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VENEZUELA | Growth outlook. The Venezuelan economy has continued its downslide: in the third quarter, activity was running 7.1% lower than a year earlier (making it the seventh quarter running to show year-on-year falls). The only comfort the central bank was able to draw from the situation was that this represented a lesser pace of decline: in the second quarter, GDP was down 9.2% on the same period of 2002.

Chiefly responsible for the QIII contraction was a 9% fall in the oil sector (which accounts for just under a third of GDP), led by a slump in production in the state subsector; the non-oil economy shrank by 6%, with construction down 33.9%, commerce down 10% and manufacturing down 9.9%. The accumulated fall in the first three quarters of the year was 14.7%.

COLOMBIA | Market upswing boosts export earnings. Colombia's export earnings in the first nine months of this year reached US$9.55bn, or 7.7% more than in the same period of 2002. The increase was borne mainly by raw materials, many of them buoyed by better world prices. Earnings from oil, coal, coffee and ferronickel jointly grew by 15.9%, to US$4.45bn -- or 46.6% of total export earnings, up from 43.3% in the same period last year.

Even the flagging oil industry was favoured, achieving a 5.3% increase in earnings despite a 13.9% fall in volume. The end of the prolonged coffee crisis translated a 4.5% increase in volume into a 9.9% rise in earnings. Similarly, ferronickel was up 14.3% in volume, 41% in earnings. Coal was a different proposition: it achieved a 47% increase in earnings, but on the strength of a 65.5% increase in volume.

ECUADOR | Earnings lifted by oil price. Improved world oil prices have raised Petroecuador's oil export earnings in the first 10 months of the year to US$933.6m, or 14.1% more than in the comparable period of 2002. The state oil company's contribution to the fiscal purse increased by about the same amount. The price for Ecuador's mix of crudes averaged US$26.12 per barrel in January-October.

Reproof and threats from outsiders are shrugged off, and repression of opposition protests continues unabated.

Last Tuesday was an important date for Haiti: it marked the 200th anniversary of a crucial battle in the struggle for independence from France. Almost all of the diplomatic corps stayed away to signal reproof of the manner in which a pro-Aristide mob had been mobilised the previous week to disrupt a protest demonstration by the opposition.

US ambassador James Foley issued a public warning against Haiti falling back into `its historical past of authoritarian government, misrule and abuse of human rights.' According to Radio Kiskeya, additional pressure was applied in the form of the decision to cancel the US tourist visa of interior minister Jocelerme Privert, the man reputed to have been leading the bloody repression of the Armée Cannibale, starting with the late September murder of its leader, Amiot Metayer [WR-03-38].

It did not seem to make much of a difference: on 20 November the police were forcibly breaking up an opposition demonstration in Petit-Goave. Haiti's leaders are sanguine about threats from the US, which has invaded them thrice, the first time (in 1915) installing a military occupation that lasted for 19 years. The third, ironically, was the one in 1994 to restore Aristide to power.

The Aristide administration justifies its actions claiming that the opposition coalition, Convergence Démocratique, is only interested in destabilising the government, not in reaching an agreement to clear the way for new elections. The outside forces seeking to broker a solution, led by the OAS, note that the government has failed to comply with a series of demands, including the disbanding of the pro-government mobs, the appointment of a non-partisan police chief and the prosecution of those who attacked members of the opposition after what the government portrayed as a failed coup in December 2001. Nobody now believes that credible legislative elections can be held, as scheduled, before the end of the year, or even in early 2004.

Colombian authorities are keen to obtain details about Panama's third discovery of armaments presumably destined for export to one of Colombia's illegal armed organisations. The cache, seized last week, included 34 AK-47s, 55 boxes of ammunition and three grenade launchers. This made it the smallest this year, but proof enough that Panama continues to be a live conduit for gunrunning in the region.

In March, the police intercepted a shipment of 110 AK-47s in La Chorrera, 32 kilometres southwest of Panama city. In July a cache of 144 AK-47s, 10 PKMs and 1,724 rounds of ammunition was discovered in Santa Clara, in the central province of Coclé.

The Panamanian police are noncommittal over the provenance and destination of the arms. They point out the AK-47 assault rifle has become the weapon of choice of drug traffickers and even the street gangs known as maras, throughout the isthmus and all the way to Mexico's northern border. Still, this conduit has been much used by both guerrillas and paramilitary organisations in Colombia, and the size of the first two shipments seized this year suggests that this is their likeliest destination.

JAMAICA | Growth outlook. GDP growth has been slowing down: in the third quarter, GDP was 1.2% up on the same period last year, paring down the increase over the first nine months to 2.1%. The deceleration resulted from a 0.9% decline in the goods-producing sector weighing down the 2.3% expansion in services. And that decline was largely up to the 5.9% slump in manufacturing: mining and quarrying was up 4.9%, agriculture 4%. Expansion in services was led by finance & insurance (5.9%) and electricity & water (4.9%). The planning institute, PIOJ, is expecting a slightly higher GDP growth rate of 1.8% in the last quarter.

DOMINICAN REPUBLIC | Oil at last? Conflicting reports have surfaced regarding Murfin Dominicana's search for oil in the southern Cibao region of the Dominican Republic. One, on 19 November, says that three of 14 wells drilled show commercially exploitable deposits. Another, from Murfin Drilling Company, says more testing is yet needed. Once before, the illfated President Antonio Guzmán (1978-82) announced a find that did not materialise.

GUATEMALA | Korean pullout threat. Korean maquiladoras (assembly plants) may start pulling out of Guatemala as a result of the latest salary increase decreed by the government, which takes minimum pay up to US$177 a month (versus US$60 in Nicaragua, US$40 in Haiti). The warning came from Bong Chung Park, vice-president of the Asociación de Maquilas Coreanas. Korean assembly plants give employment to about 72% of the 138,000 workers in Guatemala's maquila sector.

COSTA RICA | Investment patterns shifting. Foreign direct investment (FDI) has been shying away from tourism: this year it is expected to attract only US$54.5m, down from US$111.5m in 2001, and below the US$56m a year average that other services have been receiving over the past couple of years. The latter's share of total FDI has increased from 1% in 1998 to an estimated 12% this year. The main target for FDI in Costa Rica continues to be the industrial sector, expected to account for 62% of the total this year.

A study by the Carnegie Endowment for International Peace provides hints for negotiators entering the FTAA end-run.

The season of Nafta assessments is upon us, now that the North American partnership is about to celebrate its 10th anniversary, and the conclusions will be studied carefully by those embarking upon the decisive final phase of the FTAA talks.

A study by the Washington-based Carnegie Endowment for International Peace (CEIP) has come up with a largely negative (the authors prefer `muddled') balance sheet, underlining that Nafta had failed to create enough jobs in Mexico (and hence to curb illegal immigration into the US), had harmed Mexico's small farmers, and had had only small effects on employment in the US. It notes that `unprecedented growth in trade, increasing productivity and a surge in both portfolio and foreign direct investment have led to an increase of 500,000 jobs in manufacturing from 1994 to 2002' — but that this has been offset by the loss of 1.3m jobs in farming.

The one thing nobody is denying is that Nafta boosted US-Mexican trade beyond all expectations. Much of the increase on the Mexican side, however, came from the maquiladora (assembly) plants strung out next to the US border, and these have proven highly susceptible to downturns in the US economy. In 2001, just before recession struck, 1.3m jobs had been created in the maquiladoras; in the subsequent downturn, more than 400,000 of them disappeared. CEIP's Sandra Polaski, who headed the economic research unit at Nafta's labour secretariat in the late 1990s, says that `a magnifying glass' is needed to detect job increases.

The CEIP study clashes with another conducted last year by the World Bank, which concludes that Nafta has brought `significant economic and social benefits to the Mexican economy' — particularly in helping it overcome the Tequila crisis of 1994-95. The main drift of the World Bank study is that Mexico would have been worse off without Nafta. The CEIP study does not quite contradict this, but comes close. Polaski prefers to say, `Mexico would have been better off with a better Nafta.'

Lessons for FTA negotiators
The CEIP study draws some lessons from Mexico's experience for the other countries about to strike free-trade agreements with the US. They are told to seek:

• A more gradual tariff-reduction calendar for such basic products as maize, rice and beans, which are not only the main staples but also the livelihood of small farmers. This would give them more time to prepare for competition with the bigger (and subsidised) US agricultural concerns. (Countries should avoid over-eagerness such as Mexico's decision to speed up tariff reductions on US maize, which had a devastating impact on small Mexican farmers.)
• A degree of preference for domestic industrial inputs over imported goods, so that more jobs may be created.
• Financial assistance for the retraining of those displaced by competition from abroad.
  

`Agree on what you can' is the principle behind a deal that avoids the more confrontational regional trade issues.

The drama many had been expecting had been removed from the FTAA meeting held last week in Miami by the earlier agreement between the US and Brazil to go along with the latter's proposal for a pared-down, `flexible' agreement that simply left out the confrontational areas — agricultural trade for the US; investment, intellectual property and the like for Brazil.

Only a few countries put up some resistance: Canada, Mexico and Chile — those who had already struck free-trade agreements with the US and were unhappy about seeing others gain similar access without making the same kind of concessions.

The formula that has been adopted is simple: negotiation continues in all the areas originally selected, but each country can graduate the extent to which it wants to deal. Access will then be roughly proportional to concessions. Tough unsolved issues will be shunted away to the multilateral arena, under the WTO.

The only concrete target set in Miami is to reach agreement on market access, however graduated, by September next year, so that whatever else has been agreed can be wrapped up in time to meet the original launch deadline of 2005.

The compromise reached in Miami is a long way from the `single undertaking' principle for which Brazil had fought so hard at the beginning of the FTAA process; the rule that `nothing is agreed until everything is agreed'. It is also distant from the `early harvest' alternative proposed by the US: to lock into place each partial agreement as it was achieved. At the time, Brazil got many to share its fear that the US would simply push ahead with its own preferences and leave aside those of others that it did not care for.

Washington's bilateral push
The Miami formula, however, may not be the final face of the FTAA. The US has clearly decided to plough on with its policy of striking bilateral free-trade deals with anyone who is willing. Before the assembled ministers had left Miami, Zoellick had announced that negotiations would be starting on a two-stage agreement with the Andean countries (minus Venezuela): Colombia and Peru first, Ecuador and Bolivia later.

He also announced that negotiating would be stepped up with Panama and the Dominican Republic — the latter with a view to `docking' the deal with Cafta, the free-trade agreement in the making with Central America. So far, the only country in the region to have reached a separate FTA with the US is Chile.

At this rate, the only Latin American countries which would not have a bilateral arrangement with the US would be the four Mercosur partners (Brazil, Argentina, Paraguay and Uruguay) and Venezuela. Uruguay has already been floating the possibility of seeking a separate FTA, and Argentine President Néstor Kirchner has suggested that Mercosur could seek an agreement as a bloc.

Some US critics have suggested that this approach of successive bilateral deals might conspire against the FTAA, because once countries have secured access bilaterally they will lose interest in a broader deal — indeed, that they may actively oppose it, because it would mean losing an edge over regional competitors.

Report by the official human rights commission catalogues shortcomings ranging from the careless to the illegal.

The `case' of the Ciudad Juárez women's murders [WR-03-43] has been taken a step further with the release of a report by the national human rights commission (CNDH), based on a review of 62,000 pages of related files and 650 interviews. What has attracted most attention is its condemnation of police mishandling of the investigations.

The shortcomings identified by the CNDH range from simple carelessness, through sloppy investigative procedures to the use of torture and forged evidence. CNDH spokesman Federico Gómez makes the point that the report `provides evidence of everything said so far by international and local groups regarding negligence and carelessness in the conduct of the investigations.'

The report does not, however, corroborate the claims that patterns common to many of the 263-290 murders point to the work of one or more serial killers. The one crucial common feature in such a pattern would be evidence of rape or serious sexual assault. This, according to the special prosecutor for women's crimes, applies to 76 cases; according to the most active Mexican NGO in this matter, Nuestras Hijas de Regreso a Casa (NHRC), to 95.

Questions are beginning to be raised about the role of the special commissioner appointed by President Vicente Fox, Guadalupe Morfí­n [WR-03-41]. It now appears that she will not have access to the dossiers on the investigations into the Juárez murders. The local bureau of the chief prosecutor's office said that Morfí­n's job was one `of coordination, not investigation' — and focused chiefly on devising preventive measures so that no further crimes of the same kind occur in the future.

Outspoken ambassador Adolfo Aguilar Zí­nser of `backyard' notoriety [WR-03-45] did, after all, get his marching orders. Perhaps intending some sort of face-saving exercise, foreign minister Luis Ernesto Derbez announced that Aguilar would cease to be Mexico's ambassador to the UN on 1 January. 

President Vicente Fox provided the official motive: he, and Mexico, had been `offended' by the reference to the country as the `backyard' of the US — deliberately misconstruing Aguilar's words and thus avoiding a more damaging cause for offence: the ambassador's claim that Mexico would continue to be considered the US backyard as long as its stance continued to be submissive.

The ambassador took Fox to task publicly for this. In an open letter in which he announced his immediate resignation, Aguilar said, `You are wrong, Vicente. Your statements are unfair. I am a patriot and it is not I who has offended the Mexicans. It is not I who sees and treats Mexico as a backyard [...] While I was Mexico's representative on the Security Council, it was not anyone's backyard.'

Both opposition parties, the Partido de la Revolución Democrática (PRD) and the Partido Revolucionario Institucional (PRI) have publicly criticised the foreign minister for removing Aguilar from his post. Prominent members of both parties had initially expressed indignation at Aguilar's remarks on the strength of the same misinterpretation adopted by Fox.

Mexico city's security and prosecution cabinet has been discussing the possibility of gradually legalising the use of drugs, starting with controlled distribution in prisons and later moving on to other areas where narcomenudeo (small-scale trafficking) takes place. The chief state prosecutor in the capital, Bernardo Bátiz, says the initiative will be discussed at a meeting of prosecutors scheduled to take place in December in Tampico, Tamaulipas.

Bátiz notes that any changes in the attitude towards narcomenudeo would require amending the constitution, the penal code, and health legislation, but he believes the benefit of free supply would be a sharp lowering of street prices, which would neutralise the appeal of `pushing'. Recent official figures show that the age of initiation into drug use in Mexico city has fallen to 11-12. There has also been a marked shift in the drugs of choice, with the numbers of adolescents using cocaine and heroin trebling between 1993 and 2000.

TAX REFORM | Alternative proposals multiply. Tax reform proposals rivalling that of the government have emerged from three quarters. The opposition PRI has come up with one which, in order to keep food and medicines exempt from the value-added tax (IVA), proposes creating a new tax on production, intermediation and imports (IPI) at a 10% rate. It also lowers the general IVA rate, but only from 15% to 13% (as against the government's 10%), hypothecating 10 points for the federal government, two for the states and one for the municipalities, and reduces the income tax rate from 32% to 25% for individuals and from 34% to 30% for businesses.

Coparmex, the umbrella employers' confederation, proposes reducing the general IVA rate to 10% (like the government) and extending it to food and medicine, but at the lower rate of 5%.

The senate has suggested raising fiscal revenues, not via new or higher taxation but by strengthening tax collection and curbing evasion, reckoned to be equivalent to half current tax receipts. Tax receipts in Mexico amount to 11% of GDP, one of the lowest rates in the hemisphere.

GROWTH OUTLOOK | Farming & building are driving forces. September economic activity figures continue to show a pattern of weak overall growth, at 1.2% above the same month of 2002. Two sectors, agriculture and construction, showed more than moderate year-on-year expansion (7.6% and 3.9%, respectively), but this was offset by a 1.8% decline in manufacturing.

EMPLOYMENT | Jobless rate remains high. The open unemployment rate in Mexico's 32 biggest cities was 3.63% in October, slightly down from the 3.87% measured the previous month. The countrywide rate in October was 2.8%. The official open unemployment rate excludes anyone who worked even a single hour in the week the survey was conducted. The broader rate of `critical employment conditions' was 10.32% in October.

PUBLIC DEBT | Domestic debt hits record high. At end-September Mexico's domestic public debt reached a record M$851.2bn (US$77.8bn), or 13.4% of GDP — almost one percentage point more than at the end of last year. The external public debt at end-September totalled US$75.9bn, up only US$6.2m since end-2002.

Fear of China was said to have influenced the FTAA outcome — but not everyone has reason to fear.

According to one school of thought, a major factor in securing agreement over the FTAA in Miami was the fear of China. One of the arguments deployed by US Trade Representative Robert Zoellick in his pre-summit discussions with the Brazilians was that without the FTAA Brazil risked being swept out of the US market by China. OAS secretary-general César Gaviria said, `The fear of China is floating in the air. It has become for us a challenge, not only in the area of cheap labour but also in that of skilled labour.'

According to a recent study by investment bankers Goldman Sachs (The Sweet and Sour Effects of China in Latin America), these fears are only half-justified — or rather, justified for some Latin American countries but not for others. Adverse affects can be expected by those who compete internationally with China, like Mexico and Central America: the prices for their exports of apparel and light manufacture will be driven down by Chinese competition, and China's lower labour costs will lure away maquila (assembly plant) investors.

On the other hand, those who export raw materials to China, like Argentina, Brazil, Peru and Chile, will see the prices for their goods boosted by Chinese demand, and the volumes boosted by China's rapid growth rate. Chilean economist Sebastián Edwards has been warning his fellow countrymen that, if they wish to export more than raw materials to China, they will have to `leapfrog' into high-tech goods, since China will prove a formidable competitor in such other manufactures as electronic products, vehicles, telecommunications equipment, light machinery and equipment.

Brazil leads the pack
This is what Brazil has already begun to do, selling Embraer's aerospace output as well as its raw materials. Brazil expects its exports to China to reach US$5bn, or 83% more than in 2002 — while Mexico, apart from seeing the Chinese attract its maquila investors and displace its products from the US market, is facing a huge trade deficit with China as a result of the increase in its own imports of Chinese goods.

At the recent Brazil-China Business Round in Gwandong, it was noted that Latin America's trade with that region of China alone has increased from US$800m in 1993 to an estimated US$3.7bn this year. Unusually, acceleration is far greater on the Latin American side: Gwandong's exports to the region in the first nine months of the year were up 5.9%, to US$1.85bn, while its imports from Latin America were up by 73.8% to US$1.86bn. Gwandong's chief imports from the region: iron ore, copper, soya, leather and spare parts. As a rule of thumb, Gwandong takes about 10% of China's imports from Latin America.

Further expansion is in the works: a trade mission headed by China's deputy agriculture minister arrived in Brazil last week with a long shopping list.

The Chinese do not show much sympathy for those who complain about the competition they are offering. A typical response to their situation is that of Xingmin Yin, deputy director of the Shanghai-based China Centre for Economic Studies. `China,'he told the press, `was inundated with foreign products, but we did not blame [the exporting countries]. Instead, we learnt how to produce like them.'

Gutiérrez and Uribe bury the hatchet, but new developments heighten Ecuadorean concerns about the spillover from the Colombian war.

Ecuadorean President Lucio Gutiérrez and his Colombian peer Alvaro Uribe have decided to ignore the friction recently caused by the latter's claim that arms from Ecuador's military arsenals were being used by Colombian guerrillas [WR-03-41]. This, however, has not yet cooled tempers in Ecuador, where that spat had translated into a magnification of all the grievances arising from the `spillover' of the Colombian conflict.

Indeed, concerns about the `spillover' were heightened last week as a result of two separate developments: the discovery of a camp established by the Farc guerrillas inside Ecuador, and the prediction of a continuing influx of Colombian refugees.

The manner in which the Farc camp was discovered is a bit of an embarrassment for the Ecuadoreans, who had been contrasting their deployment of 7,000 troops along the border with Colombia's neglect of the area. A Colombian engineer kidnapped by the Farc was being ferried by launch on the San Miguel river, the border between the Ecuadorean province of Sucumbí­os and the Colombian department of Putumayo. Spying Ecuadorean soldiers on the bank, he dived overboard and swam ashore. There he told the military where to find the camp where the guerrillas had been holding him — only 22 kilometres away from the township of General Farfán.

This is not the first Farc camp to have been found in the border area, but it is the first known to have been in use recently. Like others, it was found to contain caches of foodstuffs, munitions, explosives and communications equipment.

This example of border porosity was followed by another: the local representative of the UN High Commissioner for Refugees, José Euceda, reported that Colombians had been fleeing the conflict and crossing into Ecuador at a rate of about 1,000 a month — three times as many as in 2001. Euceda said his agency projected a continuation of this trend throughout next year.

Since 2000, the year the US-backed Plan Colombia was launched, about 20,000 Colombians have applied for refugee status in Ecuador, which allows them to reside and work legally. Only 5,000 have so far been accepted. Reception facilities in the border area have already been overwhelmed, but in any case the newcomers do their best to move away to the cities as fast as possible. Ecuador, worried about its ability to absorb this influx, has requested urgent international financial assistance to expand facilities near the border, and has been trying to persuade Colombia to agree to some form of migration control.

The White House's Drug Policy Office reports that while coca cultivation has increased this year in Bolivia, this had been more than offset by the decline achieved in Peru. The area cultivated with coca in Bolivia is said to have increased from 24,400 hectares in 2002 to 28,450ha in June this year, while in Peru it had shrunk from 36,600ha to 31,150ha. This adds up to a decline of 2.2%. 

In September, the UNODC's more comprehensive survey showed a 21% increase in both countries combined. It should be kept in mind, also, that the UNODC's estimate of the cultivated surface in Peru in 2002, the starting point for these calculations, is 27% bigger than that of the US. The US figures are based on a `sampling' of satellite imagery.

"Bolivia once had a sea -- and I dream of bathing on a Bolivian beach."

Hugo Chávez , President of Venezuela, triggering a diplomatic row with Chile.

"I am not a very diplomatic diplomat."

Adolfo Aguilar Zí­nser, former Mexican ambassador to the UN, after having been dismissed for saying that the US considered Mexico its `backyard'.

"It is my government's decision never to forsake the poor in the neediest departments of the country [...] because poverty can be a breeding ground for terrorism."

Alejandro Toledo, President of Peru.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		22.11.02	14.11.03	21.11.03
Argentina	peso	3.48	2.87	2.90
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.44	7.77	7.80
Brazil	real	3.56	2.93	2.92
Chile	peso	710.00	626.00	630.00
Colombia	peso	2,666.56	-2,666.56	2,831.15
Costa Rica	colón	374.93	413.81	414.98
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	20.81	39.24	40.95
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	7.62	8.04	8.06
Honduras	lempira	17.01	17.77	17.90
Mexico	nuevo peso	10.22	11.10	11.28
Nicaragua	córdoba oro	14.58	15.47	15.65
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,680.00	6,150.00	6,160.00
Peru	nuevo sol	3.59	3.46	3.48
Uruguay	nuevo peso	28.50	28.23	29.65
Venezuela	bolí­var	1,350.00	1,600.00	1,600.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	August	September	October	Last 12m	Jan-Dec 2002
Argentina	Indec	0.00	0.00	0.6	3.90	41.00
Bolivia	INE	0.64	0.23	1.25	4.35	2.45
Brazil	FGV	0.62	1.05	0.29	13.98	26.41
Chile	INE	0.20	0.20	-0.2	1.20	2.80
Colombia	Dane	0.31	0.22	0.06	6.58	6.99
Costa Rica	DGEC	0.70	0.13	1.17	8.91	9.68
Ecuador	Inec	0.06	0.73	0.01	6.86	9.36
El Salvador	Min.Ec.	0.30	0.10	0.31	2.30	2.80
Guatemala	BCG	0.28	0.42	_	5.68	6.33
Honduras	BCH	0.90	0.40	_	7.90	8.10
Mexico	Bco.Mx.	-0.07	0.60	0.37	3.96	5.70
Nicaragua	BCN	0.30	0.22	_	4.97	3.87
Paraguay	BCP	-0.20	0.20	2.1	9.90	14.60
Peru	INE	0.01	0.56	0.05	1.30	1.52
Uruguay	DGEC	1.16	0.80	0.52	11.14	25.94
Venezuela	BCV	1.30	1.30	1.5	25.70	31.20
US	DOL	0.40	0.30	_	2.30	1.60
Previous: WR-03-42

The stockmarket in figures
Market	Index	14.11.03	21.11.03	Variation (%)
Buenos Aires	Merval	932.21	945.02	1.37
São Paulo	Bovespa	18985.87	19248.39	1.38
Santiago	IPSA	1469.60	1414.19	-3.77
Bogotá	IGBC	2206.03	2230.71	1.12
San José	BCT	12276.09	12201.32	-0.61
Quito & Guayaquil	Interinvest	67.47	67.56	0.13
Mexico	BMV	8606.03	8335.12	-3.15
Lima	ISVBL	2111.67	2116.22	0.22
Caracas	BC	20811.72	20925.96	0.55
Source: Daily market reports.

Press report `reveals' what it describes as the most radical politicisation of Brazil's administration, by Lula's party.

Within about four years Brazilian President Lula da Silva could be facing the same kind of problems his Venezuelan peer Hugo Chávez is dealing with right now. The prediction comes from Venezuelan Vice-President José Vicente Rangel, in an interview granted to the Brazilian newspaper Folha de São Paulo. According to Rangel, in Latin America there is great resistance to change and `any reform process generates almost irrational reactions.'

In Venezuela's case, that reaction began with the `demonisation' of Chávez . So far, only the far-right fringe has attempted anything similar with Lula, but this may be changing. Almost immediately after the Rangel interview was published, the influential Brazilian newsmagazine Veja led with a major report on what it described as the most radical attempt ever to politicise Brazil's state apparatus — by Lula's Partido dos Trabalhadores (PT).

The main drift of the report is that the Lula administration has been filling government agencies with ill-prepared appointees chosen solely for their loyalty to the party. Much is made of Lula's campaign tirades against technocrats, and his claims that some of their jobs could be better performed by blue-collar workers. 

The report claims that the Lula government has lowered the qualifications required for certain positions in order to facilitate the appointment of the party faithful. It does not dwell on the fact that the radical wing of the PT is highly critical of the surfeit of `technocrats' appointed to such areas as the management of the economy.

Veja also notes that PT members appointed to government posts have to contribute to the party coffers more than other members — the message being that political appointments carry a financial reward for the party. The magazine reckons that the PT will raise from members' contributions more than US$10m for next year's municipal elections. This is a considerable achievement by Brazilian standards, where campaign financing has relied considerably on private contributions with strings attached, or on corruption.

The `revelations' of the Veja article have already been picked up and featured prominently by the New York Times, in much the same manner as anti-Chávez reports in the Venezuelan press found a ready echo abroad. Lula may find that timespans have been shortened since Chávez took office.

Groups initially based on the demands of the unemployed have grown into a constellation with very diverse agendas, emboldened by official inaction.

For five days running, the `micro-centre' of Buenos Aires, where the government buildings and the financial district are located, has been under siege by protesters — and the main roads leading into the capital have been sporadically cut off. The unrest has not been confined to Buenos Aires: over the past week-and-a-half seven provinces witnessed protest actions, some violent.

The protests are being staged by the piqueteros, which started out in the Menem era as small groups of unemployed workers who pressed their claims by establishing pickets blocking main highways, and have grown into a constellation of fairly organised bodies, many of them manipulating the grievances of the jobless for their own purposes. Local piquetero bosses mediate distribution of the Arg$150 (US$51) a month handed out as a subsidy by the government. Many have been accused of using the threat of picketing and roadblocks as a means of extorting concessions from local authorities. A number of piquetero groups have been taken over by activists of the far left.

From diversity to convergence
The most recent wave of piquetero protests did not begin as a coordinated set of actions across the country. In each place particular agendas were being pursued. On 20 November in Salta, protesters raided the premises of two oil companies and set them alight, demanding payment owed them by the government for the shares they had been allotted at the time of the firms' privatisation.

A week later, in Neuquén, riots broke out when the provincial government started re-registering beneficiaries in order to replace the cash handouts with debit cards, as a means of ensuring that the funds reached their intended targets. In clashes with police, about 30 people were injured, three of them by gunfire, which prompted reports, later proven untrue, that the police had used live ammunition.

Buenos Aires city and its environs endured five days running of piquetero protests. First hit was the city centre, by groups demanding more subsidies. Later, on the boundary with Buenos Aires province, one group blocked the access to the capital demanding the creation of 1m jobs, while another surrounded a car factory asking for jobs there. In northeastern Misiones, seasonal plantation workers demanded employment; in central Santa Fe, government employees and neighbourhood associations demanded subsidies for those affected by recent floods; in northwestern Catamarca, government employees and pensioners demanded back pay; in centre-western Mendoza, former oilworkers blocked access to a refinery, seeking more subsidies.

The federal government last month gave the impression that it was going to crack down on the piqueteros, but later adopted a two-track policy, seeking to win over the more moderate groups. This has only goaded the more radical groups into more spectacular action. Now piqueteros of the most diverse extraction have announced that they will be converging on Buenos Ares on 19-20 December to stage a mass protest rally. This has led former interim President Eduardo Duhalde to criticise the government for its `silk glove' approach, which he said only encouraged these groups to become bolder. Duhalde, whose support was crucial to President Néstor Kirchner's electoral victory, had been keeping in the background, rarely commenting on current developments. Analysts have been suggesting that a split may be developing.

Overreaction to Chávez 's remarks has resulted in what Chile least wanted: multilateral involvement in Bolivia's maritime claim.

The government of President Ricardo Lagos has been trying hard to push back into the bottle the genie released when it overreacted to Venezuelan President Hugo Chávez 's by now well-known remark about dreaming of bathing on a Bolivian beach (WR-03-46). An early attempt to ignore the issue — always difficult after a tit-for-tat mutual withdrawal of ambassadors — was partly abandoned after pundits in several countries began to talk about Chile's disdain for Latin America and its `isolation' from its neighbours.

Lagos has started using every available opportunity to highlight Chile's Latin American vocation. A typical statement: `Foreign policy is conducted by each country from its own reality, and our reality is Latin America and Mexico.' His interior minister, José Miguel Insulza, added a more politically specific observation: `The Concertación [the ruling coalition] has always been, and will continue to be, Latin-Americanist.'

Meanwhile, foreign minister Soledad Alvear has been rushing about trying to keep aloft the `principle' that had motivated the reaction to Chávez 's remarks: that the issue of Bolivia's claim for an outlet to the Pacific is a bilateral matter, and that outsiders have no business interfering. The issue, however, was being multilateralised by the day. When UN secretary-general Kofi Annan visited Bolivia, he offered his good offices to help find a solution to Bolivia's maritime demand. Alvear later got him to rephrase his offer to make it sound less pro-Bolivian.

Enter Peru
Then the Peruvians were dragged in. Bolivia's defence minister, Gonzalo Arredondo, stated, `The maritime issue has ceased to be bilateral to become one of regionwide interest, so Peru must take a position on it, because as a country it took part in the problem.' This was echoed by Admiral Luis Aranda, commander of Bolivia's armed forces: `We'll have to see what Peru says. After all, wasn't it involved in the problem? Historically that was the case.'

Peruvian President Alejandro Toledo's immediate reaction was to agree with the Chilean that the issue was bilateral, but his government quickly toned this down when reminded that a 1929 treaty between Chile and Peru stipulates that the latter must be consulted on any solution to the issue reached by Chile and Bolivia, if that solution involves territory that used to belong to Peru before 1879. Bolivians describe this as `a Chilean padlock in Peruvian hands.' Peru's deputy foreign minister, Manuel Rodrí­guez Cuadros, restated his country's stance as supporting `Bolivia's just aspiration' to a sovereign outlet to the Pacific, while underlining that the matter should be discussed `within the principle of respect for the treaties.'

Stirring it up
Beyond the government, the mood in Peru was stirred up by a press report, in the newspaper Expreso, which used a minor topical peg (the US Congress authorising the sale to Chile of the destroyer USS Fletcher) to trot out older details of Chile's military procurement plans, giving them a menacing tilt. Its headline: `Chile Insists on Arms Race.'

The cue was promptly picked up in congress by Luis Gonzales, an outspoken member of the defence committee, who wrote in La República that `the Chilean purchases are in open contradiction with South American integration.' Retired Admiral Javier Pinillos sounded a more alarmist note: `Why is Chile arming itself? Before the war of 1879 it was the same: Chile armed itself and Peru disarmed itself — and we know what the outcome was.'

All this gave a gleeful Hugo Chávez the opportunity to proclaim, `I'm still dreaming of bathing someday on a Bolivian beach [...] If we were to conduct a survey among the peoples of the continent, we'd find that all think alike; that we'd want to bathe on a Bolivian beach. That includes the Chilean people, which is aware of the brotherhood of the South American peoples.'

On that last point he was almost prescient. A survey conducted in Chile by the Fundación Futuro showed 47% of respondents in favour of granting Bolivia greater access to Chilean ports — but without ceding sovereignty. The next-biggest group, 27%, preferred not doing anything about the issue.

Bolivia-Chile: key points

Both Peru and Bolivia lost territory to Chile in the War of the Pacific (1879-83); the latter losing its access to the ocean. Apart from a brief interlude between 1975 and 1978, Chile and Bolivia have not had full diplomatic relations (though they do have consular links). In 1993 Chile and Bolivia signed an agreement of economic complementation, which was scheduled to become a free-trade agreement this year. This last step was suspended by the Bolivian government that succeeded President Gonzalo Sánchez de Lozada, in whose ouster anti-Chilean sentiment played an important role.

Montevideo calls off the meeting intended to finalise an FTA between Mercosur and the Andean Community.

Diplomatic friction has emerged within the ranks of Mercosur, as a result of a decision by Uruguay — currently occupying the rotating presidency of the bloc — to call off the joint summit of Mercosur and the Andean Community (CAN) scheduled for 17 December for the purpose of finalising a free-trade agreement. Uruguay's foreign ministry said there were still unresolved `substantive' issues, and that a ministerial meeting would be the appropriate forum to sort them out.

Brazil's foreign ministry promptly issued a communiqué of its own, saying that `Brazil has already made manifest to the government of Uruguay [...] its position favourable to inviting the Andean presidents to travel to Montevideo [...] for a summit.' It added that Brazil was `fully committed' to finalising the free-trade agreement with the CAN, and hoped that this would happen before the end of the year. In the thick of this, Uruguayan President Jorge Batlle has flown to visit his Colombian peer, Alvaro Uribe. Though each represents one of the blocs negotiating the new FTA, they also have another thing in common: at the urging of the US they have broken with the Brazilian-led G-20 [WR-03-40].

No sooner had Humberto Núñez, commandant of the national police, set up last week the brand new internal affairs department, centrepiece of an overhaul of the force, than he started receiving threats — in his view, coming from within the police.

Interior minister Orlando Fiorotto, who is masterminding the overhaul, promptly came out to support Núñez publicly and vow that nothing would halt the reforms. Only days ago a police brigade was disbanded after it had been linked to gangs of car thieves, and proceedings were initiated against another group of officers accused of robbing from foreign exchange dealers.

Fiorotto's plan includes virtually recreating the auto theft section as an independent unit with carefully selected personnel, to crack down on an illegal industry that is said to provide almost half the cars currently circulating in Paraguay. Also, the antikidnap department will be enlarged and provided with state-of-the-art equipment to deal with a threat that has suddenly mushroomed in Paraguay. Between 1973 and 2001 there were only six reported kidnappings for ransom in Paraguay; last year alone there were 10.