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Cuba y Venezuela se están moviendo en direcciones opuestas. El Presidente de Venezuela, Hugo Chávez , visitó Cuba esta semana para celebrar el décimo aniversario de la sociedad especial firmada entre los dos paí­ses. El Presidente de Cuba, Raúl Castro, aprovechó esta histórica ocasión para anunciar que el Partido Comunista de Cuba (PCC) celebrarí­a su largamente anticipado congreso en abril de 2011, nueve años más tarde de lo programado, para establecer la futura dirección de la Revolución. Castro presentó a Chávez una copia de un documento clave que será discutido en el congreso: en él se aboga por ampliar el sector privado y atraer la inversión privada sin renunciar al socialismo. La ironí­a era inequí­voca: Chávez está poniendo frenos al sector privado, desalentando la inversión extranjera, y todo en nombre del socialismo.

Chávez y Castro extendieron el acuerdo de cooperación de 10 años de existencia entre los dos paí­ses, que crudamente ve al petróleo yendo en una dirección y a los doctores en la otra, por otra década más. La extensión de este acuerdo es imperativo para la supervivencia económica de la Revolución. Por tanto, afirmó Castro, es el congreso del partido que se celebrará en la segunda mitad de abril del año próximo, el que marcará el 50mo aniversario de la fallida invasión de Bahí­a de los Cochinos (presentada por los cubanos como la victoriosa Batalla de Girón y la proclamación del carácter socialista de la Revolución Cubana). El futuro de la economí­a será el tema principal del congreso del partido, subrayando las reafirmaciones rituales de la ideologí­a socialista de Cuba.

La oportunidad del congreso, en cuestión de dí­as después de la fecha tope para el eufemí­stico despido de 500.000 trabajadores del estado, muestra que el gobierno reconoce que podrí­a necesitar reaccionar a los acontecimientos en el terreno, no menos por las dificultades asociadas con los mimados miembros del aparato comunista que repentinamente se convierten en empresarios en ciernes. Eso también valora la necesidad de atraer al público: las discusiones públicas se celebrarán entre el 1 de diciembre y el 28 de febrero, basado en un borrador de proyecto para la nueva economí­a socialista de Cuba, un documento de 32 páginas bajo el tí­tulo 'Guí­as de Polí­tica Económica y Social'. Eso difí­cilmente sea la quintaesencia de la doctrina marxista. Castro insiste en que “el planeamiento y no el mercado" será primordial en actualizar la economí­a, pero los cambios en la estructura y el concepto de la economí­a cubana evoca a aquellos introducidos por Deng Xiaoping entre 1979 y 1983 en China, que se alejaban de la economí­a socialista mientras preservaba el status quo polí­tico.

El documento recapitula las reformas económicas ya anunciadas en agosto, como la racionalización y modernización del “abotagado" sector estatal, incrementando el tamaño del sector privado de contribuyentes fiscales y reducir el enfoque paternalista de la Revolución [IL-10-31], desarrollando todos estos y agregando varios más. Promete, entre otras cosas, ofrecer créditos bancarios para apoyar al naciente sector privado; para crear un sistema financiero más sofisticado; para reestructurar la deuda externa y cumplir las obligaciones de su servicio para mejorar la credibilidad del estado; para crear un ambiente más favorable para los inversionistas extranjeros; y para relajar las restricciones sobre la venta de propiedades (para alentar el flujo de dinero de los cubanos expatriados).

El gobierno espera realizar esta transición económica forzando a los cubanos ordinarios a volverse más autosuficientes. El Estado mantendrá los servicios gratuitos, como la salud y la educación para los más necesitados, pero “el gasto social será ajustado en lí­nea con los recursos disponibles"; la libreta de racionamiento mensual, un sí­mbolo del paternalismo del estado por décadas, será eliminada gradualmente, y las compañí­as ineficientes serán cerradas. Esas podrí­an ser las más riesgosas reformas polí­ticamente, pero la más importante reforma económica, que dictará el éxito de todos los otros cambios propuestos, es la promesa de poner fin a la moneda dual.

Las distorsiones de la moneda dual son una de las causas de la seria crisis en la balanza de pagos que Cuba ha sufrido en los últimos pocos años. El peso convertible, en el cual se venden los productos importados, vale 24 veces más que el peso cubano, moneda en la que se pagan los salarios. La mayorí­a de esos productos son “lujos" pero si el gobierno aboliese los subsidios en los í­tems más esenciales eso podrí­a causar enormes problemas. Al reducir el tamaño del sector estatal, el gobierno claramente espera que podrá ser constantemente capaz de incrementar el valor del peso cubano pues las nóminas de pagos de salarios del estado habrán sido reducidas, pero es probable que lleve años hacer un puente sobre la brecha entre las dos monedas. Mientras tanto, el sector bancario está en una crisis sistémica de liquidez sin una entidad crediticia de último recurso.

Mientras Castro intenta conducir la nave del estado cubano fuera de las profundas aguas socialistas, Chávez está avanzando a todo vapor hacia ellas. Su constante í­mpetu de forzadas nacionalizaciones de compañí­as privadas en su transmisión semanal por radio y televisión de su programa Aló, Presidente, provocó una cáustica nota en el diario El Universal el 9 de noviembre de un concejero opositor en la municipalidad de Baruta, en Caracas, titulada ¡Aló, exprópiese! La nota afirma que 26 compañí­as habí­an sido expropiadas en los 34 dí­as previos, creando un enorme desincentivo para la inversión extranjera.

Aunque esto provee un marcado contraste con los desarrollos económicos en Cuba, no hay sugerencias que Castro y los veteranos revolucionarios que lo rodean están por aflojar su control sobre el poder polí­tico. El estado de un solo partido está tan firmemente afianzado como siempre y las reformas polí­ticas no están en la agenda del congreso del PCC. Sin embargo, Castro anunció que se celebrarí­a una conferencia nacional del partido más tarde en el año. Dependiendo cuán bien el congreso del PCC y las reformas económicas vayan, Castro podrí­a sentir la presión entonces para inyectar algún vigor juvenil en el politburó y el consejo de estado. El gran imponderable cuán activo será el rol que su hermano Fidel piensa asumir en todo el debate. El ha cedido muchos de sus tí­tulos a Raúl, pero él aún es el primer secretario del PCC.

• La balanza comercial

Cuba ha logrado restringir las importaciones mientras incrementaba las exportaciones en los primeros nueve meses del año, arguyó el ministro de comercio exterior, Rodrigo Malmierca, permitiendo al gobierno cumplir con algunas de sus deudas impagas con los acreedores extranjeros e incrementar la credibilidad del paí­s para otros inversionistas. Malmierca dijo que las importaciones crecieron en solamente 1% en los primeros nueve meses, mientras las exportaciones se elevaron en 21%, recortando el déficit comercial en 7%. Cuba exportó bienes por un valor de US$2,9bn en 2009, con importaciones de US$7,1bn, dejando un déficit de US$4,1bn, dijo. Eso hizo que el gobierno congele las cuentas en bancos cubanos de negocios extranjeros y frenar los pagos a muchos proveedores extranjeros.

Una cierto tipo de golpe correcto
En cualquier otro paí­s en el Hemisferio Occidental, excepto Cuba, los comentarios hechos esta semana por el más alto comandante de las fuerzas armadas en Venezuela, habrí­a provocado la abrupta terminación de una carrera militar. Hablando en el diario de Caracas, Ultimas Noticias, el General Mayor Henry Rangel Silva dijo que la perspectiva de un gobierno de oposición no solamente era “duro de tragar" sino que “no serí­a aceptado, por las fuerzas armadas, o por el pueblo". El Presidente Chávez ha hecho mucho para desdibujar las distinciones constitucionales entre el Estado y el ejército -Rangel, en primer lugar, es el comandante operacional estratégico de la Fuerza Armada Nacional de la República Bolivariana de Venezuela. Rangel dijo que la oposición actúa “con el apoyo de terceros paí­ses", que afecta el “nacionalismo" -y los militares no aceptarí­an eso. La opositora Mesa de la Unidad Democrática (MUD) dijo que los comentarios eran enteramente inapropiados. La prensa opositora, con alguna justificación, señaló que eran equivalentes al anuncio de un golpe de estado preventivo, y que solamente las distinciones ideológicas hacen este aceptable y el breve golpe que desalojó a Chávez en 2002 inaceptable.

El Presidente Felipe Calderón  se reunió con el Presidente de EU, Barack Obama en la Casa Blanca el 3 de marzo. La quinta reunión entre los dos lí­deres fue claramente la más difí­cil hasta ahora. En la etapa previa a la reunión, ambas partes señalaban el resultado que deseaban de la cumbre. Calderón lo fue haciendo crecientemente claro, culminando en una serie de entrevistas con el Washington Post poco antes de reunirse con Obama, que él deseaba que el embajador de EU en México, Carlos Pascual, sea retirado. Las dos principales ambiciones que EU deseaba obtener de la cumbre fueron tener a los dos sospechosos acusados de la muerte de un agente de Immigration & Customs Enforcement (ICE) extraditados para afrontar juicio en EU, y persuadir a México que deje de lado su prohibición que funcionarios de EU porten armas en México. Aunque EU obtuvo más que México de la cumbre, el único resultado claro fue el anuncio de otro intento para resolver la antigua disputa sobre el acceso de camiones mexicanos de carga en las carreteras de EU.

Los eventos que siguieron a la cumbre no han mejorado las relaciones entre los vecinos. México aún debe responder formalmente a la revelación que EU habí­a permitido deliberadamente que rifles de asalto y otras armas sean introducidas de contrabando en México (bajo la “Operación Rápido y Furioso") a fin de descubrir las redes que usan los gangsters. El ministerio de relaciones exteriores ha pedido al Departamento de Estado de EU que expliquen lo que estaba pasando.

Es probable que la riña continúe. El ministro del interior de México, Francisco Blake Mora, debe testificar ante la cámara baja del congreso acerca de lo que conoce el gobierno mexicano sobre la “Operación Rápido y Furioso". La operación fue montada por la Oficina de Alcohol, Tabaco y Armas de Fuego y Explosivos de EU (ATF, siglas en inglés. La ATF admitió que “miles" de armas fueron ingresadas de contrabando para las bandas de drogas de México. La cifra oficial es 1.998. La ATF, al parecer, ha perdido el rastro de 1.200 de esas armas que permitió que ingresen a México.

El comité nacional de defensa de la cámara baja ha pedido a Mora y a otros dos funcionarios, Alfredo Gutiérrez, de la oficina fiscal nacional, y Gerardo Perdomo del servicio de aduanas, que testifiquen. El congreso desea saber si EU habí­a informado al gobierno mexicano acerca de “Rápido y Furioso" y qué resultados se obtuvieron. Un agente de ATF, John Dodson, dijo a un canal de TV de EU, CBS, que la ATF deliberadamente habí­a guardado la información acerca de “Rápido y Furioso" de los mexicanos.

La “Operación Rápido y Furioso" comenzó en octubre de 2009. La ATF decidió permitir la compra ilegal de armas para que “camine" a fin de rastrear su camino y construir casos más sustantivos contra criminales más antiguos. Los funcionarios de la ATF dijeron al Centro para la Integridad Pública que la ATF permitió que un total de 1.998 armas pasasen de las tiendas de armas a los compradores de paja conectados con las redes de armas, con el entendimiento total que esas armas podí­an ser usadas en la comisión de delitos. De esas armas, 797 fueron recobradas por la ATF como resultado de alguna clase de investigación, incluidas 195 dentro de México.

La “Operación Rápido y Furioso" se volvió controversial dentro de la ATF cuando dos de las armas de contrabando fueron encontradas en la escena de los disparos el 14 de diciembre de 2010 contra el agente de la patrulla de frontera, Brian Terry, en la frontera México-Arizona. Al parecer también resultó que el arma usada para matar a Jaime Zapata, el agente de ICE muerto en México el 15 de febrero de 2011, también fue proveí­da bajo la “Operación Rápido y Furioso".

William Brownfield, Secretario Asistente para la Oficina de Asuntos Internacionales de Narcóticos y de Aplicación de la Ley en el Departamento de Estado de EU, defendió la Operación Rápido y Furioso durante un viaje a México el 7 de marzo. Brownfield alegó que cuando todos los datos sean introducidos, la operación demostrarí­a haber sido altamente exitosa. Durante su viaje a México, Brownfield  se reunió con Julián Ventura, el vicecanciller responsable de las relaciones con América del Norte y la canciller, Patricia Espinosa.

En la conferencia de prensa después de la cumbre del 3 de marzo, Obama elogió cuidadosamente a Calderón por su coraje en confrontar a las bandas, pero no hubo un aval de su estrategia y, lo más importante, clara evidencia que las relaciones se estaban enfriando. Obama, quizá inconcientemente, subrayó cuán difí­cil habí­a sido la reunión con Calderón, cuando dijo que la última reunión de Calderón con él (en la primavera pasada) fue “muy productiva".

Calderón no tuvo ninguna chance de Obama sobre su intento de lograr que Pascual sea retirado. El giro de EU es que los controversiales comentarios de Pascual acerca de la poca fiabilidad en el ejército y la policí­a en México, en cables al Departamento de Estado, publicados por WikiLeaks, eran válidos. Calderón criticó fuertemente esos comentarios [IL-11-08], pero EU se mantuvo del lado de su embajador.

Funcionarios de EU dieron dos argumentos sobre Pascual. El primero, que sus comentarios en el sentido que la inteligencia de EU sobre los gangsters de la droga no fue tomada para actuar de parte del ejército y la policí­a de México, es válido. EU ha señalado que los marines mexicanos, que aparentemente ve como menos subyugados ante los gangsters que la policí­a y el ejército, actuaron rápidamente en base a inteligencia de EU y tomaron a su hombre: el caso puntual fue Arturo Beltrán Leyva, un importante gangster, el año pasado.

El segundo punto es que funcionarios de EU habí­an filtrado a la prensa de EU que Calderón estaba contra Pascual por razones de polí­tica interna. Pascual habí­a estado saliendo con Gabriela Rojas Jiménez por al menos un año. Ella es la hija de Francisco Rojas Gutiérrez, el lí­der del opositor Partido revolucionario Institucional (PRI) en la cámara baja del congreso.

La determinación de EU de mantener a Pascual en su puesto, y el escándalo sobre la “Operación Rápido y Furioso", es improbable que mejoren las relaciones bilaterales durante los restantes 21 meses de Calderón en el poder. Por lo tanto, es también improbable que EU haga mucho progreso sobre las dos cuestiones que Calderón deseaba abordar en la cumbre: el derecho de funcionarios de EU de portar armas en México; y si los mexicanos sospechosos acusados de asesinar al agente del ICE debí­an ser extraditados a EU donde ellos podrí­an enfrentar la pena de muerte.

Ambas cuestiones son inmensamente difí­ciles para Calderón. Calderón prometió tratar de hablar con el senado mexicano a fin de hallar alguna salida para elevar la seguridad de funcionarios de EU en México. Calderón también afirmó que no habí­a discutido la cuestión de la extradición con Obama, pero implicó que la presidencia mexicana no podí­a pasar por encima de la ley, que impide la extradición de ciudadanos mexicanos que afrontan cargos capitales en EU.

Calderón entrevistado
El Washington Post, que entrevistó al Presidente Calderón antes de reunirse con el Presidente Obama, informó que Calderón estaba extremadamente poco feliz con el embajador de EU en México, Carlos Pascual. Se le preguntó a Calderón si él podrí­a seguir trabajando con Pascual, y replicó: “Esa es una cuestión que quizá hablaré con el Presidente Obama." Preguntado si él aún tení­a confianza en Pascual, Calderón respondió: “Es difí­cil de construir, y es fácil perderla."
     Según informes, Pascual y el Presidente Calderón no se han reunido por tres meses y Pascual, rompiendo el protocolo usual, no acompañó a Calderón en su viaje a EU. Hace un año, Pascual y Gabriela Rojas, fueron huéspedes en la cena oficial en la Casa Blanca dada por los Obama, para Calderón y su esposa.

Camiones
La consecuencia inmediata del acuerdo EU-México sobre los camiones, anunciado el 3 de marzo, es que México ha prometido poner fin a sus tarifas sobre 200 productos de EU. Esas tarifas fueron impuestas en represalia por la negativa de EU de adaptarse al acuerdo de libre comercio de América del Norte (Nafta), abriendo su mercado de transporte sobre tierra. EU promete un programa gradual para permitir a los camiones mexicanos en las carreteras de EU e insinuó que eso podrí­a ocurrir tan pronto como agosto de este año. México, de acuerdo con funcionarios mexicanos, ha acordado poner fin a 50% de las tarifas elevadas en represalia cuando se firme el nuevo acuerdo definitivo. El otro 50% tendrá fin cuando el acuerdo sea implementado y el primer camión mexicano cruce la frontera de EU con la nueva autorización.

Once organizaciones de seis paí­ses se reunieron en Cuzco, Perú, en julio de 2006 para lanzar la Coordinadora Andina de Organizaciones Indí­genas, que aspiraba representar a los pueblos indí­genas de toda la región andina. Ellas establecieron una agenda que convoca a que todos los paí­ses de la región sean "re-fundados como estados plurinacionales" en los cuales los territorios de los pueblos indí­genas son intocables y gobernados de acuerdo a las tradiciones indí­genas. Aunque algunas de las organizaciones participantes han jugado importantes roles polí­ticos en sus paí­ses, ninguna de ellas es un partido polí­tico.

Fue una reunión inusual. Estaban representados Argentina, Bolivia, Chile, Ecuador, Colombia y Perú -pero no Venezuela, pese al hecho que la reunión emitió una declaración de "solidaridad con el proceso social y progresista de los gobiernos de Venezuela, Cuba y Bolivia". De las 11 organizaciones fundadoras, sólo seis eran explí­citamente indí­genas. Además, en su documento final, ellos se declaran representantes de 16 llamados pueblos indí­genas andinos -bastante menos de los que varios de los participantes usualmente afirman representar.

En la lista estaban los Quechua, el mayor grupo indí­gena en Bolivia y Perú, y también presente en Argentina y Chile; los Kichwa, el más grande grupo en Ecuador; los Aymara, el segundo mayor en Bolivia y Perú, y presente también en Chile; y los Mapuche, el mayor grupo en Chile, también presente en Argentina. El único grupo colombiano mencionado fue el pueblo Guambiano, que está en octavo lugar, por su tamaño. Ausentes en la lista estaban los pueblos amazónicos de Bolivia, Perú y Ecuador (aunque en el último, los Kichwa del Amazonas es el tercer más grande grupo). Por otro lado, estaban incluidos un número de grupos menores de Bolivia (Chuwi, Larecaja, Kallawaya, K'ana, Killaka, Uru), Ecuador (Cayambi, Sarapuro) y un subgrupo Mapuche (los Lafquenche) a ambos lados de la frontera de Chile y Argentina.

Tres de las organizaciones fundadoras, aunque predominantemente indí­genas, no se identificaban explí­citamente como tales. Ellas son: la Confederación Sindical Unica de Trabajadores y Campesinos de Bolivia (CSUTCB); la Confederación Nacional Agraria (CNA), del Perú, y la Confederación Campesina del Perú (CPP), que provienen de la época cuando las comunidades indí­genas rurales de esos paí­ses se organizaron en términos de su identidad como "campesinos". La CSUTCB -actualmente dividida- es, quizá, la organización que ha representado mejor a los pueblos indí­genas de Bolivia. La Confederación Nacional de Comunidades del Perú Afectadas por la Minerí­a (Conacami) es una organización militante que representa a las comunidades peruanas, predominantemente indí­genas, que se oponen a la penetración y ocupación de sus territorios por las compañí­as mineras.

La Confederación de las Nacionalidades y Pueblos Kichwas del Ecuador (Ecuarunari) constituye el núcleo de la Confederación de Nacionalidades Indí­genas del Ecuador (Conaie): representa a los más grandes grupos indí­genas del paí­s y se ha convertido en el defensor de los amplios intereses indí­genas. El Consejo Nacional de Ayllus y Markas del Qullasuyo de Bolivia (Conamaq) es por lejos mucho más claro en su naturaleza polí­tica: busca el reconocimiento oficial para las formas indí­genas tradicionales de gobiernos locales.

La agenda

La Coordinadora declara que ha sido formada para poner fin a la práctica bajo la cual otros (el Banco Mundial, BID, la Comunidad Andina, CAN, gobiernos, ministerios y ONGs) pretendan "traducir" o "interpretar" las demandas de los pueblos indí­genas. En cambio, dicen, "Ahora nosotros los invitamos a ellos para debatir las propuestas de nuestros pueblos."

Al tope de agenda indí­gena andina propuesta por la Coordinadora, está la declaración que los territorios de los pueblos indí­genas son "intangibles" -en verdad, que ellos deben ser "reconstituidos", junto con las instituciones de los pueblos indí­genas. Eso está acompañado con la exigencia de prohibir la privatización o "mercantilización" del agua "y la Madre Tierra", y la expulsión de las compañí­as transnacionales de los territorios indí­genas.

La agenda también incluye la demanda que todos los gobiernos andinos deben firmar, ratificar e implementar la Convención 169 de la OIT (sobre los derechos de los pueblos indí­genas); que la autonomí­a y el autogobierno de los pueblos indí­genas sean respetados, como también sus derechos colectivos a la cultura, identidad, salud y educación, más el derecho a ser consultados sobre cualquier polí­tica o proyecto relacionados con los recursos naturales, y de vetarlos.

La Coordinadora propone que esos derechos reciban status constitucional, a través de asambleas constituyentes en las que deben incluirse a representantes de los ayllus, markas y comunidades "no ví­a partidos o elecciones tradicionales". En el mismo sentido, la agenda pide la "participación polí­tica en los procesos nacionales, basados en el trabajo de las comunidades, para que ellas puedan guiarlos y tomar las decisiones." Para el futuro, la agenda prevé la creación de la "confederación de las nacionalidades y pueblos indí­genas del Tawantinsuyo y del Abya Yala". Tawantinsuyo es el nombre que los Incas daban a su imperio; Abya Yala es como el pueblo Kuna de Panamá y Colombia de estos dí­as, llamaba a su tierra antes de la llegada de los españoles -y, por extensión a América Latina indí­gena.

Coordinadora Andina de Organizaciones Indí­genas Miembros fundadores Argentina             Organización Nacional de Pueblos Indí­genas de Argentina (ONPIA) Bolivia                  Consejo Nacional de Ayllus y Markas del Qullasuyo de Bolivia (Conamaq)                               Confederación Sindical Única de Trabajadores y Campesinos de Bolivia (CSUTCB)                               Federación Nacional de Mujeres Bartolina Sisa del Qullasuyu Chile                     Coordinación de Identidades Territoriales Mapuche (CITEM)                               Consejo Nacional Aymara de Chile (CNAC) Ecuador                Confederación de las Nacionalidades y Pueblos Kichwas del Ecuador (Ecuarunari) Colombia              Organización Nacional Indí­gena de Colombia (ONIC) Peru                      Confederación Campesina del Perú (CCP)                               Confederación Nacional Agraria (CNA)                               Confederación Nacional de Comunidades del Perú Afectadas por la Minerí­a (Conacami)

The opposition held a general strike on Tuesday 23 September. The government claims that the (illegal) strike cost US$15m in lost production. The action was called by the Frente Nacional por la Defensa de la Seguridad Social, an umbrella organisation for 60 separate unions and social organisations. The Frente fears that the government has plans to privatise the social security system. It also objects to the sacking of the well-known academic economist Juan Jované, who chaired the Caja del Seguridad Social (CSS). The government sacked him for ineptitude: he claims that he refused to sanction a government order to use fund resources to buy government bonds.  

In the strike, the worst affected industries were construction, small and medium sized businesses and tourism. The industries that were least affected were shipping and port activity, telecoms, and bigger companies.

Raúl Delvalle, president of the Cámara de Comercio, Industrias y Agricultura, reckons that the strike sends out all the wrong messages about Panama to the international community. He claims that the strike will hurt tourism and put off investors.  

To a large extent, the government's cackhanded response to a series of different problems provided the momentum that led to the strike. The main trigger was the sacking of Jované. Belatedly, the government tried to reassure people that it had no designs on the social security system. President Mireya Moscoso signed an agreement with religious leaders promising not to privatise the agency. She did admit, however, that the agency needed major reforms. These include forcing people to work for at least 30 years before they become eligible for a pension, and raising the female retirement age by three years, to 65.

The anti-government protesters say that Jované was sacked because he refused to allow the agency to buy government debt. The government was issuing the debt, the protesters say, to pay for election expenses. The government is lagging badly in voter intentions for the presidential elections, due in May.

Protesters are concerned about Jované's allegation that the government still plans to raid the CSS to issue US$500m in debt for campaigning for next May's elections.  

The strike was considered illegal by the labour ministry, and the government said that public sector workers who went out on strike would not be paid. Even so almost half the public sector workers joined the strike. The government claims that the strike is political. Moscoso accused the opposition Partido Revolucionario Democrático and its presidential candidate, Martí­n Torrijos, of fomenting the strike. Torrijos has won the backing of the singer Rubén Blades, who stood for the presidency in 1994 and won 20% of the vote running for the political movement he set up, Papá Egoro. Besides being a world-famous musician, Blades also has law degree from Harvard.

The economy is booming. Industrial output was up by 20%, year-on-year in May. Car sales were up by 166% in the first six months of the year. Economists, typically, are warning that the next six months are likely to be much less fun.

The big dampener is the elections. It looks almost certain that the leftwing former mayor of Montevideo, Tabaré Vázquez, will be the country's next president. Already he has started to offer key jobs to various people. 

The long-serving (Uruguayan) president of the Inter-American Development Bank, Enrique Iglesias, said that he was flattered to have been offered the job of economy minister but he would not be taking up the offer. He said that all Uruguayans should rally behind whoever becomes the next president.

The elections are due in October. The Instituto de Economia de la Facultad de Ciencias Económicas (IE) reckons that the uncertainty over the elections (ie business's fears about a Vázquez victory) will slow the economy down. 

The IE is forecasting that growth this year will be 9%, rather than the 7% forecast by the government. It reckons that the bulk of the growth will have been in the second quarter and that the economy will slow down in the second half of the year as the elections draw closer. 

This is bad news for the current Blanco-Colorado coalition. Despite the hurtling level of growth in the first quarter of 2004, (17.4% year-on-year), the economy's total output is still 11.3% below the level it reached at the end of the third quarter of 1998. This was the pre-recession peak. The economy was first knocked by the Argentine recession and then collapsed six months after Argentina's imploded. The IE forecasts that unemployment at the end of the year will be about 13%; still high in Uruguayan terms. The end-year figure implies that the number of jobs created will have grown by 6%. 

The general slackness of the labour market will mean that real wages will still have fallen this year. The IE expects inflation to be about 10% this year. Overall, poverty and social deprivation levels are still high and will remain so this year, despite the recovery, the IE forecasts.

The recovery in Brazil and the general pick-up in the world economy will lead to a surge of about 30% in both exports and imports. This combination, the IE reckons will produce a current-account surplus of 0.6% of GDP. The fiscal deficit is likely to come in at 3% of GDP in 2004.

• Industrial output in May was 20% up on May 2003. This means that output is up by 25% in the first five months of the year. Both figures exclude the erratic data on oil refining and come from the Instituto Nacional de Estadí­stica. The recovery is broad-based: only three sectors saw lower output than for the same month of 2003. These were woodworking, publishing and basic metal-bashing.
• Food and drink was the best-performing sector: this is largely due to the fact that in May 2003, the country was still barred from selling beef to the US. The textile industry is also picking up nicely, as is the chemical industry, machinery and equipment. 
• The state-electricity company, the UTE, had its busiest day on 9 July, one of the coldest days of the year. The company generated more electricity (1,431MW) that day than for any single day in 2002 or 2003. There was also a surge in demand for gas canisters and a 30% increase in sales of logs. The cold snap, which started in June, means that the UTE has been generating about 5% more electricity each day since then. The worst of the winter is usually over by the beginning of August. In the first half of the year electricity consumption (megawatt hours) was 6.6% higher than for the same period of 2003. This year the UTE has sold 3.1m MWh compared with 2.9m MWh in the first half of 2003. 
• Sales of new cars were up by 166% in the first half of the year at 3,371. There were 975 new vehicle sales in June. Chevrolet is the market leader with 1,008 sales so far this year. Its closest competitor is Volkswagen with 450.
• Exports in the first half of the year came to US$1.396bn, up 29.4% on the first half of 2003. In June exports were up by 35% year-on-year at US$277m. The main exports were: meat, dairy products, honey seeds and wool. The main markets were the US (US$266m for the first half) followed by Brazil (US$215m) and Argentina (US$103m). 
• The recovery this year has boosted tax revenues. In the first half these came to US$1.03bn, up 20.6% on the same period of 2003. Receipts from Value Added Tax, which is levied at the rate of 23%, were up by 31%, while corporate tax receipts were up by 97%, year-on-year.

The government expects the economy to grow at a steady 4.5% for the next three years. In 2004 the growth rate was 5.1%. The deputy economy minister, Fernando Zavala, said that companies such as Hunt Oil, Phelps Dodge and Barrick Gold had all confirmed that they would increase their investment in the country.

The latest economic data point to an economy in decent nick. Imports in March were up by 23% year-on-year at US$956m, For the first quarter imports are up by 25% at US$2.75bn according to figures from the tax inspectorate, Sunat. Another sign of health is that soles credit is rising (albeit by just 1% in February compared with January) while dollar credit is continuing to fall. 

The government's critics claim that the government may be counting too much on clinching a free-trade deal with the US; too much on seeing off the challenge from China to the country's textile industry and too much on its hope that the dodgy political outlook will not affect the economy. 

Hardly a week goes by without President Alejandro Toledo being buffeted by another crisis. On 17 March, Pedro Pablo Kuczynski, the economy and finance minister, threatened to resign unless President Alejandro Toledo vetoed a bill passed by congress on 16 March that alters the way the agriculture sector pays taxes. Kuczynski has become frustrated that despite Peru's impressive economic growth in recent years the government, and particularly Toledo, remains deeply unpopular. Kuczynski might be making a bid to try and distance himself from Toledo and campaign for the presidential candidacy for the ruling Perú Posible on the strength of his achievements as economy minister.

Kuczynski claims that the change in the way the agriculture sector pays taxes would mean the government would be deprived of NS$180m (US$55m) up front as the agriculture sector would switch to paying taxes in arrears rather than on account. Kuczynski said that the change would mean the government would be unable to honour a recent agreement to increase teachers' salaries, which, he said, would cost NS$300m (US$90m).

Zavala claimed that private sector investment will run at about 17% of GDP this year. He argued that to get the economy growing at a [Chile-like] 7% a year, investment will have to rise to around 24% of GDP. Mining companies are currently trying to get the supreme court to reverse the government's plan to levy a royalty of between 1% and 3%. The government claims that the royalties will generate US$60m a year; but the Sociedad Nacional de Minerí­a claims that the take will amount to just US$32m.

Mining is continuing to attract investment and generate export revenues. The big investment this year will come for Xstrata and go into Las Bambas. The energy and mining minister, Glodomiro Sánchez, reckons that exports will rise by 9% this year (down from the 45% rate of growth registered in 2004). 

Southern Peru: The country's biggest mining company, SPCC, approved a merger with another subsidiary of its parent company, Grupo México, to become the second biggest copper mining company in the world. The new company will trade as SPCC, after Americas Mining handed 99% of the shares its subsidiary Minera México to SPPC in return for a 67% stake in SPCC. The shares shuffled were worth US$3.6bn. The deal is designed to increase SPCC's copper output by 25% in the next three years. Grupo México will now have a 75% stake in SPCC, which will continue to be listed in New York and Lima.

Tax collection: This increased by 17.4% in March in real, inflation-adjusted, terms, to N$2,495m (US$765m), according to the tax collection agency.

Inflation: In March this came to 0.65%, bringing the rate for the first quarter to 0.51% and the 12-month lagging rate to 1.88%.

Although there are some long-term economic problems looming (notably in the oil industry, see Commodities Report) the immediate outlook for the economy in this election year looks decent. This means that an economic crisis, similar to the one caused by the delayed devaluation in 1994, is unlikely to cripple the final few months of the Fox administration or the first year of the new administration. Few economists can quibble with the finance ministry's forecast that the economy will grow by between 3.6% and 3.7% in 2006. The central bank governor, Guillermo Ortiz, is a shade more cautious, forecasting growth of between 3% and 3.5%.

The economy probably grew by at least 3% in 2005, the finance minister, Francisco Gil Dí­az, said. He argued that if the government had been able to introduce the structural reforms it had wanted growth would have been faster. In Gil's view the principal threat to the 2006 forecast would be a slowdown in world, and particularly, US growth. There are some worrying signs, such as the flatness of various yield curves in the US which suggest that the US may be heading towards a slowdown or recession.

Demand in Mexico seems strong. The country's second biggest bank, BBVA Bancomer, expects mortgage lending to grow by 43% in 2006. The bank argues that lower interest rates (which have already come down from 9.5% in August 2005 to 8.25% now) and the rate at which new households are being formed will drive demand. Some economists rate the forecast as conservative: mortgage lending in Mexico grew by 60% in 2005.

The construction industry should have a good year, if the BBVA Bancomer forecast is accurate. Not only will house building be strong, but there is also likely to be strong demand for new installations from the energy industry, gas in particular, and in the south-east of the country where a lot of reconstruction still needs to be done in the wake of hurricanes Stan and Wilma.

The Mexican government reckons that the country is short of between 4m and 7m houses. In President Vicente Fox's six years of office the government expects to have built 750,000 new houses.

The remaining dangers from the election campaign

President Ernesto Zedillo, who was elected in the pivotal year of 1994 (which started with the Zapatista uprising, continued with the assassination of the ruling Partido Revolucionario Institucional's candidate, Luis Donaldo Colosio and ended with a catastrophically misjudged devaluation), made his priority what he called the "blindaje" (literally armour-plating) of the economy to prevent his successor facing the economic mess he had to confront. President Vicente Fox did not face a home-grown economic crisis in 2000, though the Mexican economy was sent reeling by the sharp decline in the US economy in 2001. Like Zedillo, Fox has focused his economic policy on ensuring macro-economic stability. The budget is now in surplus (so it should be with oil prices where they are). Foreign debt has fallen as a proportion of total debt as the government has borrowed more in pesos. The government even has the cash to pay off foreign debts that mature in 2006 and 2007. So how might the election affect the economy? In 2000, there was a fair amount of exchange-rate fluctuation. The peso slid in the run-up to the election before recovering its poise as Zedillo made it clear that his government had no problem with Fox succeeding him. Whether Fox will be able to take such a magnanimous view, when he has plotted so frantically to prevent the opinion poll front-runner, Andrés Manuel López Obrador, succeeding him, may be more unlikely.

Output in Mexico is recovering. In November, industrial output was up by 3%, year-on-year. This was significantly up on the 2.6% (y-o-y) increase in October and the fastest rate for seven months. Construction, up 3.8% (y-o-y) in November, and the vehicle industry, which is benefiting from a recovery in the US, are leading the recovery. The star industry in November was maquiladora manufacturing: here output was 5.3% above what it had been in November 2004.

Overall, however, for the first 11 months of 2005, industrial production was only 1.4% above what it had been in the same period of 2004. In the first 11 months, construction was the most buoyant sector (up 2.9%) followed by manufacturing (up 1.2%) and mining and the oil industry (up 1.1%). In 2004, industrial production rose by 3.8%.

In November, the vehicle industry built 176,367 vehicles, the highest monthly figure since October 2000, and up 53% on November 2004. Overall, vehicle production in 2005 was probably up by about 12% to about 1.8m units. The industry recovered strongly in the second half of 2005 after having a sticky time in the first half when US demand was weak. The vehicle industry is vital to Mexican manufacturing, accounting for about 15% of the country's total manufacturing output and 10% of its industrial output.

The economy ministry expects the industry to grow strongly in the next few years. The ministry reckons that, taking into account the investments already announced by manufacturers, output will be up to 3.5m in 2010, of which 2.4m will be exported. Exports in 2005 were around 1.2m. In the first 11 months of 2005, exports of vehicles and vehicle parts were worth US$28.73bn.

Imports of vehicles and vehicle parts came to US$19.63bn in 2005. The economy ministry explained the US$1.1bn rise in the bill as a result of the modernisation of the industry: assemblers now wanted more modern components that could not be sourced locally.

The Asociación Mexicana de la Industria Automotoriz reported that sales of vehicles in Mexico (both locally produced and imported) came to 1.13 units in 2005. This was 3.3% up on 2004.

Galling

What is galling for economic policymakers is that the economy can clearly grow a lot faster. Gil admitted that if the economy grew faster, more people could find work and living standards would rise. Even so, he argued that the creation of 750,000 jobs in 2005 was something of which the administration should be proud. In 2005, the Instituto Mexicano de Seguridad Social registered 576,599 more people that it had on its books at the end of November 2004. The total number of IMSS-registered workers (ie people paying tax and social security, and therefore working or intending to work in the formal economy) was 13.257m. The number of permanent employees making IMSS payments was up by 1.8% while the number of contracted employees making IMSS payments was up by 21%. The IMSS said that 84% of the people making payments to it were permanent employees.

Gil and the Fox government have made a rod for their own back in insisting that the government should run a fiscal surplus rather than the traditional deficit. Arguably, this policy has helped to lower inflation. Its cost has been slower growth and fewer jobs. Gil said that the government will not increase spending this year unless the oil price comes out significantly higher than the US$36.5 per barrel forecast in the budget. It is worth noting that even if the price is higher than budget, and it has flitted between US$45 and US$50 a barrel in recent months, the government may not have much leeway because production, and thus exports, are under such pressure. It is more than likely that the state-owned oil company Petróleos Mexicanos, will not be able to maintain exports at the 1.8m bpd it has forecast, especially if domestic demand continues to recover.

Foreign direct investment: The economy minister, Sergio Garcí­a de Alba, said that foreign direct investment in the country in 2005 was US$17.6bn and would hit US$18bn in 2006. In 2004 FDI was US$16.6bn. Garcí­a reckons that investment in the motor industry in 2006 will come to around US$8bn. Of this US$3bn will go on new assembly plants while between US$2.5bn and US$5bn will go on new car part factories. Garcí­a said that all the new investment would come from companies established in the country: Ford, Nissan, Chrysler, Toyota and Volkswagen all have plants in Mexico.

Exports: The economy minister, Sergio Garcí­a de Alba, forecast that exports in 2006 would come to US$240bn up from US$220bn in 2005.

What López Obrador might do differently

Although it is by no means certain that Andrés Manuel López Obrador will win the presidential election on 2 July, such a result looks probable. The latest opinion polls show López Obrador with a lead that ranges form four percentage points to 12 percentage points. His closest rival, Felipe Calderón Hinojosa, from President Vicente Fox's Partido Acción Nacional, is likely to stick with the mix of orthodox economic policies which have not done particularly well for the current administration. López Obrador will try to do things differently. His chief economic adviser is Rogelio Ramí­rez de la O, a well respected and fluent economist. He pointed out, before the truce on campaigning over Christmas and the New Year, that under Fox, GDP per capital will have risen by only 0.4% a year. Indeed in the first three years of Fox's administration GDP per capita fell by 0.9% a year. The second three years will be better, perhaps hitting 2.1% but overall the rate of GDP growth per capita will be less than 0.5%. This is half the rate of the preceding administration headed by Ernesto Zedillo, who had to deal with the economic mess created by President Carlos Salinas de Gortari's mismanagement. Salinas's refusal to run coherent economic policies, and above all to fix the exchange rate, produced the devaluation of 1994 and the 6.9% fall in GDP in 2005. Ramí­rez de la O argues that the recovery in 2005 has little to do with the government. He points out that higher oil revenues and the surge in remittances accounted for at least two thirds of 2005's growth. Ramí­rez de la O points out that after the crisis of 1995, investment and exports both picked up and they powered the economy to 5.5% growth in 2000, the least year before Fox took over. Ramí­rez de la O argues that investment, but not in businesses promoting consumption, such as new cinemas or shopping malls, is the key to increasing Mexico's growth rate and creating more jobs. He also dropped a hint that a López Obrador government would try to reduce the growth in internal credit. He argues that if credit does lead to an expansion in exports, it creates more demand for imports. Since 2000, he claims, the non-oil trade deficit has increased by 50% to US$36bn. Another clear hint is that a López Obrador government will do a lot more micro-managing, especially to create more jobs. Ramí­rez de la O argues that the Fox government is too focused on creating macro-economic stability. He pointed out that Maynard Keynes, who coined the hyphenate, used it to describe the product of thousands of individual decisions. His great book that described this process, Ramí­rez de la O pointed out, is called A General Theory of Employment, Interest Rates and Money. Ramí­rez de la O argues that creating employment is the only proper goal of government economic policymaking. His clear implication is that if a government does not care about employment, it should give up policymaking and leave everything to the market.

Inflation: The consumer price inflation rate in 2005, at 3.3%, was the lowest since the Banco de México started keeping a record in 1970. The previous record was in 2003, when the rate was 3.93%. Before that, the record in 1971 when the rate was 5.3%. Before 1970, the central bank used to monitor wholesale prices. These fell when there was a recession, most notably in 1953, when they fell by 2%.

Eleven people, including several employed by Corporación Cimex, a government holding company, and an official from the foreign trade ministry, were sentenced to between four and 20 years in jail for corruption on 9 November. Raúl Castro who has taken over from his brother, Fidel, as head of the government is coming down hard on corruption. Such an anti-corruption drive may benefit his supporters in the military who run Gaviota, a company with business interests across the whole economy. 

The sentences were reported in a Cuban magazine, Bohemia, though none of the convicted were named. Those convicted were accused of conspiracy, fraud, forgery, people trafficking and smuggling. The scheme appears to have revolved around a Spanish firm, Provimar, which supplies airlines, ships and chain of duty free stores. What happened was Provimar won supply contracts in Cuba in return for kickbacks.

The scandal came to light in 2003 when a senior Spanish executive at Provimar complained about what had been happening in Cuba, although, according to Bohemia he had been involved in the corruption. The main corrupter, whom Bohemia identified only as Iván, was tried in November and had his appeal rejected recently. Iván owned four cars and bank accounts containing US$130,000. 

The president of Cimex, Eduardo Bencomo, said that the corruption was exceptional. He said that 24,000 people worked for the company and there were around 2,000 executives, so to say that the four who were convicted were representative of the whole group would be wrong. 

Cimex was set up in the 1980s and has interests in 80 companies in all parts of the Cuban economy. Among its interests are construction companies, banks and the Zelcom free zone, the country's most important. Cimex also acts as a wholesaler and supplies fuel, rents cars and repairs cars and boats. 

UNDP: The UN's Human Development Report for 2006, published by the UN's Development Programme (UNDP) ranked Cuba as the fifth most developed country in Latin America, above both Mexico and Brazil. The report ranks countries by indicators such as education and healthcare as well as traditional economic criteria such as income and GDP. 

The report draws on 2004 data. Overall Cuba comes 50th in the world, up two places on the last ranking which used 2003 data. In Latin America, only Argentina (36), Chile (38), Uruguay (43) and Costa Rica (48) rank above it. Mexico comes 53rd and Brazil 59th.

Cubans have a life expectancy of 77.6 years, more than Argentines' 74.6, but less than Costa Ricans' 78.3. Cuba has the highest literacy rate in the region (99.8%); the nearest rival is Argentina 97.2%. Cuba claims to have increased its literacy rate by three percentage points between 2003 and 2004.

Cuba also has one of the fairest income distributions in the world. In Latin America only Uruguay, Argentina, Costa Rica and Barbados have lower poverty rates. One interesting sideline is that Cuba's health spending, at 6.3% of GDP was exceeded by Colombia (6.4%) in 2004. Yet no country in the world has more doctors per head of population. Cuba has 591 per 100,000; this is twice as many as the US (256 per 100,000) and more than even Norway which heads the Human Development Index (with 313 doctors per 100,000).

Swiss banks pull out:
The central bank accused the two biggest Swiss banks, UBS and Crédit Suisse, of kowtowing to the US after the banks decided to stop operating in Cuba. Crédit Suisse and UBS announced on 12 November that they would not take part in any more loans to Cuba. The banks said that the country was "sensitive" and monitoring deals with it took a disproportionate amount of time and expense. In 2004 UBS was fined US$100m for breaking the US Treasury embargo on doing business with Cuba, Iran and Libya.

The economy is growing lustily. In the second quarter, output was 0.8% up on the first. This means that in the 12 months to June, the economy grew by 4.8%, which is close to the government targets of 5%. What is striking is the surge in foreign direct investment: the gross figure for the first seven months of 2007 was US$31.8bn, almost twice the US$16.4bn recorded in the same period of 2006.

Foreign direct investment in August was running at nearly twice the rate of August 2006 at US$2.04bn. The central bank said that foreign direct investment in the first half of September was US$950m and should reach US$1.3bn by the end of the month.

Interestingly, the central bank now prefers to look at the net figure for FDI, after withdrawals. What is significant is that withdrawals are steady at just over US$1bn a month, even though fresh investments are surging. The central bank has raised its forecast for (net) foreign direct investment in 2007 to US$32bn its previous estimate ofUS$25bn.

The strength of FDI suggests that the economy is becoming more competitive and is well placed to with-stand any slowdown in the world economy.

The resilience of exports, despite the strength of the Real against the dollar, underlines the competitiveness of Brazilian products. Exports are running 16% higher in the first eight months of the 2007, compared with 2006. Export revenues in the 12 months to August topped US$151bn and should hit US$160bn this year. Imports are rising faster, by almost 28% in the first eight months, and are now over US$107bn for the 12 months to August.

The surge in imports has prompted the central bank to chop its forecast for the current account surplus for 2007 to US$7.8bn from US$10.7bn.

Growth in the second quarter was led by the strength of domestic demand. This was up by 5.7%. This strength was reflected in the increase in imports. In the second quarter the import bill, at US$27.2bn was significantly above the first quarter bill of US$24.1bn. The surge in domestic demand is not only pulling in imports: it is also increasing demand for domestic goods. Industrial output was up by 6.8% between April and June.

The boom in agricultural commodities is also contributing to growth. Agriculture grew by 6.6% in the second quarter.

Farmers and manufacturers believe that the good times are here to stay and are increasing their investments. Strong growth in both the manufacturing and agricultural sectors led to a 13.8% expansion in private sector investment. This increase in capacity will keep the economy growing and prevent bottlenecks that could lead to higher inflation.

The government's critics grumble that the 0.8% quarter-on-quarter GDP growth rate was below rates registered in previous periods: quarter-on-quarter growth was 0.9% in the first quarter of the year; 1% in the last quarter of 2006 and 2.8% between July and September 2006. The critics claim that this pattern suggest that the economy is running out of steam. Our view is that the current pace of growth is much more sustainable that earlier rates.

The government's critics are also complaining that the government is overtaxing the productive sectors of the economy. They have a point. Tax revenues from companies and businesses increased by 6.9% between April and June, well above the 4.4% growth in the aggregate value of goods and services. Our view is that companies which had previously kept at least some part of their business in the informal are moving more of their operations into the formal part of the economy, perhaps because they now see that they can get reasonably priced credit.

Interest rates
The consensus in Brazil is that the central bank will probably not cut interest rates at its next meeting in October, despite the aggressive action by the US Federal Reserve Board. The only variable that might sway the members of the monetary policy board, the Copom, is the exchange rate. If the Real looks as though it will surge again against the dollar, Copom will come under heavy pressure from business and the government to cut rates again.

At the beginning of September Copom announced a 0.25% cut in the benchmark Selic rate which brought it down to 11.25%. The bank has cut rates 18 times since September 2005. In September 2005 the Selic rates stood at 19.75%. The cut on 5 September was backed unanimously by the Copom board, but several members also stated the case for leaving rates unchanged.

Inflation is currently running at about 4%, still well inside the government's target of 4.5% for 2007, this means that real interest rates in Brazil are still significantly higher than they are in Mexico. In Mexico base rates are about three percentage points above the inflation rate. In Brazil, the margin is still twice that.

Uniao de Bancos Brasileiros, the country's fourth largest non-state-owned bank, said, after the publication of the Copom minutes, that it now expects that the country's central bank will leave interest rates unchanged for the rest of the year.

Inflation: The official rate for the 12 months to August rose to 4.18%, compared with 3.74% for the 12 months through July. The main reason for the pick up was higher food prices. The independent Fundação Getúlio Vargas believe that consumer prices jumped by 1.4% in August bringing the 12 month rate to 5.2%. This was well above the 3.8% rate recorded in 2006. The official inflation rate for 2006 was 3.14%.

Tax: On 19 September the lower chamber of Brazil's congress approved the extension, until 2011, of a provisional tax on financial transactions (CPMF). The vote was a victory for the government of President Lula da Silva, albeit a draining one. The government has already included CPMF revenues in its 2008 budget. The tax, which levies 0.38% on every financial transaction, is expected to yield R$39bn (US$20bn) next year. In order to have the CPMF extension approved the government was forced to disburse R$21.7m (US$11.5m) to finance pet projects backed by deputies who were nominally government supporters. Lula also had to appoint several associates of his political allies to management positions in state owned companies to guarantee enough support. In the end the goal was achieved with 30 votes spare: 338 deputies voted in favour of the CPMF extension. The CPMF extension will have to be approved in two more readings in the lower chamber and then go to the senate, where it must also be approved in two different readings, to take effect. The government expects the CPMF extension bill will reach the senate in November.

Unemployment: The annual unemployment rate stood at 8.5% of the working population in 2006, the lowest rate since the 7.8% registered in 1997. In 2005 the annual unemployment average rate stood at 9.4%.

Growth: The planning ministry has raised its economic growth forecast for 2007 from 4.3% to 4.5%.

Retail sales: Retail sales were up 0.5% in July month-on-month, the seventh consecutive month of expansion. In comparison with July last year sales in the retail sector were up 9.7%.

The president del Banco Central, Francisco de Paula Gutiérrez, called on economists to be cautious in how they describe the latest trade figures. The figures were alarmingly poor, showing imports rising at twice the pace of exports.

De Paula Gutiérrez  made it clear that a sensationally gloomy spin on the trade figures could produce a further run on the peso. The June figures, which looked so alarming, were published on 21 July before the central bank had had time to digest them and come up with a positive spin. Over the past month the peso has been weak against the US dollar, sliding from C$520 to C$556.

All De Paula Gutiérrez  could manage was to argue that the growing deficit in the trade account may be balanced by a surplus on the services accounts which covers sectors such as tourism; call centres and remittances. The services part of the current account for June has not been finalised, so it is not clear whether De Paula Gutiérrez is being realistic or merely hopeful.

The trade figures were poor. In the year to June imports were up by 22.5% and exports by just 9.5%. Trade economists said that the rise in the price of oil should take some of the blame; so too should the slowdown in the US economy.

Imports in the 12 months to June 2008 came to US$14.6bn. Exports in the same period came to US$9.6bn. As a result the trade deficit for the 12 months to June increased by 56% to over US$5bn.

Emmanuel Hess, manager of the Promotora de Comercio Exterior (Procomer), argued that exports had been depressed by the delay in the approval of the free trade agreement with the US (Cafta-DR) and the slowdown in the US economy. He also said that the high price of oil had pushed up inflation and exporters' costs and that poor weather had affected traditional export sectors such as bananas and melons.

Timothy Scott, director of the Asociación de Empresas de Zonas Francas said that his members had been severely affected by the US slowdown. Their sales appear to be holding up at around US$400m a month, at least for the first five months of 2008. Manufactured exports also held their own in the first five months of 2008. 

Mónica Araya, president of the Cámara de Exportadores, claimed that exporters had managed to maintain exports in the first six months of 2008 at the same level of the first half of 2007. She argued that this was a decent result, given the increase in industry's costs.

Inflation: Although inflation has risen well into double digits, the rate of increase has been rather less than in some of the country's neighbours. In the year to June 2007, Costa Rica had one of the highest inflation rates, at 8.75%. In the year to June 2008, the rate increased to 12.8% but this was considerably better than Guatemala, where it jumped from 5.3% to 13.5%, or Nicaragua, where the rate went from 6.16% to 12.16%. The performance is all the more impressive since food price inflation in the year to June was 23.8%. Only Nicaragua and Venezuela had higher food price inflation, at 32% and 46.2% respectively.

The weak first quarter results may be the low point for the economy in the current cycle. Oil prices have all but doubled since then, taking a lot of the pressure off the economy.

Even so, policymakers have been pushing to cut costs and reduce non-essential spending. So far President Hugo Chávez has staved off disaster by drawing down its international reserves and tapping various off-budget funds such as the National Development Fund (Fonden).

One sign that the government is feeling under less pressure is its renewed emphasis on nationalisation. Over the past month, the government has announced a string of nationalisations and tightened its grip on the key oil sector.

Chávez 's opponents point to the scale of the slowdown in GDP growth, ignoring the fact that the economy actually managed to grow at all, year-on-year, in the first quarter. Neither Brazil Mexico nor Chile will be able to claim that: all of these bigger economies contracted in the first quarter. To be fair, Venezuela may have been helped by the fact that Easter was late this year, which boosted the March figures in comparison with March 2008. 

In the first quarter of 2009, real GDP growth was 0.3% year-on-year. This compared with a 5% rate in the same period the previous year and 3.2% in the fourth quarter. The oil sector, worth 13% of GDP in the first quarter, contracted 4.8% year-on-year, its first contraction in four quarters, while the non-oil sector (77% of GDP) rose 1.3%. This growth is probably the effect of the later Easter in 2009.

Confirming a lengthy trend, tradeable sectors, such as mining and manufacturing, which struggle amidst an overvalued fixed exchange rate and government limits on access to US dollars for trade, fared the worst, contracting 13.6% and 1.1% respectively in the first three months. Non-tradeables such as construction, supported by public spending, rose 3.6%, though this was well down on previous quarters.

The public sector contracted 0.4%, while the private sector posted marginal growth of 0.8% year-on-year. Public sector growth was 16.4% in 2008, vs. zero growth in the private sector.  Despite its growing weight in the economy in line with the government's nationalisation process - now 29.5% of GDP, up from 25.5% two years ago - the oil-revenue dependent public sector cannot compensate for stagnant private sector activity.

The official forecast is for real GDP growth of between 1% and 2% this year. Private sector analysts generally anticipate stagflation (low or falling growth and high inflation) in both 2009 and 2010, but they have long prophesised doom for Chávez 's 21st Century socialism.

Current account: According to latest central bank figures, over the six months to end March the current account posted an average monthly deficit of US$861m, as oil exports collapsed but import growth continued apace - fuelled almost exclusively by the public sector. Total exports, of which the oil sector accounted for 93%, fell 55.5% year-on-year in the first quarter to US$9.83bn.

Despite concerted official efforts to stem non-essential purchases, and rapidly declining domestic demand, imports continued to rise in the first three months, reaching US$11.3bn (up 6.4% annually). This was driven by a 22.5% increase in public sector purchases, against 2.3% for the private sector, which was forced to drastically cut its imports due to a 35% reduction in Cadivi foreign exchange rate approvals in the first quarter.

Reserves: In mid May, reserves remained just below the official optimal level of US$30bn.

Oil prices: The average export oil price has been US$42.3 a barrel up until the penultimate week of May. In 2008 the average price was US$86.6 a barrel.

Extra cash from China, Brazil? According to the central bank, the Fonden ended 2008 with US$6.1bn in available cash. The government transferred US$12bn of reserves to the fund in January (as well as US$428m from the Simón Bolí­var Fund). Of this US$18.6bn, an estimated US$6.7bn has already been assigned for various current and capital expenditure needs (such as new housing and infrastructure stimulus packages) and also to fund installment payments for the nationalisations of Sidor, Banco de Venezuela and two of the three cement firms taken over in 2008. The government may also draw upon the US12bn China fund, as well as a proposed new US$4.3bn credit from Brazil's National Development Bank (BNDES), not only to meet budget cashfalls but also to supplement its outstanding nationalisations' bill, estimated at some US$11bn by local economists.

Inflation: In April inflation was 1.8%, up on the 1.2% rate recorded in March. This brought the rate for the past 2 months to 28.3%, down fractionally on the 30.9% rate of 2008.

• New food sector measures
  In mid-May the government lifted prices for the 14 food staples sold though the state-subsidised grocery chain, Mercal, and expropriated 10,000 hectares of farm land in a bid to increase food production. The government is considering limiting profit margins on basic consumer goods like rice and sugar in a bid to keep down inflation and, officials argue, to punish speculators. Critics note that such a measure would not ease inflation, which is mostly caused by shortages, and would act as a further disincentive to producers already labouring under price controls.
  

On 12 March the national assembly approved a tax reform which the government claims will increase annual revenues by US$200m. The main element in the reform is an increase in Value Added Tax (VAT). The government claims that wage earners will be the big beneficiaries of the reforms.

The law was approved by 40 of the 55 deputies present and will come into force on 1 July after being approved by President Ricardo Martinelli.

The reform cuts income tax rates on wages from 24% to 15% for those earning less than US$3,846 a month. It also abolishes 30 taxes, updates the fiscal code and increases the Impuesto a la Transferencia de Bienes Muebles y Servicios (ITBMS), which is effectively a VAT, from 5% to 7%.  The Left argues that sales taxes (like VAT) are regressive, because they hit the poor harder than the rich. The government counters that this will not happen because it is increasing the number of items which will be exempt from VAT. Dulcidio De La Guardia, the deputy finance minister, said that the government expects VAT receipts to fall by US$11m a year.

The reform also cuts taxes on banks with assets of between US$100m and US$750m, but increases levies for those with assets above US$750m.

The government is also hypothecating (i.e. earmarking) revenues. It said that all the extra revenues raised from the change to the VAT rates will go towards providing scholarships for children from the first to the ninth grade. The scholarships will be available for both public and private schools.

The other innovation is the introduction of a Tribunal Administrativo Tributario, which will be independent of the tax collection agency, to sort out tax disputes.

GDP: In 2009 real GDP rose 2.4% year-on-year, well below the rate of recent years. In the final quarter of 2009, the growth rate was a faster 3.9% year-on-year, however.

Inflation: In February monthly consumer prices rose 0.2%, bringing the urban inflation rate to 3% on an annual basis. Inflation in Panama City and San Miguelito was slightly higher (3.3%), but in other cities it was lower (2.1%).

The government is under pressure from orthodox economists to rein in the rate of economic growth in order to prevent hyper-inflation setting in. The pressure has got to the president of the Banco Central de Argentina, Mercedes Marcó del Pont, who admits that prices are “taut" but argues that it would be wrong to try to cool down the economy. As this is an election year, any moves by policymakers to temper the still-only-flickering national feel-good factor are unlikely.

Like most official policymakers, Marcó del Pont all but admits that the official inflation index calculated by the national statistics institute (Indec) is flawed, but she also maintains that the independent calculations of inflation are too high. The Indec reckons that consumer price inflation in 2010 was 10.9%, while independents reckon that the true rate was closer to 25%. Marcó del Pont admitted that some prices had risen more than was desirable, but said the government should continue with its policies, which are very different to conventional orthodoxy.

To be fair, the government's focus on the fiscal surplus over the past nine years has kept the economy growing, thanks to the commodity price boom. Effectively, the government is operating a siege economy. The banking system is a shadow of what it once was. At the end of October 2010, total credit in the banking system was just under Arg$500bn (US$125bn). Credit to the private sector was just over Arg$165bn (US$41bn), according to central bank figures. In GDP terms, this is less than 12% of GDP. In 2010 the country's GDP was probably around US$360bn. In Mexico and Brazil, private sector bank credit is three or four times as much, respectively.

The weak contribution of the banking system to economic growth in Argentina means that the economy could probably grow even faster. The government, however, is unlikely to allow this to happen because of what could happen to inflation.

Marcó del Pont, along with conventional economists, argues that one of the problems of the Argentine economy is that as its major exports are foods, a rise in international prices has a major effect on domestic prices.

Less conventional is the government's contention that a shortage of banknotes and coins is pushing up prices. It has ordered a new series of 100 peso notes from Brazil. The government order is for Arg$8bn (US$2bn) in notes. This is, the government claims, part of a plan to increase the supply of cash (M2) in the economy by 28% in 2011. Orthodox economists argue that putting more cash into the economy will increase inflation. What it may also do is trigger some more lending. Base rates in Argentina (Badlar) are just under 11%, so negative in real terms both according to Indec and independent economists.

The virtual absence of mortgages and car loans means that already locals are using real assets as a hedge against inflation. Car loans and property are mostly paid for in cash, often dollars.

The government's focus on collecting taxes enabled it to increase public spending by 48% year-on-year in the first 11 months of 2010. Revenues (up 45% in the first 11 months) were boosted by government raids on the central bank's reserves and its use of the inflows into the state pension system.

Forecasts: The central bank has revised up its forecasts for GDP growth in 2011. It is now expecting growth of 6.5%, up from 3.5%.

Exchange rate: Marcó del Pont argues that the central bank's management of the exchange rate has been successful. She points out [ignoring the case of Venezuela] that Argentina has been the only country in the region to avoid a currency appreciation over the past couple of years. The exchange rate has glided gently down from Arg$3.8 to Arg$4 to the dollar between 2008 and 2010.

Inflation: The Indec reported that consumer prices rose by 0.8% in December 2010. The annual rate of 10.9% represents a jump on the 7.7% official rate for 2009. Somewhat surprisingly, the heavily weighted food &drink subindex was up by 0.6% in December, way behind the 2.7% jump in leisure costs and a 1.9% jump in clothing prices.

Wine: Exports of Argentine wine to the US overtook Chilean wine in 2010. Argentine vintners said that US sales were helped by the competitive Argentine exchange rate. In 2010 Argentine wine exports to the US were worth US$222m, US$12m more than Chile's. Argentina is now the fourth biggest supplier of wine to the US after Italy, France, and Australia.

Total Argentine wine exports in 2010 were worth US$860m, up 12% on 2009. Argentine winemakers are hopeful that the strength of the Euro will price European wines out of the US market and that they will benefit. The Argentine wine industry is growing in economic importance. It now employs 400,000 people and had total sales of US$2.6bn. In 2009 the country had to import wine from Chile to meet domestic demand, because the 2009 grape harvest was so poor.

Globally, Argentina is the world's fifth biggest wine producer and the ninth biggest exporter. Its per capita wine consumption is 30 litres a year. A generation and a half ago in 1960, the average Argentine drank 90 litres of wine a year.

Drugs are the second-biggest problem faced by Peru, according to a survey carried out by the Information and Education Centre for the Prevention of Drug Abuse, Cedro. A total of 45% of respondents across seven cities in Peru put the consumption of drugs and the cultivation of coca leaf as the second most serious problem confronting the country. A massive 85% said the biggest problem was poverty and unemployment.

Significantly, the respondents were more concerned about the consumption of drugs and the resulting anti-social behaviour than drug-trafficking and coca cultivation, by far the most important concerns at a state level. The survey was confined to cities rather than rural districts, where the results would no doubt have been different.

The government has faced widespread opposition to its coca-eradication programme in coca-producing regions, suspicious of alternative development programmes. The latest protest was an indefinite strike by the coca growers of the Monzón valley demanding a halt to eradication. This has been called off, temporarily at least, because the government agreed to suspend all alternative development activities in support of coca substitutes: rice, cacao, coffee, cattle breeding and reforestation.

US Trade Representative Robert Zoellick has threatened Costa Rica with exclusion from the Central American Free Trade Agreement (Cafta) unless it agrees to open up the telecommunications sector. Zoellick, who is jetting around Central America before the final two rounds of Cafta negotiations in Houston, Texas, later this year, met President Abel Pacheco in San José yesterday.

Zoellick said that failure to open up the sector would make it far less likely that US Congress would approve the Cafta. Costa Rica has repeatedly refused to privatise the state electricity and telecommunications monopoly Instituto Costarricense de Electricidad (ICE). 'The other four Central American countries are willing to open up the sector and Costa Rica must be prepared to advance a bit so that we can work together to solve these problems', Zoellick said, adding that the Cafta would 'not wait for anybody' and, if necessary, it could be presented to Congress excluding Costa Rica. 

Costa Rica's foreign trade minister, Alberto Trejos, accepted that differences over telecommunications 'could jeopardise the free trade deal'. He added that 'we don't know the consequences […] but we left it very clear with the US that there will be no privatisation (of ICE)'. ICE wields enormous power in Costa Rica. Company workers created havoc in San José earlier this year when they went on a three-week strike, which claimed the scalp of then-economy minister Jorge Wálter Bolaños. The government does not have the political will to override ICE opposition to US demands that the telecom sector be opened.

The US was also irked by Costa Rica's decision to join the G-21 (now G-23) of developing nations at the WTO meeting in Cancún last month. It has pressured the country along with Guatemala, which also joined, to leave the group or risk exclusion from Cafta.

The economy is beginning to show that the worst may now be over. The fall in consumption slowed in August and September, though spending is still about 20% lower than it was in 2001. More encouragingly, employment is beginning to pick up. It was up 0.3 of a percentage point in July and September compared with the previous quarter.

Even so, the jobless figures are little to brag about. The unemployment rate is still stuck at 16%. The Instituto Nacional de Estadí­stica points out that industry, farming, and the government are all hiring. According to the INE 1.02m people were working in the third quarter compared with 983,900 in the same period of 2002. The pick-up in employment is most pronounced in Montevideo where 28,000 more people are in work. The problem is, though, that the number of people coming into the job market is still rising.

Although there are more people in work, wages are falling. Real household income was 9% down in the third quarter of this year compared with the same period of last year. On the other hand, incomes were about 1.8% up in the third quarter of this year compared with the second.

The government of President Lucio Gutiérrez says that it will not tolerate violent protests from indigenous groups, who for their part have upped demands for Gutiérrez to resign and threatened a popular uprising. The head of police in Quito, Fabián Villarroel, said that those who attempt to paralyse public services will be sent to prison.

On 12 December, Villarroel arrested indigenous leader Humberto Cholango for describing Gutiérrez on television as 'a liar, incompetent and inconsistent'. He was released on 13 December after dozens of indigenous activists demonstrated against his arrest. Another Conaie leader, Lourdes Tibán, yesterday described Gutiérrez as an 'animal', adding that the arrest of Cholango showed his true 'dictatorial' colours.

Gutiérrez is getting more and more edgy as the 21 January approaches. On this day in 2000, indigenous groups staged a popular uprising which led to the ousting of former president Jamil Mahuad. The umbrella indigenous group Confederación de Nacionalidades Indí­genas (Conaie) has threatened another massive uprising unless Gutiérrez revises his social and economic policies.

Gutiérrez is not bereft of indigenous support, however. Several indigenous groups loyal to the President journeyed down from the Amazon region to Quito to demonstrate in his favour. They promised 'to cut off the heads' of those who attempted to remove Gutiérrez by force.

The state government in Chihuahua has confined all its Policí­a Judicial officers to barracks. This follows the arrest of the police commander and two of his subordinates on suspicion that they were behind the killings of suspected drug traffickers found buried in a house in Ciudad Juárez at the weekend. So far, 11 bodies have been recovered from the house, which belonged to a known drug smuggler.

On Wednesday, the office of the federal procuradurí­a general (PGR) took 16 of the police officers to Mexico City for further questioning. The deputy director of the unit combating organised crime at the PGR, José Luis Santiago Vasconcelos, said that the case was extremely serious because it showed that the police had become heavily corrupted and instead of protecting people were working for drug traffickers.

The question is whether the complicity goes higher than the police commander, Miguel Angel Loya. He has not been at work for the past couple of days and the state authorities only learnt that he had been taken to Mexico City when the PGR told them. The case could have major political implications: there is a crucial gubernatorial election in the state in July.

The district attorney in Mexico City yesterday issued warrants for the arrest of Gustavo Ponce Meléndez and Carlos Ahumada Kutz. Ponce was the former city minister of finance who was filmed gambling heavily in Las Vegas. Ahumada is the construction magnate who was filmed talking about business deals and payments with René Bejarano, the leader of the majority party on the city council.

The city authorities have been accused of moving very slowly in making arrests in the two scandals. Bejarano, who resigned, has been seen in public since the scandals broke, but Ponce appears to have gone on the run. Ahumada's lawyers said yesterday afternoon that the warrant had not been served and their client had not been called in to testify.

The city attorney general, Bernardo Batiz, justified the warrant on the grounds that the two mean were involved in another scandal which has led to the city council apparently mislaying M$31m. Ahumada first made accusations about the missing money, and the way the city council was doing business, a couple of weeks ago. Yesterday yet another video was broadcast showing Ahumada apparently paying off another Mexico City borough leader, Carlos Imaz. Like Obrador, Imaz is also a prominent member of the Partido de la Revolución Democrática.

The scandal is hugely important because Andrés Manuel López Obrador (Amlo), the mayor of Mexico City, is the frontrunner for the presidency in 2006. He had a reputation for efficient administration and clean hands. Just before the DA issued the warrants, Amlo said that he had never authorised any payments to Ahumada and that his conscience was clear. He also denied that he had asked any intermediaries to ask Ahumada for money to fund his campaign for the presidency in 2006.

Amlo seems convinced that the federal government, the intelligence service (CISEN), and the US Drug Enforcement Administration are behind the scandal which is designed to destroy his political career. He has called for a mass rally next Sunday in the Zócalo to show that the majority of people in the city still support him and oppose the plotters. Amlo added that he would provide the evidence linking the CISEN, the DEA and the federal government to the scandal on Thursday.

A Mexican judge issued an injunction yesterday which halts the extradition of Francisco Rafael Arellano Félix to the US. The Arellano Félix brothers run the much-feared Cartel de Tijuana. A court in California had asked for Arellano Félix to be extradited in February for skipping bail and fleeing to Mexico in 1980.

Arellano Félix was convicted in Mexico a month ago of drug trafficking and sentenced to 10 years in jail. His family controlled a large slice of the business of supplying drugs to the US. In 2002 one of his brothers, Ramón, was apparently killed, and another Benjamí­n, who is accused of being the brains behind the organisation was picked up in Puebla.

Francisco has been in prison since 1993 when he was picked up after the assassination of the cardinal archbishop of Guadalajara, Juan Jesús Posadas Ocampo. Two other brothers, Eduardo and Javier, are presumed to be heading the organisation now.