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"It would be an enormous irresponsibility."

Marta Sahagún, wife of Mexican President Vicente Fox, on deciding now whether she will run for President in 2006 (said a few hours before she announced that she would, indeed, run).


"I'm prepared to do this for a time. This could be a very good year."  

Pedro-Pablo Kuczynski, Peru's economy & finance minister, on having been reappointed to his old job.


"We gave him this job. Now we want this job back."

Guy Philippe, former police chief of Cap Haí¯tien, who recently joined the Haitian rebels, on President Jean-Bertrand Aristide.

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

We focus on the violent insurgency that is threatening to sweep away Haiti's President Jean-Bertrand Aristide. With no coherent international response to the rebel uprising in the north and centre of Haiti, Aristide's political future is very much in the balance. Elsewhere in the Caribbean, Dominican President Hipólito Mejí­a outmanoeuvres his rivals to win the candidacy for the ruling PRD; Cuba appoints a military colonel to shake up the tourism ministry; Guyana's government's efforts to improve Indian rights are overshadowed by death squad revelations, and Trinidad's leaders discuss constitutional reform. We also preview elections in Antigua & Barbuda. In Central America, we look ahead to elections in El Salvador and Panama and assess the early days of the Berger administration in Guatemala. An annual subscription to Latin American Regional Report: Caribbean & Central America (12 issues) is priced at US$225 (Discounted rates available to academics/NGOs). For details, please call LAN on +44 (0)20 7251 0012 or email: [email protected]

Latin American Weekly Report (Online) ISSN 1741-7422. Published weekly (50 issues a year) by Intelligence Research Ltd, 61 Old Street, London EC1V 9HW, UK. Telephone +44 (0)20 7251 0012, Fax +44 (0)20 7253 8193, Email: [email protected]. Website: www.latinnews.com EDITOR: Eduardo Crawley, [email protected]. Subscription rates will be sent on request. COPYRIGHT © 2004 in all countries. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, electrical, chemical, mechanical, optical, photocopying, recording or otherwise, without the prior written permission of the publishers. REFERENCES: Back references and cross-references in the current series will be made thus: WR-04-01 will indicate Latin American Weekly Report, Issue No.1, 2004.

US Homeland Security Secretary Tom Ridge signed two agreements with his Mexican opposite number, Santiago Creel, during a two-day visit to Mexico last week. The first contains a US promise to study Mexico's demands for `safe, orderly, dignified and humane repatriation' of illegal Mexican migrants. The second is an `action plan' for border security and cooperation.

Within Mexico, it was the former that received most attention: it appeared as a response to Mexico's strong reservations about a US pilot plan which had involved returning illegal migrants at points far from where they had attempted entry. Parts of the second agreement were also welcomed by the business community: the installation of six new secure inspection systems for travellers at San Isidro and Calexico (California), Nogales (Arizona), and El Paso, Laredo and Brownsville (Texas).

This will be complemented by five fast-track crossing channels at Pharr and Brownsville (Texas), Calexico and Otay Mesa (California) and Nogales (Arizona), designed to ensure the security of the traffic in merchandise. Ridge told a business audience in Mexico city that a prime concern of the US was to ensure that the new security precautions did not unnecessarily hold up border crossings. This is being facilitated by the adoption of agreed procedures to identify within Mexico the people and merchandise deemed safe, so the security effort can be better focused on potential threats.

Ridge gained brownie points with his audience by acknowledging the `concern and apprehension' caused by some of the security measures. He said, `Not everything we do makes sense all the time.'

Ridge's visit coincided with an event that demonstrated the extent to which Mexico has become the `outer perimeter' (or, as some wags would have it, the `front porch') of the US. In one swoop, state police in southern Oaxaca intercepted 106 illegal Central American migrants bound for the US, who had already made it through the first containment barrier in Chiapas. The contingent was travelling hidden in a train carrying a cargo of maize.

The past is beginning to catch up with those responsible for Mexico's dirty war. On 19 February the chief prosecutor's office (PGR) announced the arrest of Miguel Nazar Haro, who had been head of the Dirección General de Seguridad (DGS, secret police) in the 1970s, wanted in connection with the April 1975 `disappearance' of leftwing activist Jesús Piedra Ibarra.

An arrest warrant for Nazar had been issued two months ago, after the supreme court had ruled that `disappearances' are deemed `continuing' crimes until the persons abducted, or their bodies, are produced. Still on the run are two others facing charges for Piedra Ibarra's `disappearance': Luis de la Barreda (another DGS chief) and Juventino Romero (former officer in the police of Nuevo León state).

The big question is whether the prosecution will also press charges against former President Luis Echeverrí­a (1970-76). The office of the special prosecutor for `social and political movements of the past' (FEMSPP) has determined that in the 1970s the chief of the DGS reported directly to the President on all actions targeting political dissidents. PGR head Rafael Macedo has dodged this issue, saying that it is entirely up to the FEMSPP. The mother of the victim, rights activist and former presidential candidate Rosario Ibarra, said of Nazar's arrest, `In this country it is one thing to arrest a person, and quite another to get full justice.'

GROWTH OUTLOOK I | Farming & mining looking better. The IGAE index, which usually foreshadows GDP calculations and serves as an indicator of short-term trends, shows a 3.9% year-on-year increase in December. This time round, the national statistical institute had already come out with early figures for last-quarter and full-year growth (2% and 1.3%, respectively).

In December the sector showing the highest y-o-y growth was agriculture (8.6%), not habitually a star performer in Mexico. The services expanded by 4.2% and industry by 2.4% overall ( with mining up 4.8%, construction 3.7% and manufacturing only 2.4% — while electricity, gas & water was actually down 2.4%). The good result in farming reflected increased sowings for the spring-summer cycle.

GROWTH OUTLOOK II | Fox & Ceesp issue rival appraisals. President Vicente Fox last week surprised many by saying that the economic growth rate was slowly `approaching 7%' — the rate he had promised during his electoral campaign. This is the way he worked it out: `Economic growth is improving, not as much as we'd like, but roughly as follows: 2002, 1% growth; 2003, 2% growth; 2004, we're reaching 3% growth. So there we go, approaching 7%, little by little.' He also underlined that only a little more than a million Mexicans are unemployed (according to the official methodology), as against 41.5m who are employed.

Ceesp, the think-tank of the umbrella employers' association, produced a tighter review of growth so far under Fox: 2001, -0.3%; 2002, 0.9%; 2003, 1.3%. It also noted, `While it is true that GDP grew faster in the last two years, per-capita GDP, considered one of the main indicators of wealth, showed no improvement.' In real terms, Ceesp reports, per-capita GDP last year was US$1,431, slightly lower than the US$1,436 recorded in 2002.

It was an historic occasion. On 19 February about 6,000 people, most of them members of the Nasa (or Páez ) people, gathered at the Resguardo de Huellas, in the department of Cauca, to attend the first-ever appearance of a Colombian army officer before an indigenous court acting under their customary law.

Colonel Juan Vicente Trujillo had been summoned to a hearing on the killing of Olmedo Ul at a military roadblock on 31 December. The colonel, who had promised to attend, did not turn up, but the tribunal, formed by the 16 indigenous governors of the region's resguardos, held the hearing without him. The same tribunal has in the past put guerrilla fighters on trial.

The case is an interesting test of the overlapping jurisdictions of indigenous customary law, Colombian penal law — and, in this particular instance, military justice.

"Not everything we do makes sense all the time."

US Homeland Security Secretary Tom Ridge, addressing concerns about US security measures before a Mexican audience.


"The army is no longer demobilised. The army is mobilised."

Haitian former army sergeant Jean-Baptiste Joseph, after taking control of Hinche.


"I could lose anything, except the right to go around with my head held high, looking my peers in the eye."

Brazilian President Lula da Silva, responding to the corruption scandal affecting his government with an allusion to the best advice he received from his mother.

In this month's Latin American Security & Strategic Review

The special focus of the latest issue of Latin American Security & Strategic Review is the Amazonian region. Brazil, Peru and Colombia have joined forces to contain the spillover from the Colombian conflict, ostensibly concentrating on the spread of the drugs trade. For Brazil, this is a projection of its own strategy to place Amazonia at the centre of its defence efforts. One of the results of the agreement will be the adoption of standardised rules of engagement for the interdiction of unauthorised flights over the region. Elsewhere, France considers sending a `peace force' to Haiti, there is a determined bid to lower tensions between Bolivia and Chile, and in Colombia there is progress on the battlefield but peace efforts have stalled. For more information or to subscribe call +44 (0)20 7251 0012 or send an email to [email protected]

LATIN AMERICAN REGIONAL REPORT: BRAZIL & SOUTHERN CONE - NOW AVAILABLE

The government of President Lula is struggling with its toughest challenge so far. We focus on the campaign-financing scandals which have besmirched the seemingly impeccable reputation of Brazil's ruling Partido dos Trabalhadores (PT). On the economic side, Brazil's central bank held interest rates this month, disappointing businessmen who had hoped that ebbing inflation would prompt a cut. Also, we look at Brazil's latest dalliance with space. In the Southern Cone, Argentina's government looks to have overcome the challenge of the hardline piquetero movement. In Chile, 'Panzer' Insulza prepares to roll out his presidential credentials; Venezuela backs out of Chile's maritime dispute with Bolivia, and, in Paraguay, exiled General Lino Oviedo plots his return. An annual subscription to Latin American Regional Report: Brazil & Southern Cone (12 issues) is priced at US$225 (Discounted rates available to academics/NGOs). For details, please call LAN on +44 (0)20 7251 0012 or email: [email protected]

Latin American Weekly Report (Online) ISSN 1741-7422. Published weekly (50 issues a year) by Intelligence Research Ltd, 61 Old Street, London EC1V 9HW, UK. Telephone +44 (0)20 7251 0012, Fax +44 (0)20 7253 8193, Email: [email protected]. Website: www.latinnews.com EDITOR: Eduardo Crawley, [email protected]. Subscription rates will be sent on request. COPYRIGHT © 2004 in all countries. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, electrical, chemical, mechanical, optical, photocopying, recording or otherwise, without the prior written permission of the publishers. REFERENCES: Back references and cross-references in the current series will be made thus: WR-04-01 will indicate Latin American Weekly Report, Issue No.1, 2004.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		21.02.03	13.02.04	20.02.04
Argentina	peso	3.22	2.94	2.96
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.58	7.88	7.88
Brazil	real	3.62	2.90	2.95
Chile	peso	752.00	580.00	590.00
Colombia	peso	2,938.57	2,736.66	2,693.91
Costa Rica	colón	384.72	423.40	424.28
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	25.21	48.75	50.31
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	7.86	8.10	8.12
Honduras	lempira	17.25	18.06	18.07
Mexico	nuevo peso	11.04	11.02	11.03
Nicaragua	córdoba oro	14.93	15.84	15.86
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,940.00	6,015.00	6,030.00
Peru	nuevo sol	3.49	3.49	3.48
Uruguay	nuevo peso	29.25	29.90	29.85
Venezuela	bolí­var	1,600.00	1,920.00	1,920.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	November	December	January	Last 12m	Jan-Dec 2003
Argentina	Indec	0.20	0.20	0.40	2.70	3.70
Bolivia	INE	-0.51	0.90	0.62	4.17	3.94
Brazil	FGV	0.34	0.52	0.76	7.71	12.53
Chile	INE	-0.30	-0.30	-0.20	0.80	1.10
Colombia	Dane	0.35	0.61	0.89	6.19	6.49
Costa Rica	DGEC	1.42	1.25	1.70	11.02	9.87
Ecuador	Inec	0.33	-0.04	0.41	3.92	6.07
El Salvador	Min.Ec.	0.07	0.20	1.11	2.43	2.50
Guatemala	BCG	0.45	0.58	_	5.85	_
Honduras	BCH	0.70	0.30	_	7.70	_
Mexico	Bco.Mx.	0.83	0.43	_	3.98	_
Nicaragua	BCN	0.82	0.76	_	6.48	_
Paraguay	BCP	1.30	0.90	0.30	5.50	9.30
Peru	INE	0.17	0.56	0.30	5.50	9.30
Uruguay	DGEC	0.16	0.65	2.19	10.39	10.19
Venezuela	BCV	1.90	1.80	2.50	26.10	27.10
US	DOL	-0.30	0.58	_	5.85	_
Previous: WR-04-07

The stockmarket in figures
Market	Index	13.02.04	20.02.04	Variation (%)
Buenos Aires	Merval	1089.99	1145.94	5.13
São Paulo	Bovespa	22529.80	21336.91	-5.29
Santiago	IPSA	1445.45	1504.79	4.11
Bogotá	IGBC	2927.98	3180.28	8.62
San José	BCT	9980.09	10187.74	2.08
Quito & Guayaquil	Interinvest	68.67	68.68	0.01
Mexico	BMV	9982.87	9888.73	-0.94
Lima	ISVBL	2770.86	2721.44	-1.78
Caracas	BC	28032.54	27865.86	-0.59
Source: Daily market reports.

Peru has embarked on a series of arms purchases which, defence minister Roberto Chiabra insists, is not tantamount to entering an arms race with Chile — just correcting a `strategic imbalance' created by Chile with its most recent military procurement drive. A number of Peruvian politicians are preparing an international campaign against `excessive' arms purchases by their southern neighbours.

Peru last week announced its intention to buy from Italy two secondhand missile-equipped Lupo-class frigates, with a price tag of about US$38m. It is also taking an option on the purchase of another two Lupo frigates in 2005.

The official rationale is that the frigates will replace two obsolete ships already decommissioned, another to be mothballed this year, and the destroyer Almirante Grau, to be withdrawn from service in 2008.

The `imbalance' to which Chiabra alluded was allegedly caused by Chile's recent decision to start negotiating the acquisition from the Netherlands of four secondhand L-class anti-aircraft frigates (upgraded in 2000), plus two multipurpose M-class frigates that have been in service since 1993. This comes on top of the recent purchase from Britain of the frigate HMS Sheffield, now Almirante Williams. Chile's rationale is that it needs to renew its fleet, whose ships are on average 32 years old.

The Chilean government responded to Chiabra's statement with one of its own, highlighting that its policy was to equip its armed forces with the `necessary infrastructure' for a strategy based on `dissuasion' and permanent availability for `cooperation, integration and development.' Government spokesman Francisco Vidal added, `Each country has its defence doctrines, it defence policies, its acquisition policies: we don't comment on those of other countries.' Chiabra said that if the phrase `strategic imbalance' had offended the Chilean, he would gladly change it for `technological imbalance'. He added that relations between the armed forces of Peru and Chile were `at their highest level'.

He then went on to announce that Peru's procurement drive would not be confined to upgrading the fleet. The next step would be to `raise the potential' (potenciar) of the armed forces' helicopters and airplanes — by which he meant buying new ones. Priority, said Chiabra, would be granted to transport aircraft, for two purposes: fighting the `remnants of terrorist forces' [Sendero Luminoso] and providing aid in natural disasters.

Public debate
The issue of military acquisitions has become a very public one. An association of retired Peruvian navy officers published an open letter to the government urging it to go ahead with the frigate purchases, which they said was necessary in order to `recover the navy's potential.' On a slightly different tack, a group of 70 congressmen have said that they will be circulating abroad documentation on the `excessive purchases of weaponry' by Chile. At least one Chilean legislator, the Christian Democrat Jorge Burgos, has urged his government to keep in mind that renewal of defence materiel `must follow the logic of the continent we live in.'

It is usually President Hugo Chávez who first denounces perceived external threats to Venezuela. Last week, though, it was one of his oldest enemies, retired General Fernando Ochoa Antich, who was warning against the `strategic imbalance' arising out of Colombia's most recent batch of defence purchases.

On 21 February, as Spanish premier José Marí­a Aznar began a two-day visit to Colombia, that country's defence minister, Jorge Alberto Uribe Echeverrí­a, announced the purchase from Spain of `two artillery batteries and two motorised squadrons'. He said the government had not yet determined `the precise number of artillery pieces and armoured vehicles'. The gap was filled in by the newsmagazine Cambio, which cited defence sources to report that Colombia would be spending about US$100m on 40 secondhand AMX-30 tanks.

Uribe later added that Colombia would also be taking up an earlier Spanish offer to donate two Casa troop-carrying aircraft. All this, he said, would be for `eminently defensive' purposes and to `combat drug trafficking, terrorism and gunrunning.'

`Wrong kind of threat'
In Caracas, Ochoa Antich (who was defence minister at the time of Chávez 's abortive uprising against President Carlos Andrés Pérez in 1992, and later foreign minister), described the Colombian announcement as `surprising'. He said that Venezuela's superiority in armoured vehicles would disappear with the new Colombian acquisitions, and that this would complete a process which began when Colombia neutralised, with the acquisition of Mirage fighter-bombers, the superiority Venezuela had enjoyed in the air.

According to Ochoa Antich, with the recent acquisition of US helicopters and defence materiel, Colombia had `somehow broken the strategic balance which had always existed' with Venezuela. That this should be happening at this point in time, he said, is `inconvenient'.

The former defence minister says that the Chávez régime does pose a threat to Colombia, and the region as a whole, but not of the kind that can be contained with the sort of equipment Colombia is now buying. `The real threat to the region which Hugo Chávez represents,' he said, `is fundamentally a political threat, of ideological and economic support for the subversive movements of Latin America.'

Though Ochoa Antich's statements have been dismissed by Venezuelan government officials as `the rantings of an old man', in Colombia they were taken seriously enough for Uribe to assert publicly that there is `no international defence motivation' behind the acquisitions he had announced.

Sometime this week Venezuela's electoral authority, the CNE, will have to decide whether the mass of suspect referendum petitions are just `trivial procedural errors', as the opposition claims, or evidence of a `megafraud' plotted by the opposition, as President Hugo Chávez and his followers maintain. At that point, the observers from the OAS and the Carter Center will have to decide whether the CNE decision has been impartial or biased. At the end of last week, the CNE had 213,190 petition forms `under observation'. Of these the bulk, 171,359, were submitted by the opposition; the remaining 83,127 were submitted by the pro-Chávez camp in support of recall initiatives against the opposition.

Congress has given President Carlos Mesa a helping hand, rushing through the constitutional amendments that allow him to hold referendums on such matters as the future of Bolivia's gas, and to convoke a constituent assembly to draft a new constitution. It is now expected that the referendum on the gas sector may be held as soon as May. The more complex election of a constituent assembly may be held in early 2005.

Political analyst Humberto Vacaflor, editor of the influential newsletter Siglo 21, writes, `The consensus, achieved around a proposal made by Mesa when he took office, ends the divorce between the executive, formed by officials who are independent of the traditional political parties, and the parliament, recently criticised because of the prominence of personages linked to the previous government.'

Not everyone was happy with the outcome, however. Former President Jaime Paz Zamora, leader of the Movimiento de la Izquierda Revolucionaria (MIR) was conspicuously absent from the ceremony of promulgation of the amendments. So was Manfred Reyes Villa, leader of the Nueva Fuerza Republicana (NFR), an ally of the previous government.

End of party monopoly
Unusually chipper was Evo Morales, leader of the Movimiento al Socialismo (MAS), who said that the day of the promulgation was of paramount importance, `because it ends the monopoly enjoyed by the political parties.' He added that he found in Mesa a president `more willing to engage in dialogue'.

Morales was alluding to the new text of Article 22, which says that `the representation of the people is exercised through the political parties and associations of citizens.' This is reinforced by Article 61, on the requisites for becoming a legislator, which says that the aspirant must be put forward `by a political party or directly by associations of citizens or indigenous peoples.'

Popular deliberation, previously confined to the three powers of the state, is now extended in Article 4 to the constituent assembly, citizens' legislative initiatives and the referendum.

Consensus on coca?
Mesa now has to try and forge another consensus — with the coca growers led by Evo Morales. He has agreed to hold talks with the coca growers in March, which means that by then he will have had to define his policy on eradication. His officials, following on from a decision taken by the previous government, have said the emphasis will be shifted from coca eradication to eliminating the traffic in drugs. Beyond indicating that total eradication of coca (in excess of the 12,000 hectares of legal cultivation for traditional use) will no longer be pursued, this is too vague to satisfy the cocaleros. They want no more eradication in the Chapare region, and no attempt to eradicate `excess' coca in areas traditionally devoted to legal cultivation (chiefly the Yungas valleys).

The US government has let it be known that it is opposed to anything but the previous `zero coca' target. And even among Bolivians who do not favour this approach, the alternative of concentrating on the drug traffickers is not considered viable: success in this area, they note, would eliminate demand for coca and thus affect the livelihood of the cocaleros just as effectively as eradication, creating a new conflict.

Events in Haiti appear to be moving too fast for those on the outside who are trying to influence the outcome of the crisis. All external parties, beyond nuances, have agreed that the first step towards a solution should be an agreement between President Jean-Bertrand Aristide and the opposition. They are deliberately excluding the armed rebels, who in the meantime are extending their control over the country. Soon there will be no choice but to engage them, one way or another.

The nature of the insurgency in Haiti changed last week with the arrival of former members of the disbanded Haitian army and paramilitary forces, under Guy Philippe, a onetime soldier who later became chief of the US-trained police in Cap Haí¯tien, to end up exiled in the Dominican Republic after attempting a coup against Aristide.

Formally, Philippe and his men, as well as the former paramilitaries headed by Louis Jodel Chamblain, have `joined' the former Armée Cannibale to create the new Front pour la Libération et la Reconstruction Nationales (FLRN). In command is Philippe, whose contingent outnumbers their partners by more than two to one. Both newcomers have been busy recruiting among their former associates from the days between Aristide's ouster and his reinstatement.

Their arrival made an immediate difference to the pace of the insurgency. Starting with highly mobile raids on police stations — the visible symbol of central government authority — they began to face decreasing resistance. Exceptions were Hinche, seen as the gateway to Cap Haí¯tien, and then Cap Haí¯tien itself; the second-largest city in Haiti. Not only has the regular police force melted away: the élite has drawn back to protect the capital, and the chimí¨res, the gangs of pro-Aristide `enforcers', have been acting sporadically, and mainly against the unarmed political opposition to the régime.

Many witnesses have reported that Philippe's forces have been warmly received by the population. Most telling, perhaps, is that the public has not adopted the formal name of the rebel force. Instead, they tend to refer to it as Lamé (creole for l'armée, the army), and often say they expect the new arrivals to put an end to the violence and restore order.

Philippe has said that his next target in Port-au-Prince. Taking the capital may prove a tougher proposition than Cap Haí¯tien, but even merely encircling it would establish the insurgents as the real power in the land. If this happens, any deal between Aristide and the political opposition will be irrelevant — unless the outsiders decide to go in and fight the insurgents, a prospect for which, to borrow Colin Powell's expression, there is no enthusiasm.

The `indefinite mobilisation' called by the umbrella indigenous confederation, Conaie, was called off within less than 48 hours — and talks with the government appear to have been reopened. This on-off approach has bred considerable acrimony between rival indigenous organisations and hints of a split within Conaie.

Not even the killing of a demonstrator (a 60-year-old woman) in the southern province of Azuay provided enough of a rallying point for Conaie's `mobilisation'. Miguel Lluco, former coordinator of Pachakutik, Conaie's political arm, says that two things conspired against the protest campaign. The first was timing: Indians were preparing to celebrate Carnival, an occasion which brings extended families together, and were unwilling to spend it on highway barricades. The second was a discourse lacking precision: a demand for the resignation of President Lucio Gutiérrez without any hint of what should come afterwards.

Feine, the evangelical indigenous federation, has accused Conaie of backroom dealings with interior minister Raúl Baca, trading off the protests for positions in official indigenous agencies. Leonidas Iza, president of Conaie, has confirmed an approach by Baca, to `resume dialogue'. He says a committee is working on a series of demands to submit to him. `We continue on alert,' he says; `if there are no deep changes, there will be more radical actions.'

VENEZUELA | Rebound in late 2003. In the last quarter of 2003, GDP was 9% higher than a year earlier. This was largely driven by a 25% expansion of the oil economy, boosted by improved world prices as well as the recovery in output levels (still below pre-crisis levels). The non-oil economy grew by 3.9%, largely thanks to a 16% expansion of manufacturing offsetting a 15% fall in construction. The latter has meant a slower-than-expected improvement of the unemployment rate, which stood at 16.8% at the end of the year, 2.4% lower than at end-June.

It must be kept in mind that the baseline for these figures was very low: GDP in the last quarter of 2002 was 17% lower than a year earlier, mainly because of the early impact of the opposition's strike-cum-lockout. For 2003 as a whole, GDP was down 9.2% (a slightly steeper fall than the 8.9% recorded in 2002). For this year the government is predicting a growth rate of 6.5%. Full recovery remains a fair distance away: per-capita GDP is currently at the same level as back in 1958.

BOLIVIA | Business divided over Mesa plan. Business associations are divided over President Carlos Mesa's fiscal plans, which include austerity in the public sector, eliminating the subsidy on fuel prices, tightening taxation of the oil sector, and introducing two taxes (one of 0.3% on financial transactions and one of 1.5% on assets of more than US$50,000).

The umbrella private-sector body, Confederación de Empresarios Privados de Bolivia (CEPB), has expressed support for the plan but one of its most important members, the Cámara de Industria, Comercio, Servicios y Turismo (Coinco) of Santa Cruz, openly voiced its dissent, claiming that its effects will be recessive and describing it as part of `a plot by the Altiplano [the highlands] against the productive regions' of the country. The Cámara Nacional de Comercio, for its part, criticised the two new taxes as having a dampening effect on growth.

The government of President Lula da Silva has suffered a new wave of public embarrassment with the news that its recently dismissed congressional linkman, Waldomiro Diniz, had continued to have dealings with the gaming underworld after moving to the Planalto palace, and that another minister in Lula's first cabinet was involved in seeking funds from the `bankers' of illegal gambling for the campaign of yet another present minister.

Diniz confessed his continuing links with Carlinhos Cachoeira to Extra, the newsmagazine that had first exposed that connection. Another newsmagazine, Veja got hold of José Vicente Brizola, formerly in charge of the state lotteries in Rio Grande do Sul, to uncover `pressures' by the campaign committee of the ruling Partido dos Trabalhadores (PT) to seek funding from the bankers of the jogo do bicho. Brizola said the pressure came from PT senatorial candidate Emí­lia Fernandes, who was later appointed minister for women's affairs and held that position until the January 2003 cabinet reshuffle. At the time this was happening, the PT's candidate to governor of Rio Grande do Sul was Tarso Genro — who lost, but became Lula's education minister. Also funded was the campaign of congressional candidate Paulo Paim, now vice-president of the senate.

Banning the bingos
Lula's reaction to all this was to announce in-depth investigations and issue a decree closing down bingo parlours and slot-machine galleries across the country. Previously, Lula had been in favour of legislating to regulate their activity — indeed, only days before issuing the decree he had included a regulatory bill among those slated for debate in congress this year.  

There are in Brazil about 1,100 bingo establishments, which employ about 330,000 people. Many are widely considered to be public `fronts' for the bicheiros. They have been in a sort of legal limbo since 1993, when congress approved a law authorising them to operate -- but then failed to follow up with legislation containing detailed regulations. Most of the bingo parlours operate under the cover of court injunctions or loopholes in state legislation. Congressional reluctance to fully authorise them has been linked to public accusations that they were acting as fronts for money-laundering, tax evasion and capital flight.

For now, Lula insists on retaining his chief of staff, José Dirceu, who as previous PT leader appears at the end of the trail of several strands of this scandal. Dirceu himself has told congressional leaders that if a parliamentary commission of inquiry (CPI) is set up, he will resign to devote all his efforts to his defence.

Not the first time
This is not the first time the PT has been linked with the bicheiros. In 2000 Olí­vio Dutra, then governor of Rio Grande do Sul state (and currently minister for cities), smuggled into a tax amendment law provisions that effectively legalised bingos, instant lotteries and other variants introduced by the bicheiros. This earned him a reprimand from the federal prosecution service, which forced him to back down. Still, during Dutra's tenure, the state government granted a contract to operate the official lottery services to a firm part-owned by Carlinhos Cachoeira, the same man involved in the Diniz affair.

Critics of the PT allege that the purchase of the party's headquarters in Rio was funded by bicheiros. They also note that Lula has been among those who have advocated the legalisation of the jogo do bicho.

Bichos & prohibition
The jogo do bicho has moved a long way from the cuddly image of the small-scale lottery based on 25 animals that the Baron João Batista Viana Drummond devised to raise funds for Rio's zoo back in 1882. Since it was banned, together with all casinos, in 1946 (as the state established a monopoly over lotteries), it has grown into a multi-billion dollar business that has branched out into various forms of organised crime. The banqueiros (`bankers') of the illegal lottery spread out from their home base in Rio, sharing out territories at neighbourhood, city and state levels, and publicly began to curry favour with the public by association with popular activities.  

They funded escolas do samba and took control of much of Rio's celebrated carnival. They bought football clubs and players. They became involved in politics, in some cases directly, to enjoy the protection of parliamentary immunity, but more often by `buying' politicians and funding their campaigns, much as they bribed policemen, prosecutors and judges.

Links with organised crime
Less visible was the bicheiros' involvement in criminal activities. In one notorious investigation in 1994, which led to the imprisonment of 14 of the biggest banqueiros, prosecutors found links between the jogo do bicho and 130 underworld murders. They also uncovered involvement of a leading banqueiro in gunrunning, the smuggling of electronic goods, the production of rigged caça-ní­queis (slot machines), and distribution of drugs. Police have identified hotels owned by bicheiros, some run as brothels, others suspected of being `holding places' for kidnap victims.

Though private casinos and gaming houses are banned in Brazil, in many states the jogo do bicho operates quite openly from premises that are, to all intents and purposes, casinos. The communications and distribution infrastructure built up for them and the jogo do bicho is also, according to police sources, used for sophisticated drug-trafficking and cargo hijacking operations.

Damage control in congress
The government is trying hard to either deflect growing demands for a CPI, or to spread the political impact so that it does not end up as the only casualty. Its initial tactic was to warn that a CPI might come to overshadow all government business, much as happened when one was created to investigate charges of corruption against President Fernando Collor de Melo (an episode which ended with Collor resigning to avoid impeachment). Aloí­zio Mercadante, the PT leader in the senate, said that a CPI `could bring the country to a standstill'. He argued that the best solution would be `to let the prosecution service, the judiciary and the federal police take care of these criminal matters, and congress devote itself will all its energies to improving the laws.'

Bowing to realities, Mercadante also held out a second possibility. Should the opposition insist on a CPI, he said, `then we will examine everything, not just one specific case.' This would entail offering to lift government objections to a CPI if the opposition agreed to expand the CPI's brief to include other cases of questionable campaign financing — such as how the PSDB funded the presidential campaigns of Cardoso in 1998 and José Serra in 2002, and the Lunus affair of 2002, which led to Roseana Sarney, of the PFL, withdrawing from the presidential contest. Ideally, the PT would like a broad-scope CPI to range beyond campaign funding into other financial issues, such as the privatisations carried out by the Cardoso government.

In opposition-ruled Rio de Janeiro, the state assembly has already voted to establish a CPI to investigate the Diniz affair. Assembly president Jorge Picciani (of the Partido do Movimento Democrático Brasileiro, PMDB, Lula's ally at the federal level) says this is justified because the events took place in the state — and because there is no risk to the government headed by Rosinha Matheus `because [she] had nothing to do with them'. Matheus, wife of former governor Anthony Garotinho, is of the Partido Socialista Brasileiro (PSB).

In the federal congress the proponents of a CPI must gather endorsement from a third of the members of each chamber (171 in the lower one, 27 in the senate). In the senate, the PFL and PSDB together could manage that. The PSDB has actually told the ruling PT that, if this will facilitate matters, in will agree to a broader CPI — as long as there is also one devoted specifically to the Diniz case and its direct ramifications.

The situation in the lower chamber is still unclear. The PSDB and PFL together are still 56 signatures short of what they need. The Rio de Janeiro precedent does not, apparently, help predict outcomes. The PSB, for one, has reportedly come out against establishing a CPI. So, naturally, has the core pro-government bloc (PT, PL, PCdoB) — but up to the time of writing the PMDB (78 seats), the PP (53), the PTB (52) and the PDT (12) had not yet publicly stated their positions.

The international community was expecting the political opposition to reply on 23 February to the plan already accepted `unconditionally' by President Jean-Bertrand Aristide. The reply was not forthcoming, so a 24-hour `deadline' was set. Up to the time of writing there had been no response.

The plan drawn up by Canada, France, the OAS and Caricom (see below) is largely based on the one drafted earlier by Caricom, and it has so far met the same fate: acceptance by Aristide (because it allows him to stay in his post) and rejection by the opposition (which remains adamant that any solution must begin with Aristide's departure). Indeed, the international plan differs little from the one devised by the opposition, save that the latter leaves Aristide out of the equation.

The `deadlines' issued so far are largely meaningless, because they carry no `or else' — save the one which is being dictated on the ground by the rebels. For both, the alternative is that the rebels, now led by a relatively disciplined force that has been proving highly effective, may end up taking power. That prospect is chilling to the political opposition and to outsiders, inasmuch as it seems to entail a restoration (of sorts) of the régime that unseated Aristide in 1991. Particularly galling is the presence of Louis Jodel Chamblain, former deputy leader of the Fraph, the murderous paramilitary death squads of that régime.

The problem Aristide and the opposition face is that, barring armed international intervention, there may be no force capable of stopping the insurgents — let alone disarming them as the international plan envisages. Caricom and the OAS could invoke their commitment to the defence of constitutional governments and apply sanctions to a rebel-controlled Haiti. Given the experience of the past few years, that may not prove much of a deterrent.

Guy Philippe, the rebel leader, has said he is willing to negotiate the departure of Aristide, and even downing arms if that should happen. That may be just talk, but there may soon be no alternative but to start talking to him.

Terms of the international plan

- Aristide will remain in office until the end of his term in February 2006, but his authority will be curtailed. - A three-member commission will be formed, representing the pro-Aristide camp, the opposition, and the international community. This commission will select a seven-member advisory commission which will be entrusted with choosing a new, independent prime minister and vet his government. - Create, under the control of the new prime minister, a reorganised police force, trained and supervised by the international community, which will be charged with disarming both the insurgents and the chimères loyal to the ruling Lavalas. - Organise free and fair legislative elections as soon as possible, to be followed by internationally acceptable presidential elections in 2006. - Report on progress in the implementation of this plan to a meeting of Caricom ministers to be held in Antigua on 26 March.

Venezuela has sent its ambassador back to Chile, putting an end to the three-month estrangement caused by President Hugo Chávez 's outspoken support for Bolivia's revived demand for a sovereign outlet to the Pacific. He arrived with the purpose of signalling that Chávez 's stance on this matter had changed.

Ambassador Ví­ctor Delgado did this as colourfully as Chávez had triggered the dispute. `Chávez ,' he said last week, `has only said that he wants to bathe on a Bolivian beach after a negotiated solution between Chile and Bolivia. If this doesn't happen, the President doesn't bathe.' His Chilean counterpart, Fabio Ví­o, returned to his post without rubbing it in.

Behind the scenes, apart from much diplomatic lobbying by Chile, the decisive influence had been Brazilian President Lula da Silva who, tiring of Chávez 's insistence, revealed to journalists that back at the Summit of the Americas in Monterrey he had told Chávez `that he shouldn't meddle in the issue of Bolivia and the sea.' Separately, the Brazilian government has let it be known that Lula has urged Bolivian President Carlos Mesa to tone down his public utterances on this issue.

Apparently, Lula has also let Chávez know that he does not appreciate the latter's remarks about a `Chávez -Lula-Kirchner axis' as the new force for change in Latin America.

Chilean sources say that Lula launched his effort to mediate between Chávez and Lagos as early as last December. At that time he sent his chief foreign policy adviser, Marco Aurélio Garcí­a, to Chile, where he approached senator Carlos Ominami with the message that Brazil would make every effort to lower the tension between the two countries. Still, until both ambassadors had returned to their posts and Chávez had sent a public message, Chilean officials say they kept their fingers crossed.

The testimony of a former army NCO has given added weight to reopened charges against the government of Raúl Alfonsí­n (1983-89) that guerrillas taking part in a 1989 attack on an army barracks were tortured and summarily executed by the military.

Former army sergeant José Alberto Almada, flanked by former guerrilla leader Héctor Gorriarán Merlo, made public on 18 February his claim that he had witnessed the torture and execution of at least six of the fighters that had seized the army barracks at La Tablada, just outside Buenos Aires city. He said others had been tortured as well, and that these actions had enjoyed the `acquiescence' of superiors. The official toll of the Tablada incidents was 31 guerrillas and 11 members of the security forces killed.

Almada says he took part in the recapture of the barracks as a `communications operator'. He says he was `unjustly' discharged from the army in 1998, and later `subjected to intense pressure and persecution' for insisting on his accusations. The attackers, members of the Movimiento Todos por la Patria (MTP), have always maintained that torture and executions took place. Members of the Alfonsí­n government have consistently denied the allegations.

ARGENTINA | Growth exceeds expectations. Economic growth last year reached 8.4%, almost half a point more than private analysts had been predicting. Economy minister Roberto Lavagna noted two distinctive features of the upturn: first, it was driven by domestic consumption, and second, it started with the reactivation of small and medium-sized enterprises in the interior. For this year Lavagna is now predicting 5.5% growth.

The momentum is certainly continuing in the industrial sector, which in January expanded by 3.2% on the previous month (12% on the same month last year). Utilisation of installed capacity has shrunk somewhat over the year, to 65.6%, which reflects the less dynamic performance of some capital-heavy sectors.

Both Lavagna and President Néstor Kirchner have denied press reports that, under pressure from abroad, Argentina would `ease' the restructuring terms offered to holders of defaulted bonds. Lavagna said last week that the restructuring effort would be deemed a success if it had a 50% takeup.

CHILE | Tax warning to copper miners. As the world copper price last week hit its highest level since December 1995, finance minister Nicolás Eyzaguirre warned copper miners that they risked facing a specific tax on their activity if they refused to give up the special tax treatment they enjoy under the DL-600 régime (which was designed to attract foreign investment). The ruling Concertación is preparing legislation to introduce a royalty system.

URUGUAY | IMF approvals with caveats. The IMF has approved its fourth review of Uruguay's performance under its US$3.2bn standby agreement, clearing the disbursement of a US$141m tranche. While noting that recovery `is well underway', the Fund warned that `there is no room for complacency, as the recovery is still fragile and continued strong program implementation will be necessary to boost growth in a lasting way, bolster market confidence, and ensure sustainable debt dynamics.' The government, it said, needs `to build a consensus for reforms to enlarge the role of the private sector.'

Up to the time of writing, the feared mass exodus of Haitians had not materialised, but a significant trickle of fleeing police has been taking place across the land border with the Dominican Republic and via a riskier sea crossing to Jamaica. The former have placed their military on alert; the latter are preparing to send a peacekeeping contingent to Haiti.

The Dominican authorities have acknowledged that they are holding a number of Haitian police (more than six) who have fled the fighting in the past week. They are also looking into the killing of two Dominican soldiers close to Dajabón, the man crossing-point from Haiti. In both cases the soldiers' weapons were stolen. Beyond that, the only real threat to Dominicans so far was an attempt to raid a Dominican-owned establishment in the free zone at Ouanaminthe, across the border from Dajabón.

President Hipólito Mejí­a has agreed with the Haitian claim that `at least half' of the plotters against the Aristide government live in the Dominican Republic. `It is possible,' he said. `This is where most of them are.' Certainly two of the visible leaders of the uprising crossed over recently from the Dominican Republic: Guy Philippe and Louis Jodel Chamblain, who previously enjoyed asylum in the neighbouring country. Both were reportedly accompanied by groups of armed men also previously resident in the Dominican Republic.

The Dominican Jesuits have asked the government to set up camps to accommodate the expected influx of Haitian refugees. Politicians such as former foreign minister Hugo Tolentino Dipp have been presenting hair-raising scenarios of their country being swamped by Haitians. Tolentino Dipp said that as many as 3m people could flee the fighting (Haiti has a population of just over 7m). Historian Franklyn Franco also argues for camps on straight self-interest grounds: `If we place them in an enclosure, under the control and supervision of national and international organizations, they can be repatriated as soon as the political unrest is over, and what's more, the (Dominican) government would not have to contribute a cent.'

First arrivals in Jamaica
The Jamaican opposition has also been raising the prospect of an unmanageable influx of Haitian refugees. By 21 February, 30 had turned up (several wearing uniforms, some of them armed). Meanwhile, the government was announcing that it was committed to sending a peacekeeping contingent to Haiti, but was still working out the details. The chief of staff of the Jamaica Defence Force, Admiral Hardley Lewin, had made it clear that setting up such a force would take time, and that `some kind of understanding' would have to be reached within Haiti before the contingent could be deployed. `Right now,' he said on 19 February, `hostility is such that you would not be going in a peacekeeping situation, you are going there to fight.'