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By selectively reading the new Zapatista strategy, the government hopes to wrongfoot Marcos.

`Subcomandante Marcos' did not put in an appearance at the three-day party in Oventic which launched the Zapatista movement's new strategy, based on the coordination of its 30 `autonomous municipalities' in Chiapas by five `good governance' committees and the withdrawal of their armed core -- the Ejército Zapatista de Liberación Nacional, EZLN -- from administrative tasks to concentrate on defence, and on `reaching out' beyond the confines of Chiapas.

The event went off without any incident other than a delay in the launch of the Zapatistas' new shortwave broadcasting station, Radio Insurgente, which was blamed on alleged government jamming. In the background, however, many thought they discerned an ominous tone to the government's statement that any changes made by the Zapatistas should be kept within the framework of the constitution, and its announcement that it had convened a meeting of its top security advisers to analyse the developments. This came as civil organisations in Chiapas reported an `increased military presence' close to some of the `autonomous municipalities'.

The alarm proved unfounded. When the government unveiled its formal reaction to the Zapatistas' initiatives on 11 August, it appeared to have taken its lead from Chiapas governor Pablo Salazar, who chose to see things through the rosiest lenses (WR-03-30). The interior minister described the changes as `positive' and said, `The possibilities of dialogue have grown, since we are talking about a peaceful, civilian movement, not a military one.' Like Salazar, Creel said that the `autonomous municipalities' are not in breach of the constitution; indeed, he said, they are in line with international agreements signed by Mexico.

The underlying strategy

The minister was particularly warm in his praise for the EZLN's decision to lift its roadblocks, cease to `tax' those transiting through their zone of influence, and respect the non-Zapatista indigenous communities. This was leading up to the core of the government's strategy: to wrongfoot Marcos by giving him nothing to fight against. Creel proclaimed that the government had already met all four of the conditions laid down by the Zapatistas for the resumption of peace talks: the removal of seven military roadblocks, the submission to congress of a revised indigenous rights bill, a commitment to honour the amnesty law, and the release of jailed Zapatistas. The conclusion: it is now up to the Zapatistas to make the next move.

Chiapas variant

Once again, though, Chiapas seems to be ahead in this game. Fernando Pérez Noriega, a congressman from the ruling Partido Acción Nacional (PAN), which had previously adopted the hardest line on the Zapatistas' new tack, came up with a formula under which there would be no need for the negotiations to resume. He says that all that it needed is to amend some pieces of Chiapas state legislation to accommodate the `autonomous municipalities' and their `good governance' committees.

After that, he says, `if on the ground there is no action by the EZLN against the federal government, if the law of Chiapas is accepted and if the situation returns to normal, there is no need to sign a peace agreement.'

The overlooked items

In all this, the authorities have studiously avoided any mention of what Marcos had proclaimed as one of the pillars of the new Zapatista stance: the reaffirmation of `resistance as the Zapatistas' main form of struggle.' Also ignored was the announcement by the EZLN at the Oventic gathering that one of the motives for the Zapatista army's dissociation from administrative matters was to enable it to project its action `beyond the confines of Chiapas'. One of the top leaders present at the fiesta, `Comandante Esther' called upon all of Mexico's indigenous communities to follow the Zapatista lead and adopt in their territories the régime of the San Andrés Larraí­nzar agreements which congress departed from in 2001.

`We must exercise our rights ourselves,' she said. `We do not need permission from anyone, least of all from politicians who are only engaged in deceiving the people and stealing money. We have the right to rule, and to rule ourselves according to our own thinking.'

The EZLN promised to unveil soon a national plan, dubbed La Realidad-Tijuana (in deliberate opposition to the government's Plan Puebla-Panamá), to be based on several agreements; respect for autonomy; defence of peaceful civil resistance; promotion of fair, not speculative, trade; and non-privatisation of the country's natural resources, especially fuels. It said it would call upon all `non-governmental organisations independent from the state and the political parties' to `discuss, and eventually approve, improve and apply' this plan.

City relies on former crimefighting mayors Giuliani and Orlando to help make DF a safer place.

On 7 August former New York mayor Rudolph Giuliani delivered his 46 recommendations to improve security in Mexico city, a task he had been especially commissioned to do, towards the end of last year, by the city government's secretary of public security, Marcelo Ebrard.

The Giuliani plan is not a direct transplant of his own `zero tolerance' drive in New York. His observations on the ground convinced him quite early on that local circumstances required a specifically tailored approach. The starting point is to simplify the proliferation of police forces operating in the city (reducing them from the current seven to perhaps only two).

It also includes a major overhaul of the judiciary, in order to speed up trials, do away with corruption and impunity and promote a `culture of legality' among the citizens. This last point will be sought with the parallel contribution of the former mayor of Palermo, Leoluca Orlando, who has also been retained by Ebrard to bring to Mexico city the approach he used so successfully against the Sicilian mafia. For now the aims are modest: a 10% reduction of the crime rate, with the first real results visible in four years' time.

Giuliani plan: full analysis in our forthcoming Mexico & Nafta Regional Report (RM-03-08).

Self-sufficiency is being predicted in seven years; afterwards, exports to markets in the US.

Mexico's state oil company, Pemex, is embarking on what its director, Raúl Muñoz Leos, describes as its first-ever `systematic strategic plan to discover and export non-associated natural gas.' The aim of the plan is to replace the natural gas that Mexico is currently importing, and become a leading competitor in the supply of natural gas to such importing states as California.

Mexico currently has to import 20% of the natural gas it consumes. Pemex expects to make it self-sufficient within seven years, and an exporter thereafter. Private firms will be invited to take part in joint ventures with Pemex. News of this triggered the predictable reaction from the opposition, which accused the government of attempting `backdoor privatisation'.

Both Muñoz Leos and public service minister Eduardo Romero have been at pains to explain that everything is being done in accord with current legislation. Romero went as far as to state that President Vicente Fox is pursuing a `nationalist' oil policy.

BUSINESS | Closures running at 13 a day. In the first half of the year business closures were running at an average 13 a day, according to the Instituto Mexicano del Seguro Social (IMSS), the social security institute on whose records employment rates are based. By end-June the number of registered businesses had fallen to 808,966, compared with 811,244 a year earlier.

The category which recorded the highest number of closures was that of firms with up to 100 employees. The states with the highest numbers were Oaxaca, Coahuila, Colima, Sinaloa and the federal district (Mexico city). These closures are the backdrop to the rise in the unofficial unemployment rate in June to 3.17%, the highest since February 1999. Mexico lists as unemployed those over 12 years of age who haven't worked a single hour in the week of the survey.

INVESTMENT | Outlays on machinery & buildings are down. Gross fixed investment in the first five months of this year was down 2% on the same period of 2002. This average is the result of a 6.7% plunge in investment on machinery and equipment, set against a 3.8% increase in outlays on construction.

May figures suggest that the decline in the machinery bracket is actually steepening, with greater cutbacks on imported machinery. Also, investment in construction is growing less rapidly.

TRADE | Oil price helps shrink deficit. The trade balance for the first half of the year showed a deficit of US$1.59bn; 48% less than in the same period of last year. Exports in this period were up 2% overall - the result of a price-boosted 41.4% increase in oil export earnings, set against a 1.2% decline in non-oil exports. The lowering of the deficit was also helped by the stagnation of imports (they were only 0.5% higher than a year earlier).

Towards the end of the period there were signs of an upturn in export earnings, again driven by oil, accompanied by a sharper increase in imports - which could signal an industrial upturn in the offing, particularly given that intermediate goods were the bracket with the highest growth rate.

First of four votes on pension reform is won, thanks to opposition votes which came at a price.

The Lula government is portraying its first victory in the effort to push through its pension and tax reforms as a great achievement. The opposition is crowing that this was to their credit, and that the government would have fared far better if it had sat down to serious negotiations beforehand. Both have a point: clearing the first hurdle gave the government a psychological advantage over those who want to block the reforms, but this did indeed depend on the assistance of hitherto uncommitted opposition parties - and there is still a long way to go, with the month-long strike by public-sector workers continuing to escalate.

Price of opposition support

On 6 August the lower chamber voted to approve the pension reform in general. It did so by 358 votes to 126, with 9 abstentions. Of the votes against the reform, three were cast by representatives of the ruling Partido dos Trabalhadores (PT), which also provided eight of the nine abstainers. Many of the other opposing votes came from parties formally allied with the PT.

Without the contribution of 62 votes from the opposition, chiefly the conservative Partido da Frente Liberal (PFL), the government would have been defeated. [Note that, because the reform legislation entailed amending the constitution, a majority of 308 out of 513 congressmen was required.]

That support came at a price. The very next day, after intense negotiations in which even President Lula took part, two further amendments were approved, which embodied significant climbdowns for the government. One concession was to grant the judges' demand for their pensions to be kept at 90.25% of their last pay (the government had wanted to lower this to 75%, then had offered 85.5%). Another was to raise the ceiling for pensions exempted from a new 11% tax - to R$1,400 (US$400), as against the planned R$1,058 and a first offer of R$1,200.

The pension reform still has a long way to go. It must face a second vote in the lower chamber, then two successive votes in the senate. Still, it is much further ahead than the tax reform, stalled over objections from the state governors and the municipalities.

Strikers gain allies, seek more

The concessions made no discernible difference to the 630,000-or-so public-sector employees on strike (observance, a month on, is estimated at 70% of the total federal workforce of 900,000). Rather, they have announced their intention to seek the support of their peers in the 27 state and 5,560 municipal governments - about 7m in all. The state and municipal workers are less well organised than their federal counterparts, but the latter will have an important ally: the umbrella labour confederation CUT, once Lula's powerbase, whose executive director, José Maria de Almeida, now says, `It was a mistake to try to dialogue with the government, which with its reform proposals betrayed the government employees and the CUT.'

A US$5.5bn scheme to `open up the west' runs alongside mass redeployment of troops to inland borders.

Brazil wants to enlist two of its neighbours, Peru and Bolivia, in an ambitious US$5.5bn scheme devised to open up the uppermost reaches of the Amazon basin, and in the process help cope with Brazil's energy needs and expand its agricultural frontier. The appeal for Peru and Bolivia is that it would provide them with access by river to the Amazon, and hence the Atlantic, on lines similar to the successful `soya conduit' from Mato Grosso.

The Rondônia-centred `Madeira river complex', as the project has been dubbed, envisages the construction of hydroelectric plants designed to generate 7,500MW on the Brazilian side and 3,000MW on the binational stretch shared with Bolivia. Navigation will be ensured with a complex system of locks to bypass the dams of these hydro plants and 13 other `natural obstacles' that currently render the Madeira impassable.

The Brazilian government is well aware that this will attract the opposition of environmentalists both within and without Brazil. When he presented the scheme at a seminar in Rio on 8 August, Carlos Lessa, president of the development bank BNDES, chose to preempt them with the official argument: `A worse aggression against the environment is the pauperised man without a destiny who destroys nature because that is his only way of surviving.' He also unveiled the positive spin: `This [project] mirrors on a smaller scale the conquest of the West in North America.'

New army units for empty borders

The counterpart to this integration initiative is a move to strengthen Brazil's borders with those selfsame neighbours and others further north. In the wake of Operação Timbó, the recent exercise to test defensive responses along the Colombian border (WR-03-24), the commander of the army, General Francisco Albuquerque, has announced a plan to redeploy up to 20,000 troops from the south and southeast to the inland borders.

This will start with the establishment of a new brigade of jungle infantry at São Gabriel da Cachoeira, in Amazonas, and within reach of the Colombian and Venezuelan borders, to watch over the tributaries of the Rio Negro - a route favoured by drug traffickers and gunrunners, and the same general region where there have been, in recent years, crossborder incidents related to Colombia's internal war.

Another five new units are to be established in southwestern Amazonas and Acre, facing the currently `empty' stretch of Peruvian border running parallel to that country's coca-producing valleys where the Sendero Luminoso guerrillas have recently been so active. The new bases will be installed at Estirão do Equador and Palmeira do Javari in Amazonas, and three locations in Acre: Cruzeiro do Sul, Marechal Thaumaturgo and Santa Rosa do Purus.

A similar forward base is to be located at Santo Antônio do Içá, on the Içá river, a continuation of the Putumayo, which runs along Brazil's borders with Peru and Colombia.

Albuquerque says he could complete the redeployment by 2006 - if he gets the funds. This year he won a budget increase from R$14m to R$42m for this purpose, but fiscal constraints have meant that very little has been disbursed.

The justice ministry will institute civil proceedings to recover billions pilfered in Menem era.

The government of President Néstor Kirchner doesn't only want to reactivate corruption cases gathering dust in judicial archives; it is also planning to initiate civil proceedings to recover as much of the embezzled and illbegotten funds as possible.

The task ahead is enormous. The anticorruption office of the justice ministry has 814 cases of alleged corruption on file for which it has requested criminal prosecution. Most of these cases involved officials of the Menem governments (1989-99). Only 49 of those cases have so far been taken to trial, and there have been no convictions. Justice minister Gustavo Béliz says, `These are very negative levels as regards the efficiency of the judicial punitive system.'

He adds, `We are not only seeking to jail those who stole or got rich unduly at the cost of the state, but will also take the corresponding civil actions so that the corrupt return what they stole.' The prize is attractive: the federal audit office reckons that corruption in the mid-1990s was milking about US$5bn of public funds a year.

Supreme court & rights case

The image of the judiciary has also been made an issue by the supreme court, in a sharp response to foreign minister Rafael Bielsa's statement that it was about time the court assumed its responsibilities and ruled on the Alfonsí­n laws barring prosecution of human rights violators. In a brief communiqué, the court said it was aware of the `significant transcendence' attributed by public opinion to this case, but that it would `continue in a timeframe the court itself deems necessary [and] without any kind of pressure.'

BRAZIL | Industry demands action against recession. The national industrial forum (NFI), which represents the main industrial chambers and 32 private business associations, is demanding urgent government action to ward off recession. Their call comes just as Ibge figures show industrial production in June falling 2.6% from May, to the lowest level in 19 months. Car exports in July (an outlet from a sluggish domestic market) were down 11.2% from June. The industry association, Anfavea, still says it expects the total for the year to be 20% higher than in 2002, with production up by 3%.

ARGENTINA | More evidence of slowdown. Car exports in July were 0.9% lower than in June (and 30.4% below July 2002). Adefa, the automakers' association, says the main cause is the decline in Brazilian demand. Argentina's car industry is working at only 20% of installed capacity. One bright spot: domestic car sales are up 33.6% in the year, to the highest level in the last two years.

URUGUAY | Argentine investments return. The retreat that followed the financial crisis appears to have ended. Business consultants interviewed by El Paí­s say Argentine investors are back, in everything from the financial sector to holiday homes and rural real estate. They say Argentine investment activity is at its highest for four years.

Pachakutik joins left-of-centre majority bloc in congress, which could stymie Gutiérrez; Conaie promises protests.

The first real experiment of an indigenous party in power in a Latin American country has, finally, collapsed. As our readers know from our step-by-step monitoring of the growing rift between Pachakutik (PK) and President Lucio Gutiérrez, this outcome had been building up almost since Gutiérrez took office, when he decided to ignore the formal policy commitments he made to his allies, and his party, Sociedad Patriótica (PSP), began to undermine the positions of PK ministers in the cabinet.

PK was not the first member of the ruling coalition to depart: the leftist Movimiento Popular Democrático (MPD), raising objections similar to those of PK, walked away in July. Next to withdraw support from Gutiérrez, that same month, was Ecuarunari, the biggest member organisation of Conaie, the confederation of indigenous nationalities of which PK is the political arm. Ecuarunari represents the highland Indians of Ecuador, by far the most numerous group.

The endgame

Early in August, another member organisation of the indigenous umbrella, the Seguro Social Campesino, also publicly dissociated itself from Gutiérrez. The point of no return was reached on 5 August, when PK coordinator Miguel Lluco proclaimed, `[Lucio Gutiérrez] has betrayed himself and betrayed the Ecuadoreans [...] Pachakutik is surplus to this government.' Lluco suggested, though, that a formal decision to withdraw would not be taken until 15 August, at a party convention.

The very next day, though, the PK representatives in congress forced the outcome by ostensibly walking out when a vote was called on the government's draft law reforming the structure of the civil service. This allowed the newly formed left-of-centre bloc to defeat the government initiative. [Incidentally, the representatives of the conservative Partido Social Cristiano (PSC), putative new soulmates of President Gutiérrez, also walked out of that session.] The leader of the co-ruling PSP bloc, Gilmar Gutiérrez, promptly called for his namesake the President to declare the coalition over and dismiss all PK ministers. This he did immediately. Out went Nina Pacari (foreign relations), Luis Macas (agriculture) and tourism (Doris Solí­s). A prominent PK in a top non-cabinet position, Wilma Salgado, the successful head of the bank deposit guarantee agency AGD, was left to make up her own mind. She stayed put.

PSP leaders announced that the government would now seek new allies. PK and the left are convinced that a deal has already been struck with the PSC, but officials have refused to confirm or deny this, and repeat the official mantra that the government will not tilt `to the right or the left'. The PK has said it will join the left-of centre bloc in congress and set up an `alternative government' [more like a British `shadow cabinet'], while Conaie promises protests against Gutiérrez's economic policies. Gutiérrez has warned he will use force if necessary `to defend the constitution'.

More paramilitary groups sign up for demobilisation, as leaders break silence on extradition.

The pressure which the main paramilitary organisation, Autodefensas Unidas de Colombia (AUC), has been applying on groups that have refused to enter the recent demobilisation agreement (WR-03-28), appears to be paying off. On 11 August one of the factions of the holdout Bloque Metro announced that it was defecting and adhering to the Santa Fe de Ralito accord.

The Héroes de Granada faction, which operates in the east of the department of Antioquia, conveyed its apologies to AUC leaders Carlos Castaño and Salvatore Mancuso for the `insults' directed against them by the Bloque Metro leader, Carlos Mauricio Garcí­a Fernández (aka `Rodrigo' or `00'). They said they had come to differ with the Bloque Metro over `links with drug trafficking' - which is precisely Rodrigo's charge against the AUC leaders - and `the use of landmines'.

First concentration area: Medellí­n

There may have been no irony intended, but the choice of Medellí­n - stomping ground of the Bloque Metro - as the first concentration area for surrendering paramilitaries did raise more than a few eyebrows. Last week the city government's political secretary, Jorge León Sánchez, announced that the city had been chosen as the gathering place for the Bloque Cacique Nutibara, estimated to be about 1,000 strong. Though details have still to be worked out, the plan is for this group to be fully demobilised by the end of this year.

The Bloque Cacique Nutibara is a member of the Autodefensas Campesinas de Córdoba y Urabá (ACCU), the core paramilitary confederation around which Carlos Castaño built the AUC.

Army vs paramilitaries

Another paramilitary organisation, the Bloque Central Bolí­var (BCB), recently engaged in a turf war with the Bloque Metro, is now being pursued by the army. A clash which took place shortly before these lines were being written, claimed the lives of seven BCB fighters and a soldier in Maceo, Antioquia.

The military had earlier reported that a joint army-navy-police operation in the department of Vichada, close to the border with Venezuela, had `severely disrupted' another paramilitary group, the Bloque Oriental de Frontera (BOF), affiliated with the AUC. Its leader, known as el Patrón, was captured along with 15 fighters, and weapons and money were seized.

Castaño raises extradition issue

AUC leader Carlos Castaño had begun to draw public attention to the most glaring omission of the Santa Fe de Ralito demobilisation agreement: the issue of the US extradition requests pending over him and his lieutenant Mancuso. `The most serious of the difficulties facing the process [of demobilisation], which is also the most important driving force behind it, is the extradition of those of us already requested and the threat hanging over the rest.'

Castaño said that extradition `is a valid mechanism in the fight against drug trafficking, the country's main scourge,' but added that `a minimum of political willingness on the part of the governments of Colombia and the US would allow them to agree diplomatically on a mechanism allowing an atmosphere of confidence for the development of the process, and a ray of hope for those of us who wish to live in peace.'

The AUC leader complained that, despite repeated entreaties, the US government has refused to appoint an official representative at the negotiations between the AUC and the government. `They say they support the process,' he complained, `but insist on extraditing the leadership of the autodefensas.' He suggested that what was needed was a greater knowledge in Washington of `the process of the AUC' -- in other words, a recognition of its role in the fight against the guerrillas.

President Alvaro Uribe, meanwhile, has continued to spread the message that there will be `no impunity' for the paramilitaries, or indeed, any of the illegal armed organisations. There will be, though, `alternative justice' formulas which will substitute `compensatory penalties' for prison terms. These will not be `personalised laws' but `general norms' applicable to both guerrillas and paramilitaries.

COLOMBIA | Industry produces more, pares payroll. In the first five months of this year Colombian industrial production was up 4.9% on the same period last year; industrial sales were up 5.94%. Overall, productivity must have declined, since the industrial workforce increased (by 3.5%). This may not have been the case in money terms, since regular, fulltime employment fell by 4.3%, while `casual' employment increased by 3.7%, which means that employers saved a bundle on social security contributions. Regular job losses were most marked in small and medium-sized industrial firms (-4.8%).

VENEZUELA | Car sales dramatically down. Sales of new cars in Venezuela (an eloquent indicator of consumer spending in the more affluent sectors of society) were in the first seven months of this year 64% lower than in the same period of 2002. Still, the trend seems to be bending, since July sales were down by 46% on the comparable month last year. Cavenez, the auto industry's chamber, blames the general economic contraction and exchange controls.

PERU | Getting people to pay taxes. Prime minister Beatriz Merino says she intends to get to grips with an old Peruvian problem: that society as a whole pays very little tax. The total tax burden has been oscillating between 12% and 12.5% of GDP - well under half Brazils' rate - for the past 20 years.

Merino says the government will introduce legislation designed to increase that proportion to 14% of GDP next year. The longer-term target, she says, is a ratio of 16%. Merino is not enamoured of the 19% sales tax approved before she took office last June, and prefers a progressive system in which the government `taxes more those who have more.'

ECUADOR | Bending over to please IMF. Economy minister Mauricio Pozo has said the government committed itself to submitting to congress, before the Fund begins its first assessment of performance under the existing agreement, a package of agreed reforms still pending implementation.

Among the things the IMF would like to see is a lifting - this year - of the politically sensitive subsidy for cooking gas. Another IMF aim is the transfer of electricity and telecommunications utilities to the private sector. Both of these things are opposed by the indigenous party, Pachakutik, that has just withdrawn from the ruling coalition. On both points, the unions and social organisations are also ranged against the government.

Economic growth will only reach 1.5% this year instead of the expected 2.1%. Per capita GDP remains lower than six years ago.  

The economy of Latin America and the Caribbean will grow 1.5% in 2003, `recovering modestly' from a 0.6% fall in 2002, while per capita GDP will remain flat this year, at a level 2% lower than in 1997, completing the region's sixth `lost year', according to the preliminary version of Eclac's annual Economic Survey of Latin America and the Caribbean 2002-2003, released last week.  

The study says that 2003 will be better than last year in terms of growth, employment, financial conditions and external accounts - although 2002 is a poor basis for comparison. For this year, Eclac forecasts a flattening of growth due to the lack of either a powerful drive from the world economy or strong domestic reactivation. The external engine is absent, the US is not growing as forecast, the European countries have turned in a surprisingly poor performance, and Japan remains stagnant.  

As usual, performance varies considerably from one country to the next:  

* Argentina will head the growth ranking (5.5%) although its per capita GDP will be 17% lower than in 1997. Venezuela will post the lowest growth rate (-13%), despite a significant recovery that began in the second quarter.  

* Chile's growth will rise to 3.5%, led by export sectors. (Both Chile and Brazil are building up medium-term growth capacity, according to Eclac).  

* Brazil will grow for the third year running, by 1.5%.  

* Colombia is the only Andean economy with better prospects today than some months ago and is forecast to grow 2.5%.  

* Peru, the country posting the highest growth in 2002 (5.3%), should see GDP rise 3.5%.  

* Of the group of Caribbean Basin economies surveyed (Cuba, Haiti, the Dominican Republic and Central America), Costa Rica will perform the best in 2003, with 4.5% growth.  

* In Mexico, recovery has been delayed but 2003 is expected to move from less to more, with growth reaching 1.5%.  

Foreign trade performance  

Bucking trends in the world economy, the current value of the region's exports of goods in 2003 should rise 4.4% (3.5% excluding oil), after having stagnated in 2002. The economies posting the strongest export performance are those with the most competitive exchange rates or those concentrating investments in non-renewable natural resources.  

Import values will rise 0.8% in 2003, recovering slightly from their 6.7% fall in 2002. This will improve the region's balance of trade, with a surplus (US$37bn) for the second year running, and should practically balance the current account, whose deficit should decline by US$3.7bn (just 0.2% of GDP), for the first time since 1990.  

The deterioration in the terms of trade, which began in 1997, has ceased and in the course of this year they should improve slightly, both for the oil economies (1.2%) and the non-oil ones (0.8%).  

The Eclac report notes the free-trade agreement achieved between Chile and the  

US and progress in negotiations for the Central American Common Market, also with the US. It also emphasises the renewed importance that new authorities in Argentina and Brazil have assigned to Mercosur and integration with the Andean Community, which reflect a new stage in efforts to achieve greater trade integration within the region.  

The financial scene  

International financial conditions have been improving in 2003. Net capital flows to the region should reach US$40bn, although net transfer of resources abroad will still reach US$15bn, due to sizeable profit remittances and interest payments.  

Access to international financial markets has improved, with spreads on sovereign debt declining from all-time peaks in the second half of 2002. Likewise, countries have started to issue sovereign bonds again and, in the cases of Brazil, Mexico and Uruguay, include collective action clauses which should make any future renegotiations easier.  

Three policy trends  

The Eclac study points to three `significant' economic policy trends observed in 2003:  

-Fiscal reforms became increasingly structural, and a move away from the short-term is clearly under way. Almost all Latin American economies approved, or are in the process of approving, tax reforms -- or proposed reforms that failed to prosper. The consequence in the short term, however, is that fiscal policy will not include the reactivating force of domestic expenditure in 2003. This has meant that the absence of an external engine is compounded by the absence of a fiscal engine capable of providing the driving force for a reactivation.  

-Monetary policy has gained greater freedom to manoeuvre. To defend against foreign exchange pressures, last year many economies shifted towards a more restrictive monetary policy stance, particularly in South America. Now, one of the noteworthy events observed thus far  

-Foreign exchange policy has faced a calmer year, especially for Mercosur economies. Although so far this year 12 countries have seen real appreciation against the dollar, most are enjoying more competitive exchange rates than in 2001.  

Inflation & labour  

The Eclac study predicts that inflation in Latin America will average 8.6% for the period from December 2002 to December 2003, a significant fall from last year's 12.1%. The upturn in inflation in 2002 as well as its current slowdown are mainly associated with changes in exchange rates. In 2003, the outlook for labour is expected to improve modestly. During the first half of the year, some countries managed to boost the employment rate and reduce unemployment. In contrast, in Brazil and Mexico, employment has performed poorly. Overall, the number of unemployed will reach 13.6m people.

Regional GDP growth % variation 2002 -0.6 2003f 1.5 Growth in selected countries % variation Argentina 5.5 Venezuela -13.0 Chile 3.5 Brazil 1.5 Colombia 2.5 Peru 3.5 Costa Rica 4.5 Mexico 1.5 "Both Chile and Brazil are building up medium-term growth capacity."

Other indicators Export growth (%) 4.4 Import growth (%) 0.8 Trade balance (US$bn) +37 Net capital inflow (US$bn) 40 Inflation (%) 8.6 "In 2003 more countries are implementing more expansionary monetary policies."

* Force of 1,500-plus for Juárez murders of women  

Municipal, state and federal authorities have come together to launch a major anticrime offensive in Ciudad Juárez, Chihuahua, which lies on the border of the US and has attracted much attention due to one set of unusual statistics: the murder of 258 women in and around the city over the past 10 years. Interior minister Santiago Creel was present at the launch of the Programa Integral de Seguridad (PIS, 'Integral Security Programme') which will involve the deployment of 1,200 municipal police, 300 officers of the federal 'preventive police' (PFP), 200 of the state's judicial police, and an undisclosed number of agents of the federal chief prosecutor's office (PGR). The programme will unfold along three parallel tracks: investigation of the murders, prevention of further murders, and promotion of women's rights.  

So far the authorities have dismissed the possibility of a mass serial murderer at large, while acknowledging that some cases may be the work of three multiple killers. Rosa Delia Cota Montaño, who chairs the special monitoring commission set up by the lower chamber of congress to follow the Ciudad Juárez murders, says that a multi-disciplinary group set up by the PGR will look into all possibilities - including gangs of policemen or former policemen, satanic sects, organ 'harvesting' and people-trafficking. Cota Montaño says that of the 258 cases of murders of women in Ciudad Juárez, 99 are considered closed, 51 are in the hands of the judiciary and 108 are still being investigated.  

The day after the PIS was launched, three more bodies of women were found in the desert close to San Agustí­n, 40 kilometres east of Ciudad Juárez.  

* Fourteen potential areas of indigenous conflict  

There are at least 14 'danger spots' in rural Mexico where conflicts involving indigenous communities may erupt, according to Rodolfo Stavenhagen, the UN's special rapporteur on indigenous rights (and past head of Mexico's indigenist institute), who has recently conducted an inspection tour of six states with large indigenous populations (Chiapas, Chihuahua, Guerrero, Jalisco, Oaxaca and Sonora). He also said that there are some 400 areas at risk because of land disputes.  

Stavenhagen says that Mexico's indigenous communities are not solely afflicted by land tenure and use problems, but also by human rights abuses, disadvantages regarding the administration of justice, social exclusion and extreme poverty. He also identifies as risk factors the 'excessive militarisation' and presence of 'paramilitary' groups in some areas (an allusion to Chiapas; see page 5). This said, he underlines that land disputes can turn very ugly, as in the clash between indigenous communities in May last year in Agua Frí­a, Oaxaca, which claimed 26 lives.  

* Tracking hostages via satellite  

The prospect of monitoring people's movements through an implanted chip detectable via satellite is upon Mexico. It is being launched by Solusat, a local affiliate of the US firm Applied Digital Solutions (ADS), which is aiming at hospital use - and potential kidnap victims. The Mexican market is being tapped before that of the US because of the country's high kidnap rate: 437 cases reported in 2002.  

Solusat reckons that in about a year's time some 10,000 people will have had the Verichip implanted (it is the size of a grain of rice and costs US$175) and about 70% of the hospitals will be equipped to read the data on the chip. The firm hopes to move on later to two other markets with security problems: cars and containers.

For the second time, FRG congressmen deny a quorum rather than allow a controversial debate.

The ruling Frente Republicano Guatemalteco (FRG) has chosen not to confront the recently forged alliance of all opposition parties in the single-chamber congress. On 6 August it again resorted, for the second time in less than a week, to walking out of a session to avoid even hearing the submission of a controversial motion [WR-03-30].  

On this occasion it was a request by Nineth Montenegro, of the leftist Alianza Nueva Nación (ANN), for President Alfonso Portillo's immunity from prosecution to be lifted so he can stand trial on a charge of having unconstitutionally appointed an official later involved in a massive fraud.  

The FRG has a majority of its own in congress: 59 of the 113 seats. This is a fragile lead: it would take only three absences from the FRG ranks to wipe it out. It has clearly elected not to run any kind of risk (and also to avoid taking stands which might be electorally unproductive) by simply denying the necessary quorum for sessions to be held.  

Limits of opposition unity  

The drawing together of the opposition parties and civic organisations outside of congress appears to have its limits. There has been no move to unite behind a single candidate -- though on 4 August the small right-of-centre Unión Democrática (UD) did decide to withdraw its own candidate, Rodolfo Paiz, and endorse the frontrunner in the polls, Oscar Berger of the Gran Alianza Nacional (Gana). If the polls are anything to go by, this would only transfer 0.5% of the electorate to Berger.  

Moving in the opposite direction, the Partido Unionista (PU) has formalised the nomination of Guatemala city mayor Fritz Garcí­a-Gallond as its presidential candidate. Meanwhile, Efraí­n Rí­os Montt is still a candidate: the electoral tribunal dismissed the two requests to nullify his registration on the grounds that it was illegal. The case goes to appeal.

Subregion's ministers and security chiefs debate paring down their arsenals, as events highlight the booming trade in arms.  

Managua is hosting this week a meeting of the Consejo Centroamericano Intersectorial (formed by the ministers of foreign affairs, defence and interior, and the chiefs of the military and police forces). On their agenda is an issue which the US government has been pushing strongly: arms control and limitation throughout the subregion. Indeed, there is a strong possibility that after their deliberations the council members will hold a meeting with the US Undersecretary of State for political and military affairs, Lincoln Bluenfields.  

The US has made it clear that it considers the conventional military forces of the subregion obsolete and would like to see them replaced by smaller, highly mobile forces trained to deal with terrorism, drug trafficking, gunrunning and natural disasters. It would also like to see the Central American arsenals cleared of any weaponry from surface-air missiles (SAMs) on the grounds that they might fall into the hands of terrorists.  

The arms corridor  

A recent discovery of a large hoard of assault rifles and machineguns in Panama's province of Coclé - the second one found in that area in under a year - has highlighted the fact that the subregion continues to act as a conduit for the arms-for-drugs trade with Colombia.  

Panama has also just illustrated how difficult it will be to put a lid on this trade. A Panama city court has just thrown out charges against the Israeli national Shimon Yelinek for his alleged role in helping divert to Colombia via Panama, in late 2001, a shipment of about 3,000 AK-47s and some 5,000 rounds of ammunition from Nicaragua. Yelinek was cited in an investigation into the matter conducted by the OAS: he is accused of having furnished a forged Panamanian end-user certificate for the operation.  

The judge based his decision on his conclusion that nothing Yelinek was accused of doing harmed the Panamanian state, and that neither Nicaragua nor Colombia had initiated any diplomatic action that might have threatened Panama. Moreover, he said, the events investigated took place in Nicaragua, beyond Panama's jurisdiction. The chief prosecutor's office is appealing the ruling.

Eloy Gutiérrez Menoyo believes democratisation is inevitable, and wants Fidel to lead the way.  

Only a few journalists were discreetly tipped off that something was about to happen at Havana airport on 7 August, as the visiting dissident Eloy Gutiérrez Menoyo was about to embark on his return flight to Miami. Even Gutiérrez Menoyo's wife Gladys and their children were kept in the dark about his intention to announce that he was remaining in Cuba, to try and secure legal recognition for the opposition and prompt the democratisation of the island's political system.  

Gutiérrez Menoyo had been a distinguished comrade-in-arms of Fidel Castro who achieved the distinction of being appointed a comandante de la Revolución. However, he soon became disenchanted with Fidel's rule, and in the mid-1960s he was arrested and convicted of conspiring to overthrow him. He was sentenced to death, but this was later commuted to 50 year's imprisonment, from which he was released into exile after 22 - thanks to the intercession of Spanish prime minister Felipe González.  

In 1993 in Miami he founded an opposition organisation called Cambio cubano (`Cuban change'), advocating a peaceful transition to democracy in his homeland. Over the years he and his organisation drifted steadily away from other opposition groups both within and without Cuba. A measure of this estrangement was his bald statement on 7 August that `an independent opposition is not an opposition manipulated by the US Interests Section.'  

Gutiérrez Menoyo says he brings to the debate proposals based on `social-democratic ideas of the kind prevalent in Europe.' In his view, democratisation in Cuba is inevitable, and it would be best if the transition were led by Fidel himself. `Maybe,' he says, `[Castro] is not yet fully aware that he is obliged to negotiate, but the time will come - I don't want to lose faith in that.'  

He believes that the recent crackdown on dissidents that has brought down so much opprobrium on the Castro régime is a sign that the government feels fenced in. `In some such situations,' he says, `the moment may come when the thinking heads arrive at the conclusion that they must open up the game.'  

Hostile reception  

Gutiérrez Menoyo's sudden decision (which he says he had been planning for some time, secretly so as to catch the Cuban government off guard), did not go down well with other opposition groups. Elizardo Sánchez, leader of an illegal human rights commission in Cuba, hints at government involvement: `It could be that this was a decision taken at the highest level within the island.' Ninoska Pérez Castellón, leader of the Miami-based Consejo por la Libertad de Cuba (CLC) minced no words: `This has to have been approved by Fidel Castro, who is the dictator in Cuba.' Others, without adhering to this line of thinking, have been hurt by his blanket dismissal of other dissident groups.

DOMINICAN REPUBLIC | IMF deal secured as protests spread. The management of the IMF announced on 6 August that it would recommend to the board the approval of a US$618m standby agreement with the Dominican Republic. Formal approval is expected towards the end of August. Central bank governor José Lois Malkun says the country can now rely on an inflow of just under US$600m from multilateral lenders this year: US$247m from the IMF, US$250m from the IDB and about US$100m from the World Bank.  

Meanwhile, playing a dark counterpoint to the Pan-American Games, protests against the high cost of living and the consequences of the IMF deal have continued to spread. They have been most intense in Santo Domingo, Puerto Plata and Santiago, where clashes with police have been violent. By the weekend, three protesters and one policeman had been shot dead.  

COSTA RICA | Highest growth since 1999. The Costa Rican economy is now expected to grow by 5.3% this year - two points more than originally predicted. Central bank president Francisco de Paula has underlined that the country has not witnessed this kind of growth since 1999. He predicts 4.3% growth for 2004.  

EL SALVADOR | Headed for 2-3% GDP growth. After clocking 1.7% GDP growth in the first half of the year, El Salvador's central bank is now predicting that the rate for the year as a whole is likely to be in the 2-3% range. Crucially for an economy that is almost completely dollarised, exports have been growing healthily (they were up 7.1% year-on-year in the first half, to US$1.56bn) and remittances by expatriates have continued to grow by just under 4% annually (to just over US$1bn in the first half). Not doing so well is the attraction of foreign investment: in January-June only US$67m came in.  

GUATEMALA | Expatriate remittances soar. Remittances by Guatemalan expatriates in the first seven months of the year have reached US$1.19bn, or 34% more than in the same period of 2002. If they continue to flow at this rate, by year-end they could reach just over US$2bn, or 29% more than in the whole of last year. The largest expatriate community is in the US, estimated by the International Migrations Organisation at 1.2m.

Opposition to the extradition of Argentines wanted to answer charges related to that country's `dirty war' of the 1970s had been voiced by Spain's chief prosecutor, Pedro Rubira. In a lengthy document he maintains that Spain is not competent to try the 25 former military officers and one civilian whose extradition judge Baltasar Garzón has requested.  

He follows the reasoning we outlined two weeks ago (WR-03-29). His starting-point is a recent ruling of Spain's supreme court, in the so-called `Guatemala case', which establishes that Spain can only try torture cases in which the victims are Spaniards. That same ruling, he notes, says Spain cannot prosecute when the events are being tried in the country in which they took place; Rubira notes that there is information about political and judicial changes in Argentina which enable trying over there the cases Garzón is pursuing.  

The charge of genocide, he argues, is inapplicable. Torture could be actionable, but only in cases dated after July 1978, when this possibility was incorporated to Spain's penal code. However, he notes, all the torture cases involving Spanish nationals brought by Garzón refer to events that took place either in 1977 or earlier.  

Rubira adds that, in any case, it is in Argentina `where all the evidence can be found and where trials of the accused can be carried out with due attention to the principles of publicity, orality, concentration and immediacy.' In the light of these considerations, Rubira formally recommends not proceeding with the extradition requests. This is not binding on Garzón; aware of this, Rubira has formally requested the incorporation of his observations to the dossier.  

PRD & PT join forces in Mexican congress

The small leftwing Partido de los Trabajadores (PT), with 6 seats in the lower chamber of congress, has struck an alliance with the larger Partido de la Revolución Democrática (PRD), which has 95. This still leaves them heavily outgunned by the Partido Revolucionario Institucional (PRI) which has 224 seats, and the ruling Partido Acción Nacional (PAN), which has 153.

A deal with the AUC envisages demobilisation of most paramilitary groups by the end of 2005; it is vague on penal liabilities and leaves pending US extradition requests for later treatment. 

On 15 July, after seven months of secret negotiations, the Autodefensas Unidas de Colombia (AUC), the largest of the paramilitary organisations, together with two smaller groups, the Bloque Central Bolí­var and the Alianza Oriente, signed an agreement which provides for the demobilisation of the paramilitaries. The deal does not include one important paramilitary group, the Bloque Metro, and makes no mention of arrangements regarding the paramilitary leaders, such as Carlos Castaño and Salvatore Mancuso, whose extradition on drug-trafficking charges has been requested by the US (though the matter was discussed back in May, when a representative of the US government presented Washington's list of 'concerns'). 

Demobilisation is to be gradual, tentatively concluding towards the end of 2005. As a first step the paramilitaries will cease hostilities, then begin to concentrate in designated areas. These will not have the same features as the autonomous despeje, or demilitarised area, granted to the guerrillas of the Fuerzas Armadas Revolucionarias de Colombia (Farc) by the government of President Andrés Pastrana (1998-2002) to facilitate peace negotiations which ultimately proved fruitless. 

AUC leader Castaño has said that the fighters will retain their weapons until a full peace agreement is concluded. Nonetheless, he said, the demobilisation is 'irreversible'. He promised to concentrate in an area in the western department of Urabá, within the next three months, the 'banana country bloc' (the core of the AUC under his own command) and other blocs operating in the western part of Antioquia. 

No impunity?

Peace commissioner Luis Carlos Restrepo insists that the agreement does not include a grant of impunity for 'atrocious crimes' (a legal term which technically includes murder). Those accused of such crimes will be tried and convicted - but the government will seek 'alternatives to prison' when it comes to sentencing. 

These alternatives will involve unspecified 'actions of social reparation'. Many of the actions of the paramilitary groups fit the category of 'atrocious crimes': in all tallies of violence in Colombia they figure as the principal authors of massacres, events involving the killing of several people at once. 

Regarding the pending US extradition requests, Restrepo said the issue was left out of the agreement because it had to do with the 'particular affairs of some leaders'. He added, 'We will handle [this matter] with the greatest care and prudence [at] the appropriate time.' As a separate matter, the US government has agreed to help finance the demobilisation of the paramilitary organisations. 

That is a decision likely to be challenged, if the reaction to the US State Department's recent certification of Colombia's rights performance is anything to go by. Virtually all rights organisations in the US said that it flew in the face of the evidence to claim that Colombia was severing its links with the paramilitary. This observation became even more pertinent when, in the run-up to the demobilisation deal, persuasive evidence surfaced of direct military participation in an AUC attack on the Bloque Metro, the Antioquia-based paramilitary organisation that refused to join in the AUC-brokered accord.