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In less than a week the government shifts from dismissive to denouncing an attempt to take power by force.

The protest movement that had been building up in Bolivia since 15 September, ostensibly under the banner of halting the exportation of the country's natural gas, reached the capital on 13 October, with demonstrations and riots quelled only when the army was sent out onto the streets to reinforce the police.

Until well into last week the government was shrugging off the importance of the protests, portraying them as something confined mainly to the department of La Paz, with its epicenter in the dormitory city of El Alto, next to the capital. The main protagonists were the Aymara peasants led by Felipe Quispe, allied with the unions of El Alto, and joined later by miners from Huanuni, Oruro. Quispe's arch-rival Evo Morales, leader of the Movimiento al Socialismo (MAS), was making an effort to share the limelight, but without risking a crackdown on his coca-growing powerbase in the Chapare region.

As the week drew along, though, clashes with police became more frequent and more violent. By the weekend the death toll had risen above 20, and the government, while insisting that the situation did not merit the declaration of a state of emergency, ordered the army to El Alto to restore order. The toll mounted rapidly, reaching 36 by the end of Sunday. Already the initial demands of the protesters had been superseded by an overriding new one: that President Gonzalo Sánchez de Lozada should step down.

In a parallel move the government began to portray the protests as an attempt to overthrow the government by force, pointing to Morales, and only secondarily to Quispe, as the masterminds. A lateral threat of a mutiny in the police, allegedly headed by Major David Vargas (leader of the February uprising which ended in a clash with the army and riots that claimed 31 lives ― WR-03-07), was averted with the arrest of six of the main conspirators.

On Monday 13 October, columns of protesters, in a mood turned uglier by the killings, descended upon La Paz. Only at nightfall, after the death toll had shot up to 49, did the combined army-police action restore an uneasy calm. President Sánchez de Lozada said he would contemplate holding off on the gas export scheme, but insisted that he would not resign. His resolve was strengthened by an OAS statement `categorically' rejecting any attempt to breach Bolivia's constitutional order; a warning to anyone aspiring to take over that the Democratic Charter would be invoked to impose sanctions.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		11.10.02	03.10.03	10.10.03
Argentina	peso	3.66	2.91	2.86
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.38	7.78	_
Brazil	real	3.82	2.88	2.83
Chile	peso	750.00	662.00	649.00
Colombia	peso	2,871.29	2,905.56	2,878.51
Costa Rica	colón	370.45	409.48	410.19
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	_	34.03	35.87
Ecuador	dollar	1.00	1.00	1.00
El Salvador	colón	8.75	8.75	8.75
Grenada	EC dollar	2.70	2.70	2.70
Guatemala	quetzal	7.76	8.11	8.05
Honduras	lempira	16.91	17.77	17.78
Mexico	nuevo peso	10.22	11.31	11.27
Nicaragua	córdoba oro	14.48	15.50	15.52
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,400.00	6,220.00	6,220.00
Peru	nuevo sol	3.62	3.49	3.48
Uruguay	nuevo peso	28.50	28.65	28.80
Venezuela	bolí­var	1,488.50	1,600.00	1,600.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	July	August	September	Last 12m	Jan-Dec 2002
Argentina	Indec	0.40	0.00	0.00	3.50	41.00
Bolivia	INE	0.60	0.64	0.23	3.62	2.45
Brazil	FGV	-0.20	0.62	1.05	20.13	26.41
Chile	INE	-0.10	0.20	0.20	2.20	2.80
Colombia	Dane	-0.14	0.31	0.22	7.11	6.99
Costa Rica	DGEC	0.80	0.70	0.13	8.36	9.68
Ecuador	Inec	0.03	0.06	0.73	7.54	9.36
El Salvador	Min.Ec.	-0.40	0.30	0.10	2.10	2.80
Guatemala	BCG	0.27	0.28	0.42	5.68	6.33
Honduras	BCH	0.40	0.90	0.40	7.90	8.10
Mexico	Bco.Mx.	0.14	-0.07	0.60	4.04	5.70
Nicaragua	BCN	-0.08	0.30	_	4.04	3.87
Paraguay	BCP	-0.70	-0.20	0.20	8.10	14.60
Peru	INE	0.15	0.01	0.56	1.89	1.52
Uruguay	DGEC	0.50	1.16	0.80	11.63	25.94
Venezuela	BCV	1.80	1.30	1.30	26.60	31.20
US	DOL	0.10	0.40	_	2.20	1.60
Previous: WR-03-39

The stockmarket in figures
Market	Index	03.10.03	10.10.03	Variation (%)
Buenos Aires	Merval	830.16	863.44	4.01
São Paulo	Bovespa	17089.30	17676.14	3.43
Santiago	IPSA	1475.70	1519.15	2.94
Bogotá	IGBC	2145.25	2149.35	0.19
San José	BCT	11672.53	12497.86	7.07
Quito & Guayaquil	Interinvest	67.42	69.52	3.11
Mexico	BMV	7838.77	7949.03	1.41
Lima	ISVBL	2028.04	2064.42	1.79
Caracas	BC	16914.17	18081.41	6.90
Source: Daily market reports.

The Colombian army has been accused of capturing members of an indigenous community, including a well-known leader, on the grounds that they had been aiding the guerrillas of the Fuerzas Armadas Revolucionarias de Colombia (Farc).

Arcadio Mutumbajoy, vice-president of the Organización Zonal Indí­gena del Putumayo (Ozip), was placed under arrest two days after he was told by the state prosecutor's office that there were no charges pending against him. Mutumbajoy had gone to inquire about reports that a list of alleged Farc collaborators was circulating, with his name on it.

The irony is that a few months ago the Farc announced that he had become a target because, they said, he was an army informant. Eighteen other members of Mutumbajoy's community were seized in a high-profile army operation, in the presence of the media.

The Ozip says that this action was only motivated by the local army commander's wish to prove to the President that he was doing his job. President Alvaro Uribe recently urged the military commanders to `show results in the frontal war declared on the illegal groups, or resign.'

Founded 17 years ago, the Ozip represents 12 different indigenous groups: Inga, Murui, Siona, Kamentsa, Nasa, Emberá, Pasto, Awa, Correguaje, Cofán, Quichua and Yanacona — all told some 36,000 people grouped into 128 cabildos (traditional councils). In their department of Putumayo they devised a scheme for the manual eradication of illegal coca plantations which has put them in the crossfire between paramilitary groups and guerrillas. As the Ozip puts it, they are not `enemies, but victims of this fratricide war.'

"We have always been allies of the United States and as such we feel abandoned."

Salvador Talavera, leader of former Contras in Nicaragua, seeking compensation from the US as war veterans.


"Lula has been genetically modified by the conservative forces that are sustaining his government."

João Pedro Stédile, leader of Brazil's movement of landless peasants.


"The billion dollars from American tourists will be saved for Cubans living in freedom and not for their current jailers."

Roger Noriega, US Assistant Secretary of State for the Western Hemisphere, heralding a clampdown on travel to Cuba.

LATIN AMERICAN REGIONAL REPORTS: CARIBBEAN & CENTRAL AMERICA - NOW AVAILABLE

Can Central America or the Caribbean provide the next Pope? That is the subject of our detailed special feature this week. Also, US-Cafta talks heat up as USTR Bob Zoellick visits the subregion; Nicaragua's former President Arnoldo Alemán plots his re-election strategy from behind bars; El Salvador's Tony Saca strides clear in the latest polls, and Panama has to take US criticism on the chin. In the Caribbean, Dominican President Hipólito Mejía is officially voted the least popular head of state in Latin America but still pushes for re-election; the US trade embargo on Cuba provokes impassioned debate; Trinidad's grand new budget is overshadowed by a protest about high crime levels; Jamaica's anti-crime plan makes no impact on high murder rate, and Haiti is tarnished by the stigma of lawlessness and corruption. For more information or to subscribe call +44 (0)20 7251 0012 or send an email to [email protected]

While Morales and Quispe offer a truce, Washington warns Mesa to tread carefully in areas linked to investment and coca eradication.

When Carlos Mesa was sworn in as Bolivia's 64th President on 17 October there was much talk about the Bolivian congress having `saved' the constitutional order, after former President Gonzalo Sánchez de Lozada `accepted the inevitable' and resigned. Overlooked is the fact that Goni's departure was not inevitable; indeed, right up to the end he was considering a tough response to prevent Bolivia from falling into the hands of what he described as a `narco-terrorist dictatorship'.

By this Goni was alluding to the two leaders of the protest movement that had him against the wall: Evo Morales, the leader of the coca growers who had come out a close second in the last presidential elections, and Felipe Quispe, the leader of the peasants' confederation, who had once been imprisoned for belonging to a terrorist organisation. He was sidestepping the fact that they had not acted together; indeed, that he, the President, had allowed the protest that Quispe had started to grow as a counterweight to Morales's influence.

The merit for convincing Goni that a peaceful solution was better than opting for violent repression has been attributed by some to the joint mediating effort launched by Brazil's President Lula da Silva and his Argentine peer Néstor Kirchner (see page 3). The two have also offered Goni's successor their support.

He is likely to need it. The two protest leaders, Morales and Quispe, are offering Mesa a truce of sorts, to see if he delivers on his promise to `respond to the gas issue [with] the participation of all Bolivian men and women,' to work on reforming the hydrocarbons law and to review the privatisations carried out since 1995. There is no telling how long that truce will last.

But Mesa is likely to come under pressure soon from another quarter: the US. The day after he was sworn in, Washington conveyed through its ambassador in La Paz, David Greenlee, its willingness to `accompany' the new administration. Greenlee also told Mesa that the Bush administration was concerned about the preservation of `clear rules' for foreign investors and considered it `important' that there should be a serious policy of eradication of illegal crops.

In other words, he was told to tread carefully on such issues as the privatisations review, the reform of the hydrocarbons law, and the coca growers' demands for an end to eradication.

How a protest by peasants, at first dismissed by the government, grew despite repression into an unstoppable force.

September
15: Peasants led by Felipe Quispe set up roadblocks on the highways leading southward from La Paz, in support of two sets of demands: the fulfilment of promises made by the government a year earlier, and the government's reversal of the policy to export natural gas to the US.
20: In an attempt to lead trapped travellers through the roadblocks, troops clash with the protesters: a soldier and four civilians are killed in Warisata, close to Lake Titicaca.
25: The umbrella labour confederation, COB, announces a general strike in support of the peasant protests and demands the resignation of President Gonzalo Sánchez de Lozada.
26: The Movimiento al Socialismo (MAS), the country's second-largest party, headed by Evo Morales, leader of the coca growers (and arch-rival of Quispe's) joins the protests, focusing mainly on opposing the export of gas.
27: Ministers travel to El Alto, next to La Paz, to negotiate a solution with Quispe's Confederación Sindical Unica de Trabajadores Campesinos de Bolivia (CSUTCB). They fail.
28: A convoy brings to La Paz 198 travellers who had spent a fortnight isolated by the roadblocks.
29: Halting launch of the COB's general strike.
30: Thousands join a march in La Paz against the export of gas, organised by the COB and backed by the MAS. Quispe refuses to talk with the government unless it meets him at Warisata.

October
6: Mass demonstrations bring La Paz to a halt.
8: A `civic strike' is launched in El Alto, with marches and roadblocks.
9: Clashes between protesters and police in El Alto leave two dead and at least 16 injured, many of them miners who had marched there from Oruro.
11: The government orders the army to restore order in El Alto. Clashes claim two more lives.
12: Renewed clashes between security forces and protesters in El Alto leave a toll of at least five, perhaps more than 20, dead.
13: The government issues a decree stating that no gas will be exported without prior consultation with the population and social organisations. This fails to mollify the protesters; marches multiply and a transport strike paralyses La Paz. Clashes kill at least 14 more people (including two soldiers). Vice-President Carlos Mesa withdraws his support from the President in protest against the violent repression.
14: The OAS states its support for Sánchez de Lozada. The US expresses `deep concern'. A tense calm is broken in the Chapare region by a bombing that injures two soldiers on patrol. The Nueva Fuerza Republicana (NFR), most recent and smallest partner in the ruling coalition, threatens to pull out unless the unions' demands are met. The COB declares an indefinite strike.
15: The government announces that it will call a referendum on the export of gas, the convocation of a constituent assembly, and the reform of the hydrocarbons law. The Movimiento de la Izquierda Revolucionaria (MIR), second-largest partner in the ruling coalition, joins the demand for a constitutional reform. Some 2,000 miners marching towards La Paz clash with the army and police in Patacamaya. Rioting spreads to Cochabamba. At least two more people are killed in clashes.
16: Sánchez de Lozada states that his resignation would spell the end of democracy, the disintegration of Bolivia and the establishment of a `narco-unionist or narco-terrorist dictatorship.' The protesters reject the referendum and insist on the President's departure. The governments of Brazil and Argentina send a joint team to try to mediate a solution to the crisis.
17: The NFR withdraws from the ruling coalition and demands Sánchez de Lozada's resignation. Congress is convened, but Evo Morales stays away. Sánchez de Lozada meets the Brazilian and Argentine envoys, later tells former President Jaime Paz Zamora that he will tender his resignation to congress. Instead, he flies away to Santa Cruz, en route to Miami, leaving behind his letter of resignation.

Top-level envoys rushed to help find a peaceful solution that kept things within a constitutional framework.

On 16 October, when the crisis in Bolivia was threatening to spiral out of control, the presidents of Brazil and Argentina, Lula da Silva and Néstor Kirchner, decided to intervene jointly in what was described as `an attempt to bring the parties together' behind a `peaceful' solution that `respected the rule of law'. The terms chosen are important, given the context: previous utterances from outside Bolivia had concentrated on support for the `constitutional order', and an OAS official had muddied the waters by proclaiming that demanding the President's resignation, as the Bolivian protesters were doing, was `unconstitutional'.

Two fairly top-level envoys were despatched: Marco Aurélio Garcia, one of the designers of Lula's foreign policy, and Eduardo Sguiglia, secretary for Latin American affairs at Argentina's foreign ministry. From the outset the message they were carrying was that a very constitutional solution, given the situation of ungovernability, would be Goni Sánchez de Lozada's resignation and his succession by Vice-President Carlos Mesa.

Garcia later recounted that during their first meeting with Goni he showed little inclination to step down, but that this altered as the hours passed and he was left with virtually no political support. His most important partner, the MIR, had already signalled that it was taking distance when it came out in support of constitutional reform — one of the protesters' demands.

This was followed by the defection of the NFR, which joined the chorus demanding the President's resignation. One of the first to relay to the world at large that Goni had decided to step down was Garcia.

The assessment of how much the Brazilian-Argentine effort influenced the outcome varies from one source to another. Garcia has said that `in no way' had either he or Sguiglia influenced Goni's decision. Argentine foreign minister Rafael Bielsa has said instead that the joint effort by the two governments was `decisive'. Brazil was the first country to offer, on 17 October, its `full disposition to collaborate with the new Bolivian government'. The Rio Group followed suit, pointedly endorsing the `constitutional and democratic' solution to the crisis.

The electoral council has set the dates to collect endorsements of referendum petitions; the vote on Chávez will take precedence.

Movement to change Venezuela's political map has begun in earnest. In another unanimous decision, on 15 October the national electoral council, CNE, set the dates for the signing of petitions for mandate-revocation referendums. First, on 21 November, will be the 46 referendums requested by the pro-government camp against opposition legislators, governors and mayors. Next, on 28 November, will come the 34 referendums requested by the opposition, against President Hugo Chávez and 33 pro-government legislators. The CNE also announced that the referendum on Chávez 's mandate would take precedence over the others.

Even though the decision was backed by the CNE members selected by the opposition, there was a chorus of protests against the timetable, which was described as a government-orchestrated manoeuvre to delay the referendums. Some said the plan was to hold them back until April or May, so they would clash with the campaigns for the regional and municipal elections scheduled for July.

Others ventured that the government wanted a postponement until August so that, even if Chávez 's mandate were revoked, there would be no call for fresh presidential elections, as the constitution provides for his replacement by his vice-president until the end of his original mandate.

Within less than 24 hours all this proved to be an unwarranted rush to judgment. CNE vice-president Ezequiel Zamora announced that the council members had agreed to set the date for the first referendum, the one on Chávez , on 27 March. `Only force majeure,' he said, `could prevent this from being the date for the presidential revocatorio.' The umbrella opposition coalition, Coordinadora Democrática, promptly accepted this as the date to work towards.

The first big test will thus take place in the month following the collection of signatures endorsing the referendum petitions. That is when the CNE will scrutinise the endorsements, determine their validity, and count to see if they add up to the requisite 20% of the electorate — in Chávez 's case, that means at least 2.4m. It is highly likely that some of the petitions will fail to make the grade, particularly those filed mainly for nuisance value. An illustration is provided by the 64 requests filed by Acción Democrática (AD) against pro-government legislators: 31 were rejected at the outset because they had been prepared so sloppily.

Getting tactical
One opposition party, the Movimiento al Socialismo (MAS), has added a further four referendum petitions, against pro-government legislators. This does not sound as impressive as the 33 successful filings against chavista legislators made by AD, but this is because the MAS has planned its move more carefully. It has targeted chavista legislators who either have no alternate to replace them if their mandates are revoked, or whose alternates are members of opposition parties.

The MAS's purpose is no secret: it wants to tilt the balance of power in the national assembly, where the pro-government camp's majority is very slender: it has 51% of the 165 seats. The arithmetic, of course, could change if the petitions filed by the pro-government camp against opposition legislators are successful.

Uribe's `make or break' referendum must be voted on by at least 25% of a confused electorate, more than 6.2m people.

President Alvaro Uribe has been campaigning intensely to persuade voters to turn out for both the referendum on reforms proposed by his government, on 25 October, and the elections of mayors and town councils in 1,100 municipalities, and governors and regional legislators in the country's 32 departments, on 26 October.

The first has been promoted under several guises — as changes crucial to ensuring governability; cost-cutting measures to reduce crippling fiscal deficits; a drive against corruption and politicking. This is only one indication of how complex a set of choices will be put before the voters. Specific measures, most requiring constitutional amendments, include such things as slashing the number of representatives in congress, closing down state agencies, freezing the pensions of former presidents, freezing public-sector pay, and introducing strict controls to prevent corruption. Polls show a high level of confusion among voters.

In the last leg of the campaigns the twin elections have been sloganised by the government as a `referendum for democracy and against terrorism.' The latter is an allusion to the fact that the Farc guerrillas have been conducting a campaign of intimidation and outright attacks against candidates and voters.

Opposition to the government's proposed reforms is as varied as the content of the referendum questions; it embraces opposition parties, civic organisations and unions. Many of these have opted for a simple solution: to campaign for abstention — even before the ballots are counted, the referendum has to be voted on by a quarter of the electorate, more than 6.2m people, to be valid. Opponents have been complaining that the government has improperly thrown public funds behind its campaign, in which urging people to vote meshes with the solicitation of approval, and which also includes slandering the opposition.

Uribe has been proclaiming, `If the referendum founders, so does governability.' While much of the media and most politicians recognise this as hype, its impact on the public at large is anyone's guess.

Senate election scandal
The elections of the coming weekend are not the only political headache for the government. The chief prosecutor's office has just recommended to the council of state that it should annul the senatorial election results of March 2002 in 20,503 polling stations (27% of the total). A careful scrutiny of ballot papers, counts, electoral rolls and appointments of officials produced a host of irregularities: 44,000 cases of substitution of voters, 2,000 forms with erasures and amendments, 97 polling stations with irregularities related to the substitution of jurors.

Six departments accounted for 60% of the polling stations where recounts have been recommended: Bogotá (2,810), Valle del Cauca (2,737), Antioquia (2,586), Bolí­var (1,604), Atlántico (1,506), and Santander (1,112).

This is a major embarrassment for the whole of Colombia's political class: the benefits from the irregularities cut across party lines, largely reflecting patterns of local influence. It is the kind of `corrupt politicking' Uribe says his reforms will help weed out, if approved in the referendum.

The continuing inquiry into the traffic of arms from and through Ecuador into Colombia has taken a new turn with the claim by Colombian President Alvaro Uribe that an LAW rocket used in an attempt on the life of a Colombian business leader had been sold to the Farc guerrillas by `corrupt' members of the Ecuadorean military. The Ecuadorean army says that none of its stock of these rockets is missing, and that, in any case, they do not carry any markings that would prove Ecuadorean provenance. Presidential spokesman Marcelo Cevallos has announced that a high-ranking Ecuadorean army officer was being sent to Bogotá to examine the evidence for Uribe's claim.

The issue has been muddied by a report in the US-based newspaper El Nuevo Herald linking this incident with the alleged sale of 330 castoff Ecuadorean rockets to the Farc using a forged Zimbabwean end-user certificate. An Ecuadorean army spokesman says that the projectiles involved in this sale were 68mm rockets, not the LAW-M72-A2 purportedly used in the recent Farc attack in Colombia. 

After a telephone conversation with Ecuadorean President Lucio Gutiérrez, Uribe said he had `hopes that the arms traffic through Ecuador towards Colombian terrorist groups will be halted totally.' Clearly, he was alluding not only to weapons of Ecuadorean origin, but also those passing through Ecuadorean territory.

COLOMBIA | `Worst coffee year' is left behind. Even though in volume terms production and exports in the last coffee year, which ended in September, showed poorer results than in 2001/02 (billed as probably the worst in 100 years), the Federación Nacional de Cafeteros says that thanks to a slight recovery in the world price, export earnings were modestly up. Production was down 1.99%, to 11.7m bags (of 60 kilos), exports down 1.43%, to 10.5m bags.

Figures for the current calendar year show that recovery has already spread to volume. In the first nine months of the year production has increased by 1.2% on last year, to 7.9m bags, and exports by 4.8% to 7.4m bags.

VENEZUELA | Oil to fuel reactivation in 2004. The budget for 2004 submitted last week to the national assembly assumes GDP growth of 6.5%, fuelled by a 16.9% expansion of the oil sector and 2.6% growth of the non-oil economy. This year the economy is expected to contract by 11% (the worst decline ever), largely because of the 11.5% slump of the oil sector, attributed to the two-month strike-lockout staged by the opposition in a bid to force President Hugo Chávez to resign.

The government is assuming the price for Venezuela's mix of crudes to average US$18.50 per barrel, higher than the US$16 calculated for this year's budget, but lower than the US$24.67 actually received so far this year. Oil production is expected to run at 3.02m barrels per day, as against the current 2.9m bpd.

Finance minister Tobí­as Nóbrega has ruled out a `maxi-devaluation': he expects the exchange rate to slide gradually to Bs/2,016 per US dollar (from the current fixed rate of Bs/1,600). Spending is calculated at US$26bn; in local-currency terms, 20% up on the 2003 budget. Inflation is expected to come down from this year's projected 30% to 26%.

Lula offers a `strategic alliance' in which both will share leadership of an approach to replace the neoliberal Washington Consensus.

Only days after Argentine President Néstor Kirchner let it be known that he was not supporting Brazil's bid for a seat on the UN Security Council, President Lula da Silva turned up in Buenos Aires, proposing that both of them should jointly assume a leadership role in South America, behind a strategy outlined in a `Buenos Aires Consensus'. The name had been chosen deliberately to convey the image of something intended to replace the Washington Consensus — the set of policy proposals embodying the neoliberal approach to the region's economic problems.

The approach draws on the two countries' recent joint experience in the G-22 during the Cancún trade talks, on Kirchner's stance during his negotiations with the IMF and with Argentina's external debtors, and on the strategies developed by Lula's foreign-policy advisers which envisage Brazil playing a leadership role in the international arena, building from its immediate environs outwards.

Salient points
Below are excerpts from both the `Buenos Aires Consensus' and Lula's address to the Argentina congress, which illustrate the main drift of the `strategic alliance' the two leaders are embarking upon.

•  `Argentina and Brazil have the responsibility of creating an embryo of a South American nation [first strengthening Mercosur] which must be not only a customs union but a space for the articulation of industrial, agricultural, scientific and technological policies that assume a social dimension, and guarantees the free circulation of persons.'
•  `The present strategic alliance, however strong it may seem, may not express the full intensity of what the relationship between the two countries should be. Best of all would be an association in which there was no place for leadership disputes. [This is crucial if the aim is to be] in the next few years in the UN Security Council.'
•  `South American integration must be fostered in the interest of all, with the aim of creating a model of development in which growth, social justice and the dignity of the citizens are linked together.'
•  `Regional integration is a strategic option to strengthen the insertion of our countries in the world, increasing their negotiating capacity [...]A greater autonomy of decision-making will allow us to confront more effectively the destabilising movements of speculative financial capital and the competing interests of the more developed blocs.'
•  `[Brazil and Argentina wish to] continue participating from within Mercosur in the negotiations of the Free Trade Area of the Americas (FTAA) with the aim of ensuring a balanced agreement that respects the disparate interests of the participants.'
•  `The developed countries [are urged to] cooperate effectively [in the WTO multilateral trade negotiations] so as to consolidate an open system, without distortions and non-discriminatory.'
•  `The administration of the public debt must have as its horizon the creation of wealth and jobs, the protection of savings, the reduction of poverty, the fostering of education and health, and the possibility of pursuing sustainable policies of economic and social development.'

Getting down to it
As a token that he intends to go beyond words, Lula has already launched the new partnership in the practical arena, by inviting representatives of the Argentine government to accompany Brazilian foreign minister Celso Amorim on his trip to India to lay the ground for a state visit by Lula, scheduled for next year. They will attend the Brazil-India Seminar and the meeting of the Brazil-India Trade Council. Businessmen from member-countries of Mercosur have also been invited.

This pattern is to be repeated in Brazil's planned overtures to the Arab world, beginning in November.

The unexpected intervened as well, in the shape of the political crisis in Bolivia. Brazil and Argentina quickly decided to act jointly in an effort to mediate a solution — and as we report elsewhere, seem to have played an important role in the outcome.

Additional insights
One of Lula's close advisers, Theotonio dos Santos, a professor at the Fluminense university, contributed some additional insights into the thinking that shaped the Buenos Aires Consensus. Speaking at the Monterrey book fair last week, he said that the aim of the new consensus is to `launch a new phase to recover economic growth based on the state promoting an industrial policy — a phase which will place national economies within the perspective of Latin American integration [giving them] negotiating capacity in their dealings with international organisations.'

Dos Santos said that this approach is supported by businessmen aware of the failure of the `rigid Washington Consensus recipes': `The Latin American businessmen who intend to go on being that, and not turn into employees of some global corporation, are backing the state promotion of an industrial policy .'

The adviser was in Monterrey for the presentation of the Spanish-language edition of his latest book on dependency theory, La teorí­a de la dependencia: balance y perspectivas. This might be a good book to recommend to the US Assistant Secretary of State for the Western Hemisphere, Roger Noriega, who in his inaugural address to the Center for Strategic and International Studies said, `The great debate between authoritarians, dependency theorists, and unreconstructed Marxists on the one hand and the advocates of democracy and the markets on the other, is over.'

`FTAA in 2005 is US priority'
As the Buenos Aires Consensus was being unveiled on one side of the River Plate, on the other John Maisto, US ambassador to the OAS, was telling his Uruguayan hosts that the priority for the US is the conclusion of the FTAA by the target date of 2005. Maisto's visit is to be followed this week by that of Assistant US Trade Representative Peter Allgeier, to `exchange views' with Uruguayan officials over the recent WTO meeting at Cancún. At that meeting Uruguay stuck with the Cairns group, taking distance from the G-22 (as it then was) in which Brazil, accompanied by Argentina, played a leading role.

Former President Carlos Menem has announced his intention to `rebuild' the ruling Partido Justicialista (PJ). Speaking last week from his home province of La Rioja, he accused President Néstor Kirchner of `destroying the country' and of playing into the hands of Communists. Claiming for himself credit as `the only one who ruled and didn't fail', Menem called for a restoration of the close relations with the US that he forged during his 10 years in office.

Prime minister Aní­bal Fernández responded saying, `There is nothing left to destroy, even if we wanted to, because he [Menem] already destroyed everything.' He added that the only de facto leader of the PJ was President Kirchner.

BRAZIL | Business confidence is rising. After having been on a downslide between January and July (from 58.9% to 51.9%), the CNI index of business confidence rose to 55.7% in October. The CNI says that readings above 50% reflect confidence in favourable conditions over the coming six months and a gradual recovery of the economy. The CNI's expectations index, which looks further ahead, rose from 59.3% to 61.9%.

Central bank president Henrique Meirelles says the economy is living an `extremely positive moment' in which it has also recovered the confidence of the financial markets, as illustrated by last week's take-up of a US$1.5bn issue of public debt bonds (originally planned to reach only US$1bn, but increased when demand hit US$7bn).

ARGENTINA | Reactivation is faltering. Industrial activity in September was 1.4% lower than in August, a worrying turnaround after having clocked an increase of more than 16% over the past year. A survey conducted by the national statistical institute, Indec, shows 55.1% of industrialists expecting no change in the fourth quarter, and 42.9% expecting an improvement.

The broader economic activity index for August showed an insignificant increase of 0.1% over July, which left it 8% above the reading for the same time last year. Looking on the bright side, the August index is virtually back at the same level as in August 2001, when the Argentine economy began to contract sharply.

PARAGUAY | A future in diamonds? The Belgian-Canadian firm Rex Diamond Mining Corporation is planning to start commercial development of fields that over 18 months of prospecting have yielded 10 diamonds measuring between 0.7 and 1 milimetres, and 600 minerals indicating the presence of diamonds. The firm had been prospecting in the east-central departments of Caaguazú and Guairá, and Alto Paraná, on the eastern border with Brazil. Authorisation now depends on the environmental impact assessment and a law of congress.

URUGUAY | Recovery predicted for 2004. The Uruguayan economy will register virtually zero growth this year, but will expand by 5% in 2004, according to projections released by the economics school of the national university. Actually, the figures show an upturn beginning in the last quarter of this year and carrying on into 2004, when otherwise the study suggests that there will be `modest' growth, largely concentrated in the first half of the year. Exports are expected to expand by 13% next year, driven by demand from the recovering economies of neighbouring countries.

Mexico touts `orderly & secure' scheme on its southern border; dampens hopes of a breakthrough with Bush on the northern one.

Just as Washington and Mexico city were dampening expectations of progress towards an immigration agreement with the US during the 20 October meeting between Presidents Vicente Fox and George Bush Jr, the role Mexico has been playing as the outer gatekeeper for the US was being highlighted in the Mexican capital.

The occasion was Mexico's handover to Panama of the presidency of the Regional Conference on Migration. Javier Moctezuma, Mexico's undersecretary for population, migration and religious affairs, reported that last year 119,000 illegal Central American immigrants were repatriated. Of that total, 60% were from Guatemala, 30% from Honduras and 10% from El Salvador.

Unlike Mexican emigrants to the US, the arrivals from the isthmus are not seeking work in Mexico; their aim is to go straight through the country and enter the US. The volume of this flow is such that Mexico's holding and processing facilities at the southern border are frequently overwhelmed. To remedy this, plans have been drawn up to build a new migrations centre, covering 30,000 square metres, in Tapachula, on Chiapas state's border with Guatemala.

Mexico has what it describes as a `secure and orderly repatriation' programme in place with Guatemala, and expects to sign similar ones with the governments of Honduras and El Salvador. Apart from the repatriation scheme, Mexico has an agreement with Guatemala which last year allowed 39,000 people to take up temporary employment in Chiapas. This also contributes to alleviate the pressure at the other end, on Mexico's border with the US.

The Regional Conference on Migration was established, at Mexico's behest, in 1996. Its members are Mexico's two partners in Nafta, the US and Canada; the five Central American republics plus Belize and Panama; and, since 1999, the Dominican Republic.

Only a `relaunch' in Bangkok
In early 2001, Fox and Bush initiated negotiations on a migrations agreement seeking to introduce some order in the crossborder flows and to legalise the situation of the 4m-or-so undocumented Mexicans living in the US. These talks ground to a halt after the September 2001 attacks on New York and Washington, when security concerns took precedence in the US.

When Fox travelled recently to the US to attend the UN General Assembly, and did not meet Bush, the word was put out that they intended to catch up on pending business on the sidelines of the Apec meeting scheduled for October in Bangkok. Last week the US National Security adviser, Condoleezza Rice, stated that the planned meeting between the two presidents was not to produce agreements on anything.

Through a communiqué issued by the presidency, Fox concurred, stating explicitly that the meeting was `not to resolve or decide upon a migrations agreement.' The only aim of the encounter, he said, was to `relaunch the bilateral agenda'. Indeed, he added, he planned to use part of the allotted 45 minutes to discuss how the three Nafta partners can increase their competitiveness vis-í -vis Asia, and particularly China.

Survey shows López Obrador with a stronger lead, and the ruling PAN, with Sahagún, ahead of the PRI's Madrazo.

Victories in the midterm elections [WR-03-26] do not seem to have done the opposition Partido Revolucionario Institucional (PRI) much good. Voting preferences are still being attracted mainly by the mayor of Mexico city, Andrés Manuel López Obrador of the leftist Partido Revolucionario Democrático (PRD) — and in second place go, not to the PRI, but to the ruling Partido Acción Nacional (PAN).

An opinion survey conducted by the polling firm Bimsa shows López Obrador, who recently said he did not intend to run for the presidency in 2006, with 37% of preferences. At a distance, with 24%, follows Marta Sahagún, wife of President Vicente Fox, who has been blowing hot and cold over her own intentions. The PRI's Roberto Madrazo trails behind her with 20% (and 19% of respondents either won't answer or are undecided).

Compared with their standing in a poll conducted by the same firm on the day of the midterm elections, 6 July, López Obrador has gained 8 points and Madrazo has lost 6.

The pollsters also posed another scenario, in which the PAN's candidate was interior minister Santiago Creel instead of Sahagún. This did not affect López Obrador's rating, but lowered that of the PAN candidate by two points while raising Madrazo's by one — leaving the second and third only one point apart.

According to the pollsters, López Obrador attracts the nearly unanimous support of the PRD sympathisers, plus most of the independents and followers of smaller parties — and, interestingly enough, of 21% of the respondents who identified themselves as PRI sympathisers. One out of every three persons who voted for Fox in 2000 would now cast their ballot in favour of López Obrador.

Adopting `pragmatic' style
The PRD seems to be seeking to capitalise on López Obrador's lead by adopting his style of `pragmatic' politics instead of holding on to its older positions, in the current debate over energy reform. Party president Leonel Godoy says the party favours granting autonomy to the state oil company, Pemex, and the state power utilities, Comisión Federal de Electricidad (CFE) and Compañí­a de Luz y Fuerza, ending the state's centralised control over the three.

To this, though, Godoy attached a warning: if new régimes were to be adopted for energy, taxation or labour that did not reflect a truly broad consensus, Mexico could find itself in a situation akin to Bolivia's, with `focuses of social resistance' that would threaten institutional stability.

Voting preferences in September 2003
Scenario 1	%	Scenario 2	%
PRD - Andrés M López Obrador	37	Andrés M López Obrador	37
PAN - Marta Sahagún	24	Santiago Creel	22
PRI - Roberto Madrazo	20	Roberto Madrazo	21
Undecided	19	Undecided	20
Source: Bimsa.

They are gambling that he will be in a run-off with Alvaro Colom; the strategy has a couple of risky flaws.

Emboldened by the poor showing of retired General Efraí­n Rí­os Montt in the opinion polls, nine of the 11 candidates running for the presidency in the 9 November elections have decided to join forces to block the election of the conservative frontrunner Oscar Berger.

Parties to this agreement are Jacobo Arbenz of Democracia Cristiana (DCG), Francisco Arredondo of Unidad Nacional (UN), Rodrigo Asturias of the Unidad Revolucionaria Nacional Guatemalteca (URNG), Alvaro Colom of the Unidad Nacional de la Esperanza (UNE) coalition, Manuel Conde of Cambio Nacional (CN), Fritz Garcí­a-Gallont of the Partido Unionista (PU), José Angel Lee of the Partido Democracia Social Participativa (PDSP), Leonel López Rodas of the Partido de Avanzada Nacional (PAN), and Eduardo Suger of Desarrollo Integral Auténtico (DIA).

This array covers the political spectrum all the way from well right of centre to the former guerrillas of the URNG, but only one of them appears in the polls as attracting a significant share of voter preferences: Alvaro Colom, whose UNE coalition can be described as left of centre, running second with 18.2%. Colom, it must be noted, has been climbing steadily since he first appeared in the polls with 7% support.

Leading the field by far is Oscar Berger, a businessman running under the banner of the Gran Alianza Nacional (Gana), a coalition built around three small parties well right of centre: Partido Patriota, Partido Reformador and Solidaridad Nacional. He is currently polling 37.8%.

Rí­os Montt, of the ruling Frente Republicano Guatemalteco (FRG), is running a far third, with only 11.4% of voter preferences.

Two-step strategy
The nine candidates who have ganged up to block Berger have not decided to do so from the outset: they will run separately in the first round and in the run-off will urge their followers to vote for whoever of the two remaining candidates is not Berger (or, to be cautious, Rí­os Montt).

The reason for this two-step approach is simple: the first round will allow the various parties to stake claims to shares of power, on the strength of the votes they attract for their legislative and local government candidates — the assumption being that the winner will be beholden to them and use the first-round record as a yardstick for the shareout of government posts.

If the current lineout lasts relatively unchanged, there will be a run-off, on 28 December, as no candidate will attract more than 50% of the valid votes, and the run-off will be between Berger and Colom. There are obvious problems with the anti-Berger/Rí­os Montt coalition's assumption. The first is that there is no certainty that they command the full 32.6% of the vote not committed to the leading three candidates: Colom would need to add that much to his current support to win the second round. Berger, on the other hand, needs only an extra 13.6% (and the FRG voters might prefer to back him rather than a left-of-centre candidate).

The second is that it makes no provision for the prospect of a run-off between Berger and Rí­os Montt — though it is foreseeable than many of those voting for Colom would prefer anyone to Rí­os Montt.

The Rí­os Montt scenario
But could Rí­os Montt conceivably make it to the second round from such a low starting-point? Some local analysts think this is quite feasible, for two reasons. One is that the polls may be under-representing the opinions of rural Guatemalans, the very people from among whom the FRG draws its support — so his starting-point may not be as low as it seems.

The other is that the FRG may resort to dirty tricks to tilt the election in its favour. Last week the supreme electoral tribunal (TSE) issued a warning about the likelihood of violent incidents during the elections in at least 205 of the country's 331 municipalities, where the current mayors are seeking reelection. Of the 205 deemed at risk, 103 are controlled by the FRG, most in rural areas.

The TSE's warning is at least partly based on past experience of electoral violence in the same places. Some local electoral boards have not only voiced similar fears but have called on the government to deploy the army to provide extra protection. The authorities are determined, however, to respect the electoral law, which bans any such participation by the military. Security will remain in the hands of the 20,000-strong national police, which has not been very active in preventing political violence so far, or even in tracking down and apprehending those responsible for it.

A month-and-a-half after he had promised to do so, President Vicente Fox last week appointed a federal commissioner for Ciudad Juárez, to deal with the situation created there by the inordinately high rate of murders and disappearances of women [WR-03-35]. He chose lawyer and poet Guadalupe Morfí­n, former president of Jalisco state's human rights commission and member of the consultative commission of the Academia de Derechos Humanos.

Fox's decision came just after a string of events related to the Juárez killings: a visit by US legislators (who recommended that the issue be included in the US-Mexican agenda), a complaint by Amnesty International about the delays in responding to the situation (including the appointment of a commissioner), and the discovery in the area of another woman's body, the 24th so far this year. The matter was also due to be brought before the Inter-American Human Rights Commission early this week.

Morfí­n says she sees her task as threefold: `listening, working to rebuild the social fabric [of Ciudad Juárez], and building bridges to the future to guarantee governability and stability.'

TAXATION | `Lower growth without reform'. The Mexican economy will grow next year by 3.1%, rather than the 3.5% predicted earlier this month by the finance ministry, if congress does not approve the government's tax reform proposals. This is what Rubén Aguirre, undersecretary for revenues, told a special congressional committee last week. He said that as things stand, fiscal revenues next year will shrink by 4.9% — as a result of the absence of divestment receipts, lower income-tax collection and the prospect of a lower average price for oil.

The opposition parties have dismissed this claim as scare tactics, and their argument has been reinforced by an institution that actually agrees with most of the government's reform proposals, the Instituto Mexicano de Ejecutivos de Finanzas (Imef). According to Imef president Alberto Espinosa, each of the two reforms proposed by the government — of taxation and energy régimes — `will enable a growth of only half a percentage point, so both of them together would only increase GDP by one point.' He said the effects of the reforms will only be felt in the longer run; the economy will not experience any substantial changes until 2006.

TRADE | No deal with Japan, overture to Mercosur. The free-trade agreement with Japan was not ready to be signed, as hoped, during President Vicente Fox's visit to Tokyo last week. Negotiations stalled over Japan's unwillingness to grant significant market access to Mexico's agricultural exports. Japan's offer to halve tariffs on pork and increase the quota at the new rate by 14%, to 80,000 tonnes a year, was deemed insufficient by the Mexicans, who had been seeking a zero-tariff quota of 250,000t. Mexico's position is in line with its stance as a member of the G-22 at Cancún.

Mexico's chief coordinator of international trade negotiations, Fernando de Mateo Venturini, said while visiting Brasí­lia last week that his country wants to reach a free-trade agreement with Brazil and with Mercosur as a whole. It recently closed an FTA with Uruguay and is currently negotiating with Argentina. In the first nine months of this year Brazil ran a surplus of US$1.6bn on two-way trade of US$2.4bn with Mexico.

The only real help needed from the US, they say, is that it `abstain from scripting the inevitable democratisation.'

A coalition of opposition movements within Cuba has come out with a strong statement against US President George Bush Jr's recently announced policy of tightening the embargo against their country. The US government, they say, `continues to misread the visible signs of effective policies [...] To think that Cuba doesn't attain democracy because not enough pressure has been exerted on it, is the same kind of nonsense that leads the government of Cuba to think that the opposition exists because of a lack of police pressure.'

These statements come from Arco Progresista, a coalition of groups which in the main identify themselves as social-democrats: Coordinadora Socialista Democrática, Coordinadora Socialdemócrata, Movimiento Cubano por la Democracia, Mujeres de Izquierda Democrática, Movimiento Juvenil Socialista Democrático, Partido del Pueblo, and Centro de Estudios del Socialismo Democrático. Determining the strength of their following is all but impossible.

Bush's words, says Arco Progresista, `weaken the fundamental premises of a possible and necessary relationship between the two countries; a relationship based on respect between states [...] The US seems unable to offer the only kind of help we need: to abstain from scripting the inevitable democratisation of Cuba, from substituting for those whose role it is to design it, and from underestimating the capabilities of the promoters of democratic change in Cuba.'