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The government will launch a 'plan for democratic security' in January 2005. President Leonel Fernández said as much but no more on 30 November during his first public address since he was inaugurated. One thing that seems certain is that the plan will involve in some shape or form the increased involvement of the armed forces in domestic security. 

Fernández, who devoted most of his speech to his government's success (so far) in turning around the economy, said that violence and the crisis in the electricity sector were the two biggest threats to the country's future. 

Rising violence
A campaign against violence was launched in Santiago in early December. The campaign - 'Por un Santiago Seguro' - is led by monseigneur Ramón Benito de la Rosa y Carpio. In the four months since August 2004, a total of 107 people have been murdered and a further 144 injured in Santiago. Most of the murders are linked to drug-related violence. 'There are police officers that need to be investigated,' de la Rosa said. The Cardinal Archbishop of Santo Domingo, Nicolás de Jesús Cardenal López has also entered the debate. He said that there should be a thorough purge of the police force to make way for new young recruits. 

The government is trying to do something about this. It has ordered a cleanup of the police force, following revelations of corrupt practices that included the appropriation of cars recovered from thieves. It has also changed the police hierarchy again: General Tomás Holguí­n la Paz, who was only appointed as police commissioner on 18 August 2004, was replaced by General Francisco Antonio Pérez Vásquez on 6 December.

The army
The use of the armed forces to contain rising violence is a controversial issue in the Dominican Republic as it is across Latin America. It raises concerns that the government is blurring the distinction between the role of the military and the police. Even before the release of Fernández's new plan, soldiers are already beginning to play a more active role in domestic security in the Dominican Republic. The government announced on 8 December that some 200 soldiers and 800 police officers will be deployed in and around the principal tourist resorts in the Dominican Republic until early 2005. The announcement followed a series of attacks on tourists in late November and early December. The armed forces are now escorting buses from Dominican airports to resorts following the recent holding up of a tourist bus by four hooded men in Punta Rusia (Puerto Plata), in the north of the country. The army is also assisting the police to patrol crime hotspots to tackle the rise in violence.

The importance of tourism was underlined in November by the release of statistics by the tourism secretariat showing that earnings from tourism are expected to amount to some US$3.4bn in 2004. The number of visitors to the Dominican Republic should increase in 2004 by 5% on 2003 to 3.4m, confirming the tourism sector, which accounts for 24% of GDP, as the country's main source of hard currency inflows. Remittances from Dominican expatriates are worth slightly less than tourism earnings: they should come to US$2.7bn this year the IDB reckons. A separate threat to tourism in the Dominican Republic is malaria. More than 2,000 cases have been reported in 2004, a 31% increase on 2003. Many of these have been reported in the province of Altagracia, a major tourist centre. More than 20 foreign tourists have contracted the disease since October 2004.

Portia Simpson Miller was sworn in as prime minister on 30 March. Her first move was to plump for continuity in her new government. She retained much of the cabinet she inherited from PJ Patterson, including two of the leadership contenders against whom she competed in February: Peter Phillips, the national security minister, and Omar Davies, the finance and planning minister.

The retention of Phillips, Simpson Miller's closest rival in a highly charged People's National Party leadership contest, was the most eye-catching appointment. Phillips will have the task of tackling the intractable issue of violent crime. Murders rose in 2005 to a record 1,671 - equivalent to 64 per 100,000 inhabitants - by far the highest rate in Latin America and the Caribbean. Phillips's anti-crime initiative Operation Kingfish has met with some success however, receiving plaudits from the US State Department in its International Narcotic Control Strategy Report (see RC-06-03), and the murder rate has been falling in the first two months of this year to a projected 50 per 100,000.

Big budget

Davies was kept on for expediency if nothing else. Within two weeks of Simpson Miller taking office, Davies had to present his budget speech. On 12 April he tabled a J$358bn (US$5.47bn) budget, bigger than last year's revised estimates by 3.5%. The shadow finance minister, Audley Shaw, dismissed the budget as unrealistic and suggested that it was an election budget. Far from being extravagant, however, the budget is fairly restrained. Given that inflation was approximately 11% for the last fiscal year, there is actually a real decrease in expenditure. 

Although any budget is constrained by the need to service Jamaica's nearly J$1tr debt, Davies increased education funding, especially for the Education Transformation Project (ETP), and funding for health and agriculture and housing, transport and works to cover infrastructural works in Kingston and St Andrew in preparation for the Cricket World Cup in 2007.

If Shaw is right and Simpson Miller really is intent on calling general elections soon to capitalise on the wave of support she has received since becoming Jamaica's first female PM she will need Phillips to contain violent crime and Davies to begin to solve the problem of unemployment which fluctuated around 12% in 2005.

The government announced in mid-June that it would invest US$750m in building three new power stations over the next four years. The government said that the country needs 150MW more power to meet current demand. 
The departments with the biggest energy needs are: Atlántida, Colón, Yoro and Olancho. All are on the Caribbean side and in the north and east of the country. One of the new power stations will be financed by Taiwan.
The other two will be financed by the private sector. The three new power stations will have a generating capacity of 200MW. 

Currently, 30% of the country's electricity is generated by the state sector: the rest is produced by private sector companies. 

Resignation: Elizabeth Azcona, the trade and industry minister, resigned on 19 June. Azcona took office with President Manuel Zelaya and is the daughter of a former Liberal president, José Azcona Hoyo (1986-1990).

Inflation: Inflation in May was 0.4% down a bit from April's 0.6%. The rate for the first five months of the year was 3.3%. The rate for the past 12 months was 5.4%, slightly better than the 5.6% rate for 2006. 

Two weeks after Haiti's lower chamber ratified President René Préval's third choice for prime minister, Michí¨le Duvivier Pierre-Louis [RC-08-07], the 18-member senate followed suit on 31 July, with a two-thirds vote in her favour. While Pierre-Louis' ratification was undoubtedly a boost for the country (after nearly four months without a prime minister), she continues to struggle due to disagreements within the government. Most recently, the congressional session during which she was due to announce her new cabinet and legislative agenda was called off on 19 August.

Pierre-Louis' difficulties in drawing up a cabinet - let alone a plan of governance - that satisfies all the members of Préval's disparate coalition government were largely predictable. As she has pointed out, there are 19 different parties and only 18 ministries to distribute among them. The parties' jockeying for ministerial positions threatens to undermine Pierre-Louis' already fragile position: both her proposed cabinet and her legislative agenda must be approved by the two chambers of congress. If they are not, several deputies have said that Préval might have to start looking for (another) new prime minister.

The influential lower chamber faction, Concertation des Parlementaires pour le Progrí¨s (CPP) - which was responsible for vetoing President Préval's two previous proposed candidates for prime minister - is backing Pierre-Louis. The problem is that many other parties are making their vote conditional on being represented in the new cabinet. Meanwhile Préval recently announced that several ministries - including finance, planning, interior and agriculture - would remain in the same hands as before. This caused uproar among the parties, who claim that since the previous ministers proved themselves incapable of doing their job they should not be awarded any posts this time around. CPP leaders point out that Préval promised to give at least eight ministries to senators.

• Senators' threats

A number of senators have threatened to resign if they are not given their preferred ministries, which would render the already seriously underweight senate inquorate. Due to senate elections being long overdue, the upper chamber is currently operating with only 18 out of 30 senators. Senator Jean Hector Anacacis has proposed a reduction of the current quorum of 16 to 10 in order to resolve the problem.

 

The main right-wing opposition Alianza Republicana Nacionalista (Arena) fractured in mid October, one day after the party's president Alfredo Cristiani had emphasised the need for unity. Cristiani was speaking on 11 October during the first party convention since Arena suffered its first defeat in presidential elections in March. The decision by 12 deputies to break away from Arena and form a splinter group is potentially a huge boost for President Mauricio Funes, and the ruling left-wing Frente Farabundo Martí­ para la Liberación Nacional (FMLN). Funes, however, is acting cautiously by stressing the need for a strong, constructive, opposition party.

The dissidents claimed they were left with no alternative but to rebel because the Arena party leadership, Coena, had lost touch with the people, with public support flowing to Funes who now enjoys an unprecedentedly high approval rating for a head of state in El Salvador. They maintained that there would now be two Arenas, one in favour of the people and one in favour of millionaires. This masks the true reason for their revolt, which was that the Arena party leadership had not so much lost touch with the people but lost touch with party members - specifically the 12 dissidents.

The dissidents objected to the way in which the 13 new members of Coena had been appointed. They said they should have been awarded with three Coena posts because they represented 11 departments and 800,000 votes between them.

Why did Arena split?
Arena, it should be noted, had exercised power for the last 20 years. When Funes took power in June, Arena was suddenly faced with the uncomfortable reality of serving in opposition for the first time. It is scarcely surprising that the party should have descended into infighting over conflicting interpretations of the momentous defeat and assignment of blame and, significantly, over who should enjoy the positions of power and privilege that remain.

When the FMLN faced its long years in opposition, the orthodox leadership kept a very tight grip on the party. This fuelled resentment, prompting several splinter groups to break away to set up rival parties. None of these parties ever posed much of a threat to the FMLN and have either been subsumed back into the party or continue to exist only on the political periphery.

There is a clear parallel with the Coena hierarchy. Guillermo Gallegos, the most prominent dissident who had previously served as head of the party in the legislative assembly and was a close associate of former president Tony Saca (2004-2009), accused Coena of “total abandonment". Coena posted a statement on the Arena website accusing Herbert Saca, the cousin of Tony Saca (and a close adviser) of fomenting the rebellion for his “personal advantage". Herbert Saca denied the claims while Tony Saca explicitly condemned the dissidents for breaking ranks, but the recriminations simply serve to demonstrate the party's difficulty in adapting to not wielding power.

The big irony for Cristiani is that he invested so much time in constructing a right-wing tripartite coalition together with the Partido de Conciliación Nacional (PCN) and the Partido Demócrata Cristiano (PDC) to make life hard for Funes by obstructing FMLN initiatives in the legislative assembly he failed to see the divisions emerging within his own party.

The new-look congress
The 12-strong bloc formed by the dissidents is now the third most significant in the 84-seat legislative assembly after the FMLN, with 35 seats, and Arena, now with 20. The PCN has 11 seats and the PDC five seats. The small left-wing Cambio Democrático (CD) also has one seat.

Funes gave a measured response to the split in Arena, calling on the party to resolve its conflict swiftly to preserve the credibility of the legislative assembly. He also underlined that his government required a “strong, responsive, rational and reasonable opposition" to move El Salvador forward. But, this is the popular diplomatic statesman and not the party political strategist talking. The new composition of congress opens up some intriguing possibilities for Funes, which he will be keen to exploit.

The 12 dissidents have made it clear that they will vote for “the good of the country", which would extend to voting with the FMLN. The PCN could also do so now it has effectively been freed from the grand right-wing coalition to which it belonged. Neither bloc would ever be a reliable source of support for Funes, as they both still hail from the right ideologically, but it does mean Funes could comfortably reach the simple majority of 43 required to approve the 'ordinary' 2010 budget of US$3.65bn he sent to congress in early October [RC-09-10].

It even means Funes could potentially muster the magical two-thirds majority of 56 required to win approval for the second 'extraordinary' budget of US$408m for social investment. This requires two-thirds support because it would be funded by international loans (see sidebar).

Cristiani had insisted at the Arena convention that the party would only approve the budget if the government refrained from dismissing any more public employees and provided funding for the political projects of the Arena mayor of San Salvador, Norman Quijano. These include a Metrobús initiative to combat congestion in San Salvador. The dissidents have hinted that they would be prepared to back the budget without conditions.

• Army

The defence minister, General David Munguí­a Payés, announced that some 6,500 soldiers were available to support police efforts in crime hotspots to combat widespread insecurity in El Salvador. President Funes insisted that they would not all be deployed in this way but that the number helping the police would increase “significantly" over the next six months. Funes has previously placed an emphasis on combating mara gangs with a more socially responsible policy which aims to eliminate the causes of organised crime rather than imprisoning gang members under the mano dura (firm hand) policy of Arena governments.

• Same sex marriages

Attempts to amend the constitution to prohibit same sex marriages have stalled in El Salvador's legislative assembly after the FMLN's decision to withhold its support from the amendment meant it fell short of the necessary two-thirds majority. The archbishop of San Salvador, José Luis Escobar Alas, initially called on Arena, and other right-wing, deputies to condition their approval of the 2010 budget on the FMLN voting to ratify the amendment. He later recognised that his remarks were “inopportune" and called on deputies to approve the budget on time.

*** BARBADOS CONTINUES FISCAL CONSOLIDATION.  On 11 March, the Barbados Senate passed four bills that give effect to the removal of tax-free allowances for travel and entertainment for employees and the increase in VAT from 15% to 17.5%.
The government's goal is to reverse the fiscal deficit to achieve a small surplus by 2015, and to bring the country's debt-GDP ratio below 100% with the goal of getting it down to 60%-70%.  In line with these targets, the government has announced a 7% decline in government expenditure for the 2011/12 fiscal year, along with a 5.7% increase in projected revenue.
Minister of Finance Chris Sinckler has said that he expects a small increase in GDP for 2010 of 0.3%, up from the 4.7% contraction recorded in 2009.

*** DEFEAT ON HANGING BILL FOR T&T GOVERNMENT.  The government of Trinidad & Tobago, led by Prime Minister Kamla Persad-Bissessar, suffered its first major legislative defeat on 28 February, losing a vote on bringing back hanging.  The prime minister reacted angrily, saying that the electorate would “hang the PNM".  The opposition People's National Movement (PNM) used its 11 votes to prevent the ruling People's Partnership (PP) from securing the 75% majority needed.

*** ST VINCENT & THE GRENADINES SECURES IMF SUPPORT.  On 8 February, the IMF agreed a US$3.26m Rapid Credit Facility (RCF) for St Vincent & the Grenadines to help with the recovery from Hurricane Tomas which struck in late October 2010.
 The damage from the hurricane is thought to have amounted to 5% of GDP.  The IMF said: “Because of the hurricane-related spending, the fiscal deficit is expected to widen in 2011."  However, it added: “The authorities remain committed to securing fiscal and debt sustainability over the medium-term.  To this end they have implemented fiscal reforms to facilitate the primary surpluses needed to put the debt-to-GDP ratio on a firmly declining path."

*** BELIZE BUDGET.  On 11 March, Belize's Prime Minister Dean Barrow presented his budget for 2011/12 on the basis of 3% growth on top of an estimated growth of 2.4% for the 2010/11 fiscal year.  The budget sets a primary surplus of 2.23% of GDP, with an overall deficit of 1.57%.

*** ST LUCIA PM BACK-TRACKS ON ELECTION DELAY THREAT.  Prime Minister Stephenson King and his ruling United Workers' Party (UWP) should face the polls before 11 December 2011, the fifth anniversary of the last general election.  However, as we reported last month, King had hinted that there could be a delay of up to three months as the country struggles to overcome the consequences of Hurricane Tomas. 
The opposition St Lucia Labour Party (SLP) was adamant that any delay beyond 11 December would be unacceptable, but King maintained: “I can't give any assurances, what I have indicated is that the experience of Hurricane Tomas has certainly extended the agenda of the government and has added more weight to our workload.  It has given the government the additional task of engaging in its reconstruction programme, and that can extend the call of the election."
 However, at the beginning of March King eventually gave way, and he has now confirmed that elections will be held this year.
 King was not wrong in emphasizing the impact of Hurricane Tomas.  Almost the entire island was affected by the hurricane that hit on 30 October 2010, causing damage estimated at 43% of GDP.  On 12 March, the World Bank approved a US$15m zero-interest credit to help with the rehabilitation of key infrastructure.

President Lula da Silva and the government are putting on a brave face after the central bank's monetary committee (Copom) decided on 20 October to increase the basic interest rate, the Selic, by 0.5 of a percentage point to 16.75% annually.

The markets were expecting an increase in the Selic after Copom said at its previous meeting on 15 September that it would start a 'gradual period of readjustment to contain inflationary pressures'. At the time, Copom had decided to raise the basic interest rate by 0.25% after the central bank announced it would also increase its previous inflation target for 2005 from 4.6% to 5.1% due to high oil prices in the international markets. However, no one, not least the government, expected the Copom to raise the Selic by 0.5%.

At its last meeting, the Copom made it clear that increasing the Selic was necessary because inflation in the month of August had reached 0.69%, bringing the accumulated inflation index 0.36 percentage points short of the central bank's 5.5% target for 2004. This time, however, the Copom did not explain its motives, announcing only it had decided to 'readjust the Selic moderately' and that the decision was supported by all the committee's members. The Copom has always reiterated its main concern is to avoid an 'inflationary contamination' in the economy. However, after a sharp increase in August, inflation closed the month of September at a healthy 0.29%, according to the trade-union-linked Dieese - the lowest level since April. The Fundacão Instituto de Pesquisas Aplicadas (Fipe) also registered a fall in the inflation rate, 0.21% in São Paulo's metropolitan region in September, after hitting its highest level of 0.99% in August. Fipe expects an inflation rate of 0.40% in October.

The impact of high oil prices
One of the most probable explanations for the Copom's decision to increase the Selic by such an elevated rate is the high price of crude oil in the international markets. This year alone the price of crude has swollen by over 60%. On 20 October the price of a barrel was being traded at US$55 in New York. The Brazilian central bank has based its calculations on the price of crude end the year at US$35 a barrel or below.

High oil prices prompted the state-owned Brazilian oil giant Petrobrás to increase the price of fuel by an average of 10.7% last June. Just before the Copom's October meeting, Petrobrás announced its second readjustment of the year. In the company's refineries the price of gasoline increased 2.4% and that of diesel by 4.8%. Analysts, though, were surprised by Petrobrás's new prices: previous forecasts pointed to at least a 10% increase in the price of gasoline and 12% in the price of diesel. Even with the new increase the prices charged by Petrobrás are still on average 26% lower than the prices charged abroad. 

Low readjustment fed speculation that the discrepancy in fuel prices was caused by the proximity of the run-off municipal elections in 31 October but the government has since denied it is holding the prices of fuel artificially. Finance Minister Antonio Palocci however, signaled new readjustments were on the way, a comment that might have influenced the Copom's decision to increase the Selic in order to cushion the impact of higher fuel prices on the central bank's inflation target for next year. 

The Copom's autonomy
The second explanation for the Copom's 50 basis point increase in the Selic is tactical. According to some market analysts the committee decided to go for a full-on increase in order to 'reaffirm its autonomy' in the management of Brazil's monetary policy, sending a clear message its decisions are not forced upon it by pressure from the manufacturing sectors or by the government. 

After the announcement of the impending basic interest rate increase, a wave of criticism followed. Allied and opposition congressmen called the Copom's measure 'conservative and exaggerated' and said that it would generate a 'climate of pessimism' in the country. The Central Unica dos Trabalhadores, Brazil's biggest trade union and an ally of the government, said the Copom's decision was 'in disregard with the expectations of all sectors of Brazilian society', while João Paulo Gonçalves, president of Força Sindical, declared it only proved that 'the government [had] lost control of the economic levers'.

Industry representatives also condemned the central bank's monetary committee. The National Industries' Confederation called the austerity measures 'unfavorable to investments and to the recovery of economic activity'. Most financial institutions were also surprised by the level of readjustment. According to Alex Agostini, from Global Invest, the Selic increase was 'unnecessary and shocking' in the current economic scenario. The chief-economist of Citibank in Brazil, Carlos Kawall, said the Copom's decision served to strengthen the autonomous position adopted by the central bank.

The government's position
The government was putting on a brave face after the announcement. Since July, when the first rumors of a Selic increase started to emerge, the government has tried to cool off the atmosphere by saying the country was 'suffering from an unnecessary pre-Copom tension' which was harming the economy.

President Lula da Silva has tried never to criticize the central bank's monetary policy directly, yet he made it clear on several occasions he would like to see lower interest rates. After the announcement, President Lula da Silva gave contradicting declarations: on 21 October he defended the Copom's decision, pronouncing that the committee's austere measure was necessary if the economy was to continue to recover. 'It's better to walk slowly forwards than to try bigger steps and fall at the first jump', he declared. The following day, however, Lula said consumers were being 'crushed' by high interest rates. 

Cabinet ministers also tried to minimize the impact of the Selic increase. Palocci said the committee's 'reasons [for the increase] were transparent and clear'. The minister for political coordination, Aldo Rebelo, a critic of the central bank's high interest rate policy, continued to maintain that the government's stance was to find the right 'balance between controlling inflation and reducing interest rates', but was careful not to condemn the Selic increase.

Economy and elections
The Selic increase could not have come at a worse time for the Partido dos Trabalhadores (PT), and will certainly affect the party's performance in the run-off municipal elections on 31 October. The state of the economy is fundamental to voters' support. Before economic indicators started to improve, showing that Brazil was heading for a 4% GDP growth in 2004 after having contracted 0.2% last year, a CNT-Sensus poll in June showed that 47% of Brazilians would not vote for Lula if a presidential election was held then.
The PT has only managed to attain the success it did in the first round of the municipal race on 3 October because the economy showed signs of recovery. Since then, however, several economic data releases show the economy is slowing down, mainly because of the lack of domestic demand, blamed on high interest rates. More worryingly, unemployment increased slightly to 11.4% of the workforce in September, while salaries shrunk by 0.9% year-on-year.

Fernando Lugo, a former bishop, shot to prominence in June by positioning himself as a possible candidate for the opposition to rally behind in the presidential elections in 2008.

Lugo, 52, was bishop of San Pedro, one of the poorest areas in the centre of the country, until he was "retired" by the Vatican earlier this year. He is now chairman of the NGO, Resistencia Ciudadana, which drew 30,000 people to a demonstration on 7 June to demand the resignation of the five judges who permitted President Nicanor Duarte to hold simultaneously, albeit only briefly, the positions of president of the Republic and president of the ruling Partido Colorado. Under the constitution the president cannot hold another job. Lugo first announced himself on the scene on 29 March when he rallied thousands of people to similar protests.

Pedro Fadul, the president of the second biggest opposition party Patria Querida, called on Lugo on 14 June to chair a broad social and political opposition front to contest the presidential elections (possibly against Duarte if he is permitted to stand for re-election). The other main opposition parties- Blas Llano's Partido Liberal Republicano Auténtico (PLRA) and Enrique González Quintana's Unión Nacional de Cuidadanos Éticos (UNACE) have also pledged their allegiance to the front. In addition to this Lugo commands the support of five trade unions and more than 100 civil associations.

Lugo, who says he will announce his intentions in December, would have his work cut out keeping such a disparate front together even if he were chosen as a consensus candidate. The political opposition has a long history of division and fragmentation and has never really believed that it can topple the Partido Colorado which has clung on to power since 1947.

Church opposition

Lugo's dalliance in politics is already being frowned upon by the Vatican which does not promote the active involvement of bishops in political life. Cardinal Franc Rodé, prefect of the Congregation for Institutes of Consecrated Life and Societies of Apostolic Life, expressed his concern at Lugo's intent. "It is not the job of a bishop or a priest to get involved in politics... In an exceptional case maybe," he said. He added that Lugo should appeal to the Holy See for permission if he decides to run. The process of papal dispensation could take several years. The Paraguayan bishops' conference has stressed, on several occasions, that Lugo no longer speaks in the name of the Roman Catholic Church.

What the right does not like to admit is that President Néstor Kirchner's economic policies have delivered. Since 2002 the poorest 10% of the population has seen its income triple. The average monthly wages for this portion of the population is now US$106 a month. Proportionally, this is a greater rise than that enjoyed by the richest 10%: this segment saw its average monthly income merely double from Arg$3,461 to Arg$6,678 (US$1,088 to US$2,100). What this means that the poorest 10% of the population is living on only US$3.5 a day while the richest 10% lives on an average daily income of US$220. 

The immediate outlook for the economy is slightly worrying. In August industry saw its biggest ever month-on-month rise: 9.7% seasonally adjusted. Year on year the jump was the same: 9.7%. 

Inflation: The official consumer price inflation rate for September was 0.8%. This was up a bit on August's 0.6%, but much lower than most independent economists had calculated. 

On 10 March the 12-member South American Defence Council (Consejo de Defensa Suramericano, CDS), the defence arm of the Union of South American Nations (Unasur), held its constitutive meeting in Santiago, Chile.

The CDS was first proposed by Brazil's President Lula da Silva in the wake of a tense regional trilateral crisis in March 2008 between Colombia, Ecuador and Venezuela over a Colombian military raid on a Fuerzas Armadas Revolucionarias de Colombia camp inside Ecuador.

The most notable element in the constitutive 'Santiago Declaration' was its express support for the principal of sovereign territorial integrity and inviolability, which Ecuador interpreted as giving it the high moral ground in its extended stand-off with Colombia.

The summit host, Chilean defence minister José Goñi, said that the new council would allow the region to create a new South American “defence identity" to boost stronger regional co-operation on defence and national security policies.  The CDS is not a classical operational military alliance along the lines of the North American Treaty Organisation (NATO) but rather a method of safeguarding peace and asserting the primacy of civilian over military power in the region. In effect it would preclude the need for appeals to the Organization of American States (OAS), under which any intervention in intra-regional conflicts inevitably has to include the US.

According to the Brazilian vision, the CSD would also involve South American countries uniting and, eventually, integrating their defence policies. Brazil argues that by encouraging members to co-operate on national defence issues, the CDS should be able to prevent a situation like the Colombia-Ecuador-Venezuela crisis.

The CDS will not have an operational mandate, but may facilitate joint military training sessions between member states and could send combined units to participate in regional emergencies such as natural disasters, or international UN peace keeping missions. Largely at the behest of Brazil, which has a growing defence industry, the council is also aiming for better integration between national defence industries in South America.

At least four simultaneous judicial investigations are thoroughly looking into Ricardo Jaime, a former secretary of transport under President Néstor Kirchner (2003-2007). Jaime's judicial situation is becoming more difficult. Several houses in Argentina and Brazil formally owned by him have been seized and his children, as well as his partner and her family, have been barred from travelling overseas.

In late November, the police seized 11 computers belonging to Manuel Vázquez, Jaime's former advisor, containing thousands of e-mails sent during Jaime's administration which allegedly provide evidence of numerous irregularities and may indicate that in addition to the so-called 'parallel embassy' in Venezuela being investigated by the judiciary [RBS-10-05] another one also existed in Spain. There is a problem however, over the time lag between the original accusations against Jaime and the seizure of the evidence. Given that the Vázquez computers were left unattended by the investigators for years, judicial experts claim that the chain of custody has been broken and that the legal value of the e-mails may be jeopardised.

Furthermore, since the emails in question were sent by Vázquez to third parties, Jaime's defence attorney, Andrés Marutián, argues their contents are irrelevant. Even if these messages do prove wrongdoings, Jaime's knowledge of the alleged corruption schemes referred to the emails would have to be proved using other independent sources. As in Colombia, where digital evidence taken from computers owned by major narco-traffickers and guerrilla commanders is part of important test cases, the evidence found on the Vázquez computers will have undergo detailed examination in Argentina to resolve the debate over its validity.

According to some of the e-mails, Jaime appears to have spearheaded a drive to obtain illegal campaign contributions from Spanish companies for the 2005 midterm elections in which Cristina Fernández was elected senator for the province of Buenos Aires and again for her 2007 presidential campaign. The e-mails emerge at a difficult time for President Fernández, whose 2007 campaign finances are also under the magnifying glass in at least two other (unrelated) judicial investigations. Despite some (slow) progress in those investigations, it is very unlikely they will have an impact before the scheduled October 2011 general election, in which Fernández is expected to run for re-election. Argentina is still awaiting the resolution of corruption charges levied against President Carlos Menem (1989-1999).

In addition to causing a media stir and triggering renewed opposition attacks, the e-mails also underline the level of impunity with which public officials apparently felt they could act. These emails were not highly coded communications in which the alleged conspirators tried to hide their crimes, but rather the composition of people that felt safely above the law. For example, one e-mail explains how the cost of contracts with Spanish providers had been inflated for the Argentine officials and their Spanish intermediary so as to obtain a cut of some â‚ ¬700,000 (US$840,000 at the average 2005 exchange rate). Others detailed how the companies would 'hire' the services of a consultancy in Spain, led by Miguel Angel Lorente, Vázquez's contact in Madrid, to carry out a 'study' about the “essential problems" the companies faced in Argentina. The consultancy would bill the companies for the study at a pre-arranged rate, which would then be funnelled to the campaign chest. “They then receive a sealed report from the relevant ministry, with thanks for collaborating in the study. They would also have confirmation that we delivered [the money]. It would be made clear that it is an electoral contribution", reads an email dated 12 September 2005.

For the Argentine judiciary, this case not only provides the opportunity to break the widely held public belief that impunity for public officials is rampant, but also to demonstrate its independence from the executive branch (see sidebar).

•  An unlikely outcome

When Jaime's investigation began, members of the administration tried to distance themselves from their former colleague. This wasn't hard for key players like the planning minister Julio de Vido, who allegedly wasn't on speaking terms with Jaime when he was in office. However, the emergence of the emails dramatically changed this scenario as the communications reference key government figures, including Kirchner himself and his lifelong secretary, Daniel Alvarez. Thus, the Argentine media reports, de Vido recently met with the case's presiding judge, Norberto Oyarbide, to find out what might happen next, in an apparent attempt to minimise any spill over.

Fugitive union leader Carlos Ortega was arrested in Caracas in late February after two years on the run, and has been formally charged with offences related to the two-month strike-lockout he helped organise and lead in late 2002, which had the declared aim of forcing President Hugo Chávez to resign. He is the latest of several opposition figures against whom the government has recently instituted court proceedings.

Ortega, one of the leaders of the 2002 coup against Chávez and the mastermind of three other general strikes against him, sought asylum in Costa Rica when the charges were first brought against him. The Costa Rican government rescinded the asylum grant a year later, after Ortega repeatedly breached its terms by calling for the ouster of Chávez . The former secretary-general of the Confederación de Trabajadores de Venezuela (CTV) let it be known that he was going underground to organise the 'resistance' to Chávez .

It now transpires that he slipped back into Venezuela in August last year, just before the recall referendum against Chávez . The police say they picked up his trail four months ago: they had found him living openly, albeit with his appearance changed and using another identity, in Caracas. At the time of his arrest on 28 February he was indulging in his favourite pastime, gambling, in a discotheque-bingo establishment.

It is worth noting that the Caracas judge before which he was brought threw out three of the charges filed by the public prosecution service: treason, criminal conspiracy and devastation. He committed Ortega to stand trial for the other three: rebellion, incitement to commit crimes and use of a false document.

On 1 March the public prosecution service announced that it was indicting Enrique Mendoza, former governor of Miranda state, for his part in the 2002 coup, namely, taking the state television channel VTV off the air. Another prosecution announced that day was that of television presenter Napoleón Bravo, charged with 'incitement to hatred' against José Vicente Rangel Seijó, mayor of Sucre (and grandson of the Vice-President). The complaint filed by Rangel says that Bravo's broadcasting a purported plan to target pro-Chávez personalities was tantamount to incitement. Neither of these cases has been been admitted to court.

Shortly before Ortega's arrest, a public prosecutor had requested the arrest of former President Carlos Andrés Pérez on charges related to his responsibility for ordering the preparation and implementation of Plan Avila, an emergency military deployment scheme used to repress the riots of 27-28 February 1989 that came to be known as the caracazo. About 300 people are estimated to have been killed during those events.

It was the use of the military to quell those riots that provided one of the declared motives for then-Lieutenant-Colonel Hugo Chávez to stage his bloody, abortive coup of February 1992 against Pérez. The former president, now 83, is a sworn foe of the present government who has several times called for its ouster. He currently commutes between the Dominican Republic and the US, which means that an extradition request would have to be filed. This assumes that the case will be accepted in court and the supreme court will find merit in an extradition application. All told, the government is currently investigating about 400 people suspected of having committed criminal offences during the 2002 coup and the 2003 strike-lockout.

President Evo Morales got his way on land reform, just as he did gas contracts with foreign energy companies. The opposition-controlled senate approved a controversial land reform bill on 28 November after a long impasse and a rancorous exchange between Morales, the powerful Comités Civicos representing landowners in the prosperous east of the country, and opposition prefects. The dubious manner in which the bill was passed is likely to lead to a legal challenge.

On 22 November the opposition, which controls 14 of the 27 seats in the senate, boycotted the session so that the land bill could not be debated due to a lack of quorum. Earlier in the month Morales called on thousands of indigenous peasants to march on La Paz to insist that the senate approve the bill. As they converged on the capital, and amid threats from Morales to dissolve the senate in favour of a unicameral congress, the senate surprisingly approved the bill by 15 votes to 12 in a late night session. 

The opposition is likely to challenge the constitutionality of the vote: two suplentes (replacements), Abraham Araujo Cuéllar of the opposition Unidad Nacional and Andrés Fermí­n Heredia Guzmán of Podemos (both from Pando) took the place of two boycotting senators. The president of the senate, Santos Ramí­rez of the ruling Movimiento al Socialismo (MAS), ruled that the suplentes could be summoned to meetings when elected senators are boycotting senate sessions. They normally only do this when a senator is ill or abroad. In addition, Senator Héctor Mario Vargas Rivera, a Podemos representative of Beni, decided to vote in favour of the bill. 

One irate senator from Podemos burst into the senate, smashed some windows and tried to forcefully drag fellow senators from the room in a bid to curtail the session. The opposition also claims that the government bribed the suplentes and Vargas Rivera, with US$100,000 each, to turn up. President Morales denied this: "We have not paid; we have dignity and honour."

What does the land reform bill mean?

It is not crystal clear what the modifications to the national institute for agrarian reform (INRA) law are but here are the main points:

• The government will redistribute non-productive estates to the 2.5m farmers who are "without land or who possess insufficient lands." Most of the land involved in the reform is in the lush east of the country. 
• The government hopes to redistribute 199,500 square kilometres of land by the end of his term in 2011.
• The government will cap the growth of medium-sized and big farms. 

The large landowners, or latifundistas, fear that the government is intent on confiscating their private property and dishing out their land to peasants without the means to make productive use of it. Before the vote Morales devoted some time attempting to assuage their fears by stressing that the government will respect properties that were obtained legally and are productive, irrespective of their size. 

They will not have been impressed by the triumphalism that greeted the passage of the bill, however. "Legally, constitutionally, we will end the latifundio," Morales said. "We will not take land by force but with the law in our hands."Worth noting: The senate also approved the 44 new oil contracts with 12 foreign oil companies (see RA-06-11).

The governments of Peru and Ecuador made a big show of amicability during a bilateral meeting in Lima on 18 and 19 February between the defence and foreign ministers of both countries. The meeting was held amid tension caused by the maritime dispute between Chile and Peru, in which Ecuador is finding itself an unwilling participant.

Peru has presented a case before the International Court of Justice at The Hague challenging the tripartite treaties signed in 1952 and 1954 which it claims regulated fishing rights rather than defining its maritime border with Chile. Ecuador also signed the treaties. If Peru wins its case, it could in theory seek to redefine its maritime borders with Ecuador.

The Hague case was not discussed at the meeting of defence and foreign ministers. The two countries signed 21 accords, however, (more than planned) in an attempt to underline their efforts to improve ties. The ministers agreed to enlarge future meetings to incorporate the ministers of social development in a new 3 + 3 format.

They said this would enable discussions to embrace pressing concerns such as shared initiatives to tackle poverty in the border area under the bi-national plan. The plan was approved in 1999 to help resolve border differences which provided the catalyst for the 1995 war.

The Ecuadorean foreign ministry, while doing its level best to avoid being drawn into the maritime dispute, is clearly aligned with Chile. Ecuador's foreign minister, Marí­a Isabel Salvador, said that she would be following developments at The Hague closely over the next few months, adding that Ecuador was prepared to defend "energetically" the borders agreed under the two treaties.

• Joint accords

The most salient of the 21 accords agreed between the foreign and defence ministers of Ecuador and Peru was the creation of a "bi-national commission for mutual confidence and security measures". This will meet in the second half of June in Quito to harmonise initiatives to combat delinquency, which Peru's defence minister, Antero Flores Aráoz, described as "a new threat that affects our borders". His Ecuadorean peer, Wellington Sandoval, explained that the two countries would coordinate policing in the area: the respective chiefs of police are scheduled to meet in late March.

Local economists are still not entirely sure what effect Venezuela's ban on imports from Colombia will have on the Colombian economy. Colombian export revenues have already been diminished by the slowdown in the US economy, the country's biggest single export market. Venezuela was Colombia's next biggest export market.

Colombia's industrial production slumped 6.5% year-on-year in July. Local economists argued that the data pointed to an improvement: in the first quarter of 2009, industrial output fell 7.5% (though the overall economy contracted by only 0.6%). In the worst month to date this year, April, it was down 14.5% year-on-year.

The July 2009 slowdown was led by the steel industry, where output crashed 31% year-on-year. The textile industry also saw a 24% year-on-year drop in production. To be fair, 16 industrial sectors did register growth, led by the sugar sector, which rose 12% year-on-year.

The worry for policymakers is that the overall decline in output will prompt companies to lay off more staff. In July, industrial employment, excluding the coffee industry, was down 6.3% over July 2008. The biggest impact was on contracted workers.

Industrial sales were down by slightly more than output in July (falling 6.8% year-on-year), which suggests that companies are still not prepared to rebuild inventories. Steel sales fell 21% year-on-year, while sales of basic chemicals fell 14%, and paper and packaging 15%.

Overall, for the first seven months of 2009, industrial output contracted 8.2% year-on-year. Car production in the first seven months slumped 42% year-on-year. A lot of Colombian-built cars were exported, legally and illegally to Venezuela in 2008.

Although the July output figures are the latest, they do not show the effect of Venezuela's decision to block purchases of Colombian cars, food and other goods. In 2008, Colombia exported more than US$6bn in products to Venezuela, equal to about 3% of its GDP. Venezuela sells few products to Colombia.

The influential economic consultancy, Fedesarrollo, underlined how bleak the outlook for the economy had become by being one of only two of 42 economic forecasters to suggest that the Banco Central de Colombia would begin cutting interest rates again at its 25 September monetary policy meeting. Fedesarrollo forecast that the central bank would cut rates by 50 basis points to 4%. The bank has held interest rates at 4.5% since July. Prior to that, it had cut rates at seven consecutive meetings. It reduced rates by 550 basis points between December 2008 and June 2009. Arguably, the Colombian authorities were slow to react to the global economic slowdown. The local consensus forecast (of 42 economists) is now for real GDP growth of just 0.16% year-on-year in 2009. Some fear that the economy could actually contract. In 2008, real GDP growth was 2.8% year-on-year.

Inflation: In August consumer prices rose by 0.4% month-on-month, bringing the accumulated rate for the first eight months to 2.2% and the annual rate to 3.13%. In 2008, the annual inflation rate was 7.7%.

Investment: Gas Natural from Spain is talking to Colombiana de Inversiones about acquiring Empresa de Energí­a del Pací­fico (Epsa), the main electricity supplier in the west of the country. The government is also trying to privatise the country's third biggest generating company, Isagen, for US$1.5bn.

Ecuador's economy is finally showing signs of a recovery. GDP increased by 3.58% in 2010, low by regional standards; indeed, only Venezuela was lower among South American nations. But fourth-quarter growth was 6.98% year-on-year and 2.64% on the third-quarter, the fastest rate of growth in the final quarter since 2007. The growth was led by construction and fishing, the central bank reported.
The economic policy minister, Katiuska King, boldly predicted that Ecuador would probably surpass the 5.06% GDP growth forecast in the budget for 2011 as conflict in the Middle East keeps crude prices high. The budget was predicated on an average oil price of US$73.3 per barrel, which had seemed optimistic but now eminently achievable, and a tax take of US$9.5bn, nearly 40% up on 2009. This is ambitious to say the least, but if the economic recovery picks up pace, and the government steps up its efforts to stamp out tax evasion, it might be met. This still leaves the problem, however, of financing a projected fiscal deficit of US$4.95bn.

“Hemos descubierto que somos pobres, pero también que no llegaremos a ninguna parte nosotros solos."

Lula da Silva, Presidente de Brasil, delineando su esquema de 'alianza estratégica' ante el congreso de Argentina.


“Estados Unidos y nuestros vecinos están preocupados porque puede aparecer [en Bolivia] un estado narco-terrorista."

Gonzalo Sánchez de Lozada, Presidente de Bolivia, el dí­a antes que fuera persuadido a renunciar.


“En el próximo congreso vamos a tener más ex militares que nunca. Ellos vienen de las filas de los partidos de los hacendados y de la burguesí­a."

Tom Koenigs, jefe de Minugua, la misión de verificación de la ONU en Guatemala.

LATIN AMERICAN REGIONAL REPORTS: MEXICO & NAFTA, en inglés - AHORA DISPONIBLE

En este informe, observamos los problemas políticos que confronta el gobierno, que ha decidido impulsar la reforma en el sector de la electricidad, aunque no está nada claro si el congreso va a apoyarlo. El más grande partido en el congreso, el PRI, tiene un ala nacionalista poderosa, que no desea ningún cambio en la industria de la electricidad dominada por el estado. La política menor también entra en los cálculos del PRI. Desea que Fox y su gobierno paguen un precio político por atreverse a privarlo de la presidencia en 2000. También analizamos el problemático estado de la economía y sopesamos su vulnerabilidad a la caída de los precios del petróleo. Nuestra cobertura de Nafta observa el fracaso del tratado de libre comercio con Japón y cómo responden los industriales mexicanos a la amenaza de China. También informamos de la investigación de las acusaciones de lavado de dinero contra el Cardenal Juan Sandoval Iñiguez. Para obtener más información o para suscribirse, llame al teléfono: +44 (0)20 7251 0012 o envíe un email a [email protected]

ASIA INTELLIGENCE WEEKLY ALERT

Asia se ha convertido en una de las economías estratégicas que sirve de pivote para el éxito global, con una pujante inversión extranjera y relaciones vitales de cadenas de suministro con Occidente. Sin embargo, mantenerse al día con los acontecimientos económicos y políticos en la región puede consumir mucho tiempo... pero ya no más!! AsiaInt Weekly Alert -publicación hermana de Latin American Weekly Report, editado por Intelligence Research Ltd- es un invalorable informe que asegura a los atareados ejecutivos y a los 'observadores de Asia' profesionales, que tendrán acceso a un resumen con información precisa, fácil de leer, sobre hechos clave que pueden tener implicancias para sus intereses empresariales, económicos, políticos, de seguridad o estratégicos en Asia. Para obtener más detalles y/o para registrarse para una prueba gratis, visítenos en www.asiaint.com o envíe un email a: [email protected]

Unos 1.800 miembros del gobernante Partido Acción Nacional (PAN) solicitaron integrar el consejo nacional del partido, de 300 miembros, pero la atención se ha concentrado en dos, para los cuales la admisión al segundo más alto cuerpo del PAN es un paso hacia la búsqueda de la nominación presidencial: el ministro del interior, Santiago Creel y Marta Sahagún, esposa del Presidente Vicente Fox.

Por meses, Sahagún alentó y desalentó la idea de competir por la presidencia. Sus más recientes expresiones, la semana pasada, sugerí­an que ella estaba en la fase de calentamiento. 'Las encuestas de opinión,' dijo, 'muestran que tengo una chance, y eso me ha llevado a un proceso de mayor reflexión: tendré que hacer un mayor esfuerzo, porque hay quienes esperan más de mí­.' Una indicación más sólida se produjo el 18 de diciembre cuando ella, al igual que Creel, se sometió a los 'exámenes' que deben aprobar todos los aspirantes el consejo nacional.

Se examinaran sus conocimientos de los estatutos del PAN y sus posiciones doctrinarias, les harán una prueba psicológica y examen sobre su conocimiento de la situación social y económica de México. Esa es la primera barrera. Deben obtener la aprobación de su comité de estado, el comité ejecutivo y la asamblea nacional del partido, que se celebrará entre el 30 de abril y el 2 de mayo.

Oposición interna
Entre los que serán incorporados al consejo nacional este año, está Francisco Barrios, lí­der del bloque del PAN en la cámara baja del congreso. El está decididamente contra la candidatura de Sahagún. 'Siento,' dijo la semana pasada, 'que su participación en la carrera no serí­a prudente, por su cercaní­a con el actual Presidente. Podrí­a ser una continuidad familiar, no prudente para el PAN.'

El lí­der del partido, Luis Felipe Bravo Mena, es más brutalmente desdeñoso. La perspectiva de su candidatura, dice, es 'mera especulación, con la que mucha gente se ha divertido, pero en última instancia no es en lo más mí­nimo seria.' Por su parte, agrega, 'Yo siempre he estado firmemente convencido que la Señora Marta Sahagún no será nuestra candidata.'

Lo que indican las encuestas
Las encuestas a las que Sahagún se referí­a no son nuevas, la más exhaustiva, realizada por Indemerc Louis Harris, en setiembre pasado, ubica a Sahagún en tercer lugar, con 10%, en una medición directa de las preferencias de los votantes (el alcalde de ciudad México, Andrés Manuel López Obrador, del PRD está primero con 27%, seguido por el lí­der del PRI, Roberto Madrazo, con 12%).

Esos datos se vuelven mucho más interesantes cuando se prueban combinaciones de contendientes. Si el candidato del PAN fuera Creel, él atraerí­a 16% de los votos, mientras 44% elegirí­a a López Obrador y 23% se inclinarí­a por Madrazo. Pero si Sahagún estuviera en carrera, la encuesta la ubica cabeza a cabeza con Madrazo, en 22-21% -aunque López Obrador aún ganarí­a con 44% de los votos.

El comentarista polí­tico, Salvador Garcí­a Soto, está seguro que ella tratará de superar las diferencias. 'Entre lo mí­stico, lo galáctico, y su fe Cristiana,' dice, 'ella cree fervientemente que se puede obtener cualquier cosa si uno pone determinación e inteligencia en el esfuerzo.'

ARGENTINA | Signos de reactivación. Un claro indicador de la reactivación económica es el nivel de los ingresos fiscales federales. En marzo alcanzaron Ar$6,6bn (US$2,3bn), o 37,1% más que en igual mes de 2003 (y 44% más que en febrero). El total para el primer trimestre del año subió 33,5% sobre 2003. Lo que ayudó al incremento fue el 53,6% de subida año en año en los ingresos del impuesto al valor agregado (IVA).

No todo el incremento refleja un nivel más alto de actividad económica. Las autoridades fiscales afirman que el año pasado pudieron reducir la evasión y los atrasos en los pagos en Ar$2,75bn (US$958m).

Otro signo de un mercado doméstico en alza fue el incremento de 74% año en año de las importaciones en febrero. Aunque esto aventaja por mucho el 12% de incremento en las ganancias por exportaciones, la balanza aún muestra superávit de poco más de US$1bn. El gobierno está proyectando un superávit comercial de US$16,8bn para todo el año.

ARGENTINA | Deuda se sigue acumulando. La deuda pública de Argentina a fines de 2003, llegó a US$178,8bn, o 138% del PBI -16,8% más que a fines de 2002. El pago de alrededor de la mitad de la deuda ha estado en default desde entonces, pero los intereses se fueron acumulando sobre esa porción. Otra parte del incremento puede ser explicado por los movimientos de otras monedas frente al dólar, y de este último frente al peso.

URUGUAY | Panorama. Aunque el pronóstico de crecimiento económico del gobierno uruguayo, es 5% ('como mí­nimo') para este año, el ministro de economí­a, Isaac Alfie, la semana pasada, insistió en decir en la asamblea anual del BID en Lima que analistas privados consideran posibles tasas de 8% a 9%.

Lí­deres de las ex milicias campesinas conocidas como Patrullas de Autodefensa Civil (PAC), desbandadas en 1996, rechazaron la sugerencia que podí­an aceptar asistencia agrí­cola en vez del dinero prometido en compensación por el gobierno del Presidente Alfonso Portillo [IL-04-25]. En cambio, reiteraron su ultimátum al actual gobierno y expandieron la lista de blancos de la acción de protesta que pretenden desencadenar si no reciben el pago.

El 28 de junio los ex-PAC lanzaron al Presidente Oscar Berger un ultimátum de 20 dí­as para el segundo de los tres pagos del paquete compensatorio por los años de servicio como fuerza de primera lí­nea en la campaña contrainsurgencia. Han amenazado, si no se paga, ocupar plantas hidroeléctricas, edificios del gobierno (la corte constitucional, la corte suprema, el palacio presidencial, el congreso y el ministerio de finanzas), y alcaldí­as en todo el paí­s.

La oposición a pagar compensación a los ex-PAC -tenidos por responsables de muchas de las atrocidades de la guerra interna- es alta. En lo que podrí­a ser una medida atenuante, el Presidente Berger anunció la semana pasada el pago de la primera cuota del paquete de compensación para ví­ctimas de la guerra, entre las que hay ví­ctimas de las PAC. En total, Berger espera desembolsar durante su mandato unos US$38m en compensaciones a ví­ctimas de la guerra. El paquete de Portillo a los ex-PAC, ya pagado un tercio, era casi diez veces mayor.