Hong Kong; Holland; China; Guatemala; Nicaragua; Panama; Honduras, El Salvador and Puerto Rico. 

In 2005, the country's total exports came to US$7bn, up 11.5% on 2004's result. The Promotora's target for 2006 is for exports of US$8.1bn.

Domestically, the authorities are stimulating the economy. Benchmark deposit rates hit a 14-year low in early November at 12.5% for six-month colones. So far this year, rates have fallen by 2.5 percentage points. Rates have been falling consistently since May. 

The main reason for the fall in rates has been the improvement in the government's fiscal position. This has meant that the finance ministry has been able to lower the interest rates it has to offer to tempt investors. The central bank has also been cutting the interest rates it offers on its debt in an effort to deter foreign investors from buying local currency securities. The central bank has also allowed the money supply to expand, which has prompted banks to cut the rates they offer depositors. 

The fall in inflation has also allowed banks to lower their rates. In January, 12 month inflation was 13.2%; in October it was down to 10.1%. Domestic inflation has been helped by the appreciation of the colon against the dollar, which has cut the price of imports.

Cafta-DR: President Oscar Arias reiterated in October that his government will press congress to ratify the free trade deal with the US Cafta-DR. Costa Rica is the only party to the treaty that has not yet ratified the deal. According to the foreign trade ministry, exports to the US could rise by as much as US$474m in the first year of Cafta-DR. Based on this figure, the government estimates that some 16,000 new jobs would be created, boosting employment by as much as 7%. 

Poverty: Poverty reduction has not changed since 1988, afflicting 20% of the population. The gap between rich and poor, however, has increased. Since 1988 the average income of the wealthier 20% of the population has increased by 67.9% while that of the poorest 20% has fallen by 13.9%.

The domestic economy is picking up steam again. Retail sales and economic growth in July were both much stronger than expected. Indeed the flash economic growth figure for July, 4.8% year-on-year, was the best for nine months. Inflation, however, is on the march, judging from the jump in prices in the first half of September when consumer prices jumped by 0.6% and the government's subsequent decision to freeze petrol, gas and electricty prices, even though congress has passed a proposal that will increase taxes on fuel prices.

The economy seems to be catching a second wind. Demand is being driven by the domestic economy. Retail sales in July were up 4.2% year-on-year. The problem is that the rising demand is sucking in imports: the country's trade deficit is increasing, though it is still a bit away from levels where talk of balance of payments crises should start. Even so, the trade deficit for the first eight months of the year now stands at US$6.95bn. This is the highest for any eight month period since 1994, the year which culminated with a huge balance of payments crisis and a devaluation.

There are several differences this time, however. The first is that the economy is three times as big, so in GDP terms the deficit is much smaller. The second is that the peso is floating rather than fixed, so the foreign exchange market can issue a warning about what may happen. The third difference is that last year, not the current year, was the election year. Governments are unwilling to change economic policies in an election year.

The trade deficit in August was US$1.17bn. This was the biggest monthly deficit since February. Imports were up 7.4% year-on-year, but oil revenues also fell. Weakening oil revenues are likely to be a feature of economy for the next few years unless the state oil company strikes it lucky or President Felipe Calderón Hinojosa manages to weaken Petróleos Mexicanos's monopoly on production and exploration.

In August, exports were up by 6% at US$24.2bn, but oil exports were down by 6.5%, year-on-year. Non-oil exports were surprisingly strong, rising by 8.5% year-on-year, despite the onset of the subprime crisis in the US. Vehicle exports were particularly strong, rising 21%, much faster than the overall rate of increase in manufactured exports which was 4%. Mexico is probably benefiting from the problems besetting US vehicle manufacturers: the General Motors strike in September should also benefit Mexico.

The GDP figures, for July, were clearly boosted by the pick up in the motor industry. Manufacturing output was up by 2.8%, one of its strongest performances so far this year, thanks to the motor industry. Overall industrial production was up by 2.4%, year-on-year, though the oil industry 9lurking under the mining category which was up just 1%) and construction (also up by 1%) were weak.

The fastest growing sector of the economy was agriculture which was up 8%. Agricultural data are notoriously volatile but the effects of higher agricultural commodity prices has probably encouraged farmers.

Fiscal reform
The lower chamber of congress passed a fiscal reform package on 13 September. The alliance between the ruling Partido Acción Nacional (PAN) and the Partido Revolucionario Institucional (PRI) held. The proposal now goes to the senate. The tax reforms approved by the lower chamber have four main elements.

The first is the introduction of a flat rate tax, the Impuesto Empresarial a Tasa Unica (Ietu). This will be set initially at 16.5% rising to 17% in 2009 and 17.5% thereafter. The tax which will be levied on operating profits (gross sales less labour and input costs).

The second is the gradual introduction of a new 5.5% tax on fuel over the next 18 months. This tax should yield M$22.7bn (US$2.02bn) which will go directly to states to spend. The government subsequently announced on 26 September that it was freezing fuel prices, along with electricity and gas prices until at least the end of 2007. The monthly increases in fuel prices will therefore start at the beginning of 2008 so the phased increase of the tax will end in mid-2009. This politically dangerous since mind-term congressional elections are due in July 2009.

The other two elements of the fiscal reform are a tax on bank deposits over M$25,000 and a change to the way the state oil company Pemex is taxed that should allow it to retain more of its income.

The international credit rating agencies are divided over the merits of the reform. Fitch approved of them. Moody's said that they made no difference to its view of Mexico as a credit risk. The reforms are designed to increase the government's non-oil tax revenues and so reduce its dependence on oil taxes, royalties and exports. Moody's doubts that the reforms will increase the government's tax revenues substantially. Moody's reckons that the reform will add two percentage points of GDP to the country's tax take. We would argue this is substantial, given that the non-oil tax take is around 10% of GDP. Oil taxes are currently worth around 6% of GDP.

Mexico City objects. Marcelo Ebrard, the mayor of Mexico City, claimed on 17 September that the fiscal reform penalised the capital. Ebrard complained, in his first Informe (state of the city address), that as Mexico City is not formally a state even though it is the most populous electoral district in the country it will not get any share of the new 5.5% tax on fuel. This money will go directly to the 31 states, the federal government said. Technically, Mexico City (or the Distrito Federal) is an administrative district. Ebrard claims the exclusion of Mexico City from the fuel tax revenues will cost the city M$3bn (US$272m).

The budget. The government sent the 2008 budget proposal to congress on 8 September. The budget calls for a fiscal deficit in 2008, because of what it claimed were the one-off expenses incurred by the ISSSTE reform of public sector pensions.
The government admits that GDP growth this year will drop to 3% from its revised target of 3.3%. Even the new 3% looks like wishful thinking given growing evidence of an economic slowdown in the US. The government claims that the first half of 2007 was decent economically (with 2.7% year-on-year growth), thanks to the strength of domestic demand. Even though there are clear signs that domestic demand is wilting, and the US -which takes 85% of Mexico's exports- is heading towards a recession, the government forecasts that GDP growth in the second half will be much faster than first half growth at 3.4%.

For 2008 the government is forecasting a further acceleration in the GDP growth rate to 3.5%, without a fiscal reform, and 3.7% with one. The government is conservative on oil prices, forecasting an average price of US$46.6 a barrel (despite prices nudging US$80 a barrel in New York on 12 September). It is forecasting oil production of 3.14m bpd and exports of 1.68m bpd. Law and order spending is expected to rise by 8.1%, well above the 3.4% overall increase in spending. Welfare and economic development spending will rise by only 2.7% and 2.6% respectively.

On 15 June President Hugo Chávez appointed Alí­ Rodrí­guez Araque as finance minister. There are two reasons for Rodrí­guez's return to the cabinet. Chávez appointed Rodrí­guez oil minister when he became president in 1999, and Rodrí­guez made the deals with Mexico and Saudi Arabia that cut oil production and put a floor under international oil prices which had sunk to less than US$10 a barrel on the spot market in 1998.

In the first part of July 2008 the price of Venezuelan crude hit a new record, popping over US$126 a barrel. The price has subsequently weakened (on 25 July it stood at US$117.48) but even so Chávez 's government still has money to burn.

The US House of Representatives' foreign affairs committee heard a report from Norman Bailey from the Insititute of World Politics in which he argued that Chávez has spent US$33bn on subsidies to create allies in Central America and the Caribbean. The biggest of these subsidy projects is Petrocaribe which now supplies cheap oil to 18 (including Costa Rica but not St Lucia which is also considering joining) states in the Caribbean and Central America. But Chávez has also spent heavily on propping up the Kirchner and Fernández administrations in Argentina (by buying Argentine debt) and on developing a new oil refinery in Ecuador.

Venezuela, currently the world's fifth biggest oil producer, reckons that it has the world's biggest crude oil reserves of 313bn barrels. Most of this however, is largely composed of heavy, tar-like crude, in the Orinoco belt.

The country's main economic problem is inflation, though the economy is also slowing down. Venezuela has the highest inflation in Latin America: in the 12 months to June the rate was still over 30%.

On 8 July the Central Bank of Venezuela announced that the new national index of consumer price inflation (INPC) rose 2.4% on a monthly basis in June, bringing accumulated inflation for the first half of 2008 to 15.1%. This makes the government's revised 2008 annual inflation target of 19.5%  hopelessly optimistic. Despite efforts by the authorities to boost essential supplies and to cool down domestic demand (via tighter monetary policy), inflation, led by food prices, is likely to remain strong over the second half of the year.

The risk for the government, with local elections due in November, is that voters may take their frustration out on President Hugo Chávez as their purchasing power erodes.

The inflation data coming out of Venezuela (which for the past two years has had the highest inflation in Latin America), is alarming. In the first half of 2008, food prices posted an accumulated increase of 19.3%, with health services up 16.6% and transport up 17.5%.

What is interesting, however, is that the government's policy of freeing up food markets appears has not delivered lower food-price inflation. The government removed official price caps on various staple food items (including chicken, eggs, rice and flour) in recent months in an effort to boost supplies, but food prices in the capital rose by 49.6% over the 12 months to June.

Overall, the Caracas inflation index continues to rise above the national average, with an accumulated result of 16.3% in the first half of 2008. Rodrí­guez has said repeatedly since taking office, that his main task is to combat inflation, yet the new finance minister will probably have to oversee an inflationary increase in public spending over the second half, as President Chávez channels additional funds to key states and municipalities ahead of the local elections. Moreover, despite a more restrictive monetary policy, real interest rates remain negative. Add to the mix a fixed exchange rate, and the conditions remain ripe for continued consumption.

Although government spending has risen dramatically, this has led to supply-side bottlenecks (particularly in the construction industry), which have also contributed to rising prices. The private sector has, for the most part, refused to invest in expanding its capacity. This lack of investment is now producing stuttering growth. Year-on-year growth in the first quarter was only 4.8%.

The government's problem is that increasing demand in the economy by further spending of the oil price windfall on public works projects will probably only lead to even higher inflation. The current oil price windfall is at least US$12bn (on the assumption that Venezuela oil export price averages US$95 a barrel this year). From 1 January to 25 July the average export price has been US$102.6 a barrel.

The government reckons that each US$1 change in the average oil export price moves its income by US$1bn over a year. In the first quarter of 2008 the country's oil exports were US$20.459bn. This was 68% more than the figure for the first quarter of 2007. The government has been issuing debt to pay for the spending.

According to the Banco Central de Venezuela, the country's public sector debt rose from US$29.8bn at the end of the first quarter of 2007 to US$44.3bn at the end of the first quarter of 2008. The bulk of the increase in debt has been an effort by the authorities to mop up excess liquidity: the only way the authorities were able to do that, with exchange controls, was to issue what is effectively dollar debt. What Rodrí­guez may do is to buy back some of the dollar debt with the oil windfall money.

US imports of Venezuelan oil: In the first four months of 2008 US imports of Venezuelan oil fell by 11.7% compared with the same period of 2007. The figures come from the US Energy Information Administration (EIA).  The fall is the biggest since the Venezuelan oil strike during late 2002 and early 2003. According to the EIA, US imports of Venezuelan crude dropped to 1.1m bpd in the first four months 2008, down from an average 1.3m bpd in the same period of 2007.

Even though Venezuela's state oil company, Pdvsa, claims to be producing 3.2m bpd, estimates from the Organization of Petroleum Exporting Countries for May 2008 suggest was it was producing only around 2.34m barrels/day. Pdvsa does not publish output figures and although the OPEC estimates are based on secondary sources, they echo similar estimates by private oil sector analysts.

The drop in US exports might also be attributable to President Hugo Chávez 's efforts at diversifying oil exports towards new partners, in particular to countries considered to be on more “amicable terms" with Venezuela, such as China. Venezuela is also supplying oil at preferential terms to various countries in Central America and the Caribbean under President Chávez 's Petrocaribe initiative and there are some suggestions that Pdvsa is struggling to meet all its export commitments. Exports to China were running at around 250,000bpd in April 2008.

Tax reforms: On 11 June President Hugo Chávez of Venezuela announced a package of economic measures. The package was trailed by the government as an anti-inflation initiative. In fact the key elements are popular, and, arguably liberal. The most important changes are the dropping of the new financial transactions tax for the rest of the year (coupled with a commitment not to introduce any new taxes this year) and the simplification of exchange controls for foreign purchases of capital goods up to US$50,000.

The decrees authorising these changes have a deadline of the end of 2008. Chávez faces crucial municipal and regional elections this November. Chávez said that the new taxes were not needed because of the surge in oil prices. He said that he expects the country's oil revenues this year to be around US$75bn.

Academic economists have questioned the country's impressive growth statistics. They say that the figures may be too optimistic and that the country may now be falling into recession.

The official Instituto Nacional de Estadí­sticas e Informática (Inei) changed its methodology for calculating GDP in January. Using the new system, year-on-year GDP growth was 3.1% in January; 0.19% in February and 3.05% in March.  Bruno Seminario, from the Universidad del Pací­fico, said that if the old methodology was used, there was a year-on-year contraction in each month: 0.5%; 1.38% and 1.71%.

The big problem with the new methodology is that it includes surveys designed to gauge how the service industries are doing. These new surveys measure retailing, restaurants and other services. The Inei argues that the old methodology, which dated from 1994, was no longer appropriate as it failed to measure large chunks of the service sector (such as the internet, which barely existed in 1994).

What is clear is that the change may have overcompensated. In March, on the official figures, the service sector grew by 7% year-on-year while the manufacturing sector contracted by 5%. 

Seminario argues that the change to the new methodology has generated so many distortions that nobody knows what's going on. He argues that Peru is now suffering a recession similar to that which followed the 1997-8 Asian financial crisis, and that Peru's economy has ground to a halt after surging nearly 10% in each of the last two years on a boom in commodities prices.

Other economists also complain that the new methodology is a bit of a black box, pointing out that it wasn't subjected to a public comment period by independent statisticians before being trialled in 2007 and then launched this year.  Seminario points out that the Inei has yet to publish the surveys and the deflators.

Farid Matuk, a former head of the Inei, fired after President Alan Garcí­a took office, also argues that the numbers are inflated. This has prompted the government to file lawsuits against him, alleging that his criticisms were politically motivated. 

Inflation: Inflation, which is measured by both the Inei and the Banco Central de Reserva, is slow. This suggests that the Inei's index showing spectacular growth in the service sector is probably wrong. As a lot of services are non-tradeable, suppliers tend to push up prices when demand is strong. In April, consumer prices rose by 0.02%. This was lower than March's 0.36%. For the first four months the rate was 0.4%. The rate for the past 12 months is 4.64% and the rate for 2008 was 6.65%.

The Banco Central de Reserva forecasts that inflation in 2009 will be around 2%. Independent economists are pencilling in a rate of 3%. The central bank clearly does not view inflation as a problem because it cut interest rates at its May meeting by one percentage point to 4%. The central bank is due to consider interest rates again at its meeting on 4 June.

Textile exports in January 2010 were 7% higher in cash terms than in January 2009. The industry was pleased with the result and is bullish about its prospects for 2010. Some manufacturers pointed out that exports were still 16% down in cash terms on what they shipped in January 2008.

On a cash basis, textile exports were only up a slight US$3m, at US$60.6m, in January 2010. In volume terms, they were down 1% year-on-year.

Dean Garcí­a, of the Asociación Nicaragüense de la Industria Textil y de Confección (Anitec), said that the industry shipped 20.4m square metres of cloth and clothing compared in the month, compared to 20.6m square metres in January 2009.

He pointed out that only El Salvador and Nicaragua among Central American textile producers managed to increase their exports on an annual basis in January 2010. Costa Rica saw a 31% year-on-year fall, Guatemalan posted a drop of 4%, while Honduras and the Dominican Republic recorded falls of 1.3% and 0.9% respectively. In comparison, El Salvador's exports rose 3.9% year-on-year.

Garcí­a says that the industry is expecting an increase in exports of between 5% and 7% this year. In 2009, exports fell 6%, in annual terms.

Border controls: A three-week dispute over imports and exports of perishable products such as chicken meat, eggs and chicks from Costa Rica and Honduras appeared to have ended on 13 March. A negotiated agreement calls for Nicaraguan importers of onions, garlic, cabbages and potatoes to provide fito-sanitary certificates. Importers say that the government's fussiness has cost them millions of dollars in spoilt goods. As a result of this deal, exports of chicken products to Guatemala have restarted. Guatemala had banned Nicaragua chicken products for fito-sanitary reasons. The other big problem is the Costa Rican ban on Nicaraguan beans: the Managua government claims to be making progress on this issue.

Inflation: In February monthly inflation was 1.47%, well above the January rate of 0.97%. The accumulated rate for the first two months of the year was 2.44%, putting the country back on course for an annual inflation rate in the middle teens in 2010. In 2009 the annual rate was under 2%.

An international business newspaper, the Financial Times, recently reported that in China was now lending more to the developing world than the World Bank, which is traditionally the world's biggest development lender.

Although a lot of China's lending is to Africa and Asia, it also claims to  have increased its lending to Latin America. Venezuela, which is supplying increasing amounts of oil to China, has been the rare beneficiary of a renminbi loan, one of the few experiments China has made with liberalising its capital account. The loan is used by Venezuela to pay for imports from China.

The FT reported that China's two main development lenders, China Development Bank and China Export-Import Bank, signed loans of at least US$110bn with other developing country governments and companies in 2009 and 2010. In a comparable period (mid-2008 to mid-2010) the World Bank (though the IBRD and its private sector finance arm, the IFC) agreed loans of US$ $100.3bn. 

What is not clear is whether all of China's deals with Latin America have come off. Argentina has long claimed to be a major beneficiary of Chinese loans but there is little sign of the money actually being delivered. On the other hand China has taken over from the World Bank as the financier of the country's hydro-electricity projects, notably Coca Codo Sinclair.

As China has become the biggest financier of the US economy (through its holdings of US Treasury bonds) it is hardly surprising that it is hedging its bets by increasing its involvement in developing economies. So far China has also rejected tentative World Bank overtures to coordinate lending to projects in the developing world.

According to the FT, the CDB and EximBank provide easier terms than the World Bank and other lenders for certain deals that are strongly supported by Beijing, but offer terms that are closer to international standards for less politically sensitive deals. They also tend to impose less onerous transparency conditions. So far, and unlike the World Bank, China does not appear to have any non-performing loans in its growing portfolio.

Neither the CDB nor China EximBank publish figures for their overseas loans. At least one of the experts consulted by the FT to consult on its figures suggested that they were more likely to be an understatement than an overstatement.

The FT figures also do not include China's direct equity investments in developing countries. The ball park figure from a variety of sources is that Chinese companies invested US$50bn outside China in 2010. This was at least a third up on their 2009 FDI figure. What makes this interesting is that China itself received at least US$100bn in FDI in 2010.China is the world's largest recipient of direct investment and the fifth largest foreign investor.

Guatemala: The country's foreign debt increased by US$633m in 2010 to US$5.56bn, according to the finance ministry. The main reason for the increase was a US$208m loan from Japan. Multilateral loans account for US$4.2bn of the total. The government owes less than US$1bn (US$955m) to the international bond markets.

Argentina's lower chamber has given its approval to the government's proposals for enhancing the powers of the central bank, the BCRA. Under the proposed changes the BCRA will be able to make larger loans to the government and will have the power to restructure Argentina's financial system. This law represents a key compromise with the IMF as Argentina attempts to secure a new three-year debt deal with the multilateral in September.

Yesterday's reforms, which had already gained approval in the senate on 18 June, will change the central bank's constitution, altering the terms at which the BCRA can advance money to the government. The IMF wants the government to start paying back some of the money owed to international financial organisations under the proposed three-year debt restructuring deal which Buenos Aires wants signed by 9 September. President Néstor Kirchner is, however, against the idea of dipping into Argentina's US$13.3bn foreign currency reserves to do so.

Under the new laws, the BCRA is set up as an organism independent of the government and it can make greater loans to the treasury provided that the money is used to repay international financial organisations. This pleases both parties; the IMF has long campaigned for greater central bank autonomy, while Buenos Aires can say that it is not paying from its reserves outright, but rather undertaking a short-term loan from the BCRA.  

This new system might be put to the test rather soon. If Argentina and the IMF do not reach a deal by 9 September Buenos Aires will have to pay off a debt to the multilateral of US$2.9bn which falls due on that date.

The chamber of deputies also passed a reform of the financial entities law to allow the central bank greater powers to improve the financial system. In particular the BCRA's directors will be immune from prosecution, thereby allowing them greater leeway to bail out or close banks as they see fit, for example. The reforms also made it clear that only the BCRA was able to issue money, and ruled out the possibility of provinces issuing bonds as has happened over the last two years.

The US will be as pleased as the IMF by yesterday's legislation. Washington has so far backed Buenos Aires in its negotiations with the multilateral, but there have been signs recently that the US is growing impatient with the process. Secretary for western hemisphere affairs Roger Noriega said on Tuesday that he wanted Buenos Aires to be more transparent with its economic and political plan.

Yesterday was not, however, a total triumph for the government. The chamber of deputies did not manage even to debate a law Kirchner wants implemented to compensate banks for losses incurred when dollar loans and deposits were converted into local currency.

President Hugo Chávez called on Opec to push the oil price up to between US$25 and US$32 a barrel. Currently, Opec is trying to keep oil prices in a range of US$22 to US$28 a barrel. It cut its export quotas last week to underpin prices.

Chávez did not say where or when he would lobby Opec to raise the price band. He claimed that the issue had already been discussed and would be developed further. Opec officials said that oil ministers had not discussed an alteration to the price band at their most recent meeting in Vienna. The next Opec summit is scheduled for 2005. The next ministerial meeting is scheduled for 4 December. 

Oil prices are, if anything, slightly outside the Opec band already. In New York the oil prices is US$29.4 a barrel, while in London it is trading at US$27.88 a barrel.

Saulo Abreu, the security minister for the state of São Paulo, blamed Brazil's neighbours for the crime wave that is breaking over the country. He said that Uruguay allowed money laundering, Paraguay winked at electoral fraud, and that in Peru the last president had fled. Brazil, Abreu believes, is suffering the consequences.

Abreu claimed that Brazilians were not bandits or guerrillas but such people were now active in the country. He added that the local authorities must do more to combat organised crime. He said, in particular, that there should be more controls on the border with Paraguay to stop arms getting into the country.

Abreu's outburst came in a TV interview. He was discussing the unprecedented wave of attacks by the main drug trafficking gang in São Paulo state, the Primeiro Comando da Capital, on the authorities. Since Sunday three civil and three militarised policemen have been killed in attacks on police stations. At least nine have been wounded.

Most of the leadership of the PCC is in jail. In 2001 the PCC organised one of the biggest prison riots in the state which left 21 prisoners dead. The authorities claim that the PCC is carrying out the attacks to try to force easier conditions for its leaders who are mostly held in solitary confinement in high security jails such as Presidente Bernardes, Avaré and Taubaté.

The discovery yesterday of 707 kilos of high explosives near the city of General Roca in Rí­o Negro has been greeted with no small amount of relief. Argentina was placed on national alert after the explosives, which were of sufficient quantity to do considerable damage if used against civilian targets, were stolen from a nearby mine some time between 5 and 9 December.

It is still not known who was behind the robbery, or what their intention was. The explosives were found in a canal beneath a busy road bridge, but it does not appear that they were primed to go off. What is known, however, is that the perpetrators were in possession of twice the amount of explosives used in the attack on the AMIA Jewish mutual association in Buenos Aires in 1994 in which 85 people were killed.

Argentina has been particularly jittery on the subject of terrorism after the government announced on 26 November that it had received warnings of an imminent attack on Buenos Aires. The government said it had received information from two separate foreign intelligence agencies indicating that terrorists would target US, British, or Spanish interests in the capital.

Peru's exports increased 15.6% year-on-year in 2003 to US$8.9bn. Foreign trade minister Alfredo Ferrero said that Peru registered a positive trade balance of US$432m. He said that he expects exports to top US$10bn in 2004.

Exports were driven by chemical products, which increased by 23% year-on-year, textiles (22%), mining (21%), iron and steel (19%), and agriculture and fishing (10.5%). The main destinations for exports were the US (US$2.3bn), the EU (US$2.26), and Asia (US$1.42bn). The Mercosur trading bloc still only accounts for a tiny fraction of Peru's total exports at US$260m.

Peru recently joined the Mercosur trading bloc as an associate member in a bid to boost exports. It is scheduled to start talks with the EU in May and hopes to secure a free trade agreement with the US by next year.

The first violent confrontation in the election campaign came yesterday in Nigua, San Cristóbal, when rivals from the Partido de la Liberación Dominicana and the ruling Partido Revolucionario Dominicano exchanged shots. One PRD member was shot in the chest and is intensive care while three PLD supporters were hit. A PLD deputy accused the bodyguards of a PRD senator of starting the shooting.

Separately, President Hipólito Mejí­a, who is running for re-election, has offered a TV debate against Leonel Fernández from the PLD. Fernández is well ahead in the opinion polls, but political commentators fear that Mejí­a will do anything he can to hold on to office. He has pushed through improvements in the electricity supply and has cut the price of rice - a staple food - at government stores. The elections are due on 16 May.

The third party in the elections, the Partido Reformista Social Cristiano, has hired the US political consultant Dick Morris to help its candidate Eduardo Estrella. At the weekend Estrella claimed that had more chance of beating Fernández than Mejí­a. Estrella's nomination as the PRSC candidate was, apparently, orchestrated by Mejí­a.

Jorge Rodrí­guez, one of the five commissioners on the Consejo Nacional Electoral (CNE), said that the government and the opposition had agreed on a method and date for double-checking 1.1m opposition petitions. These petitions had been sent for double-checking by the CNE because of its doubts over whether the people who were purported to have signed them actually had.

Rodrí­guez said that the full CNE board should rubber-stamp the agreement, reached last night, today. The deal sets 20 to 24 May as the period when the 1.1m people who the opposition claims support its petition should confirm in person that they did and still do. The opposition needs 2.4m valid signatures to force a referendum on Chávez . So far the CNE has confirmed 1.8m signatures on its petitions.

According to Rodrí­guez there will be 2,659 confirmation centres scattered across the country and the names of the dodgy signatories will be published in the media. Of the 1.1m signatures sent for double-checking 876,017 were deemed to have had their personal details filled in by some-one other than the signatory. The period for double-checking the government-supported referendum on opposition supporting deputies will be from 13 to 17 May.

The city of Cuernavaca was hit by three small explosions early in the morning of 23 May. Cuernavaca is the capital of the state of Morelos. According to the state authorities three bombs went off simultaneously.

A hitherto unknown group, the Comando Jaramillista Morelense 23 de Mayo, claimed responsibility for the explosions, all of which had banks as their targets. The group appears to be named after Rubén Jaramillo, who joined the Mexican Revolution and Emiliano Zapata aged 14 in 1914, and was murdered with his family on 23 May 1962. Every year since then his martyrdom has been observed in the village where he lived in the southern part of the state.

The Comando also accused the governor of Morelos, Sergio Estrada, of leading a gang of drug traffickers. Senior members of his government have been forced to resign because of their links to a criminal gang, and the governor himself is undergoing his second investigation.

Development: The World Bank approved two loans for Argentina on 29 June worth US$700m. The Bank has, however, made dispersal of US$250m of the loans dependent on Argentina fulfilling its commitments to the IMF.

Significance: The World Bank has added its voice to the intense pressure Argentina is already facing to restore relations with the financial community. In particular, the Bank called on the government to finalise the restructuring of its defaulted commercial debt and to complete the negotiation of new contracts with privatised utility companies. The government also had to agree to speed up its compensation of the banks for the losses suffered when the peso was devalued.

With its access to financial markets severely constrained, Argentina is relying on multilateral assistance. The World Bank, which traditionally adopts a softer line than the IMF, is sending a clear message that it is not to be taken advantage of. It is the larger of the two loans that stands to be affected if the Fund fails to approve its third review of the Argentine economy. This credit, worth US$500m, is to be used for helping the economic recovery. The other credit, worth US$200m, is for improving Argentina's road network.