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DOMINICAN REPUBLIC | Tourism up. The number of tourists visiting the Dominican Republic in the first five months of 2008 was up by 7.17% on the previous year to 1.68m, according to the tourism ministry. Tourist arrivals grew by 9.78% in May with visitors from Canada and the US up by 21.19% and 12.86% respectively. The figures make pleasant reading for the government of President Leonel Fernández, who warned during his victory speech after the 16 May elections that the global economic slowdown and high fuel costs would impact growth, in part by deterring tourists. Fernández is working with key advisers to devise a “strategic plan" to try and mitigate the effects of rising food and fuel prices.

EL SALVADOR | Peacekeeping mission. The army will take part in its first UN peacekeeping mission, in Lebanon, after an almost unanimous vote in the legislative assembly on 12 June. Cross-party support was obtained after the opposition Frente Farabundo Martí­ para la Liberación Nacional, a fierce critic of the army's involvement in “an occupying force" in Iraq, supported the UN mission. A visiting team from the UN approved the army's involvement in peacekeeping missions last December, stating that El Salvador's experience since the peace accords would help it to bring peace to other conflict areas. The battalion, comprised of 52 soldiers, will form part of a Spanish contingent of troops within the 13,000-strong UN Interim Force in Lebanon (UNIFIL). The soldiers will receive two months' training in Zaragoza, Spain, before being posted to Lebanon for eight months. Some of the Salvadorean troops served in Iraq where they formed part of the Spanish-commanded Plus Ultra brigade.

NICARAGUA | Violence. With less than two months to go until municipal elections, tension erupted in the municipality of León, northwest of Managua, where anti-government protesters were attacked by supporters of President Daniel Ortega on 20 September. Dozens of people were injured and the vehicle of the president of the dissident Sandinista party, Movimiento Renovador Sandinista (MRS), Enrique Sáenz, was torched. The demonstration, which had been suspended for security concerns, had initially been called to protest a series of controversial rulings by the supreme electoral court ahead of the 9 November elections: the banning of two political parties, the MRS and Partido Conservador; and the postponement of elections in seven municipalities in the North Atlantic Autonomous Region, which the opposition was likely to win. The Nicaraguan centre for human rights laid the blame for the violence squarely on Ortega, warning that it constituted “criminal intimidation".

DOMINICAN REPUBLIC | Tucanos. The government completed the purchase of eight Super Tucano light-attack aircraft from Brazil's aeronautical behemoth, Embraer, last week. It aims to use the aircraft to assist with patrolling the porous 338km border with Haiti and improving drug interdiction, as well as sealing the border to gunrunners and people traffickers. The cost of the Tucanos was not divulged by Embraer but as a yardstick of comparison, Colombia recently purchased 25 of the aircraft for US$235m.

HONDURAS | Reshuffle. President Manuel Zelaya carried out a controversial mini-cabinet reshuffle this week. Edmundo Orellana Mercado was shunted from the foreign ministry to the defence ministry while Patricia Rodas, the head of the leadership committee of the ruling Partido Liberal, picked up his old job. The controversy surrounded the appointment of Orellana's predecessor, Arí­stides Mejí­a, as vice-president to replace Elvin Santos, who resigned the position in order to compete as the PL candidate in November's presidential elections. A lawyer, José Antonio Avila, filed a suit against the appointment before the supreme court on the grounds that it was not in Zelaya's gift to appoint someone to an elected post.

Bolivia's gas exports fell 27% in the first quarter of 2009 compared with the same period last year, according to worrying figures released this week by the national statistics institute (INE). Having already revised its economic growth forecast for this year down from 6% to 4.6%, the government is under increasing pressure to address the situation, not least from local authorities, concerned about the associated reduction in the direct hydrocarbons tax (IDH).

On 24 April the INE reported that revenue from gas exports, principally to Brazil and Argentina, amounted to US$558.9m in the first quarter, down from US$763.96m in the first three months of 2008. The main reason for the decline was the fall in the volume of purchases by Brazil - which bought an average of only 20m cubic metres a day in the first quarter, down 33% on the same period of 2008.

The Bolivian institute for foreign trade (IBCE) added that it expects gas revenues to fall further from April as a result of cuts in prices. Experts forecast that the slowdown could signify a loss of between US$1bn and US$1.2bn for Bolivia this year (roughly a third of the US$3.4bn received in 2008).

The slowdown is coupled with more general long-term uncertainty over the future of Brazil as a market, given its efforts to boost its own thermal capacity, following the discovery in November 2007 of vast offshore hydrocarbons reserves. In late March, President Lula da Silva said Brazil would continue to import gas from Bolivia until 2019, in accordance with its contract, but, in an unusual swipe at Morales, he warned that “it is important to make it known that we have our own gas [and] we no longer depend on anybody's good mood".

The uncertainty has provoked a response from organisations such as the federation of municipal associations (FAM), anxious over the implied reduction in income allocated through the direct hydrocarbons tax (IDH). The FAM projected that this month, Bolivia's 327 municipalities will begin to suffer reductions of between 30% and 40% in IDH income compared with that received at the start of the year, although it is calling on the government to specify exactly how much the reduction is likely to be.

Efforts are underway to make up the shortfall. On 20 April, Bolivia's state oil company YPFB and Argentina's Enarsa announced an agreement whereby Bolivia would increase natural gas exports to Argentina to at least 4m cubic metres a day during the winter. YPFB president Carlos Villegas was cited in the local press as saying that this would double last year's figure.

A possible gas agreement with Paraguay was also floated as a backdrop to the signing of a “historic" accord between Morales and his Paraguayan peer Fernando Lugo this week. The agreement - which officially ended the border dispute that triggered the Chaco War in the 1930s - was only the latest sign of strengthening ties between Bolivia and Paraguay. It provided fresh impetus to revive the now-defunct trilateral strategic association agreement, Urupabol, between Uruguay, Paraguay and Bolivia [WR-09-02], with energy serving as one area of integration. Lugo said talks were taking place over the possibility of Bolivia providing Paraguay with natural gas in exchange for electricity.

The US human rights lobby scored its first big success on 5 August when an influential US senator, Patrick Leahy, prevented the US State Department from certifying that Mexico was respecting human rights in its war against organised crime. Worryingly for the Mexican government, the senator made his move just ahead of the Mexico-US-Canada presidential summit in Guadalajara on 9 and 10 August.

The question now is how President Barack Obama will deal with the issue when he meets President Felipe Calderón Hinojosa. All in all, this weekend may be an uncomfortable one for Calderón because his candidate, the only one nominated, may fail to win enough support to take over as president of the Partido Acción Nacional (PAN). That would be a humiliating defeat.

Leahy is a Democrat from Vermont. He is chairman of the Senate's Appropriations subcommittee on State Department and Foreign Operations. His aides told the State Department that it could not publish a report affirming that Mexico was making progress on respecting human rights in its war against the gangs. The State Department has to affirm this to unlock 15% of the US$1.4bn in military aid promised to Mexico under the Iniciativa Mérida. Leahy had helped draw up the legislation to authorise the Iniciativa Mérida, so his position is doubly significant.

Leahy's move is the first sign since the mid-term congressional elections, which resulted in a thumping defeat for Calderón's PAN, that US support for Calderón is not unconditional. Leahy, like US administration officials, underlines his support for Calderón's brave decision to take on the gangs but questions the method. The danger for Calderón is that US government officials will start pushing for a change in strategy.

The US State Department is considering whether to rewrite the report and resubmit it to congress when congress reconvenes on 7 September. Mexico may lose the money if the State Department cannot send a positive report to congress by the end of the financial year, 30 September.

Leahy said in a statement that although all Americans want the Mexican government to be successful in defeating the gangs, the law must be upheld. “The law withholds 15% of the Mérida funds until the Secretary of State reports to congress that the Mexican government is meeting four requirements, including prosecuting military and police officers who violate human rights_there needs to be evidence that the military is accountable to the rule of law. Those requirements have not been met, so it is premature to send the report to congress."

At the end of July, Human Rights Watch, a US NGO, claimed that there had been no prosecution of any Mexican soldier on human rights charges since 1996. This claim drew an immediate response from the army. On 23 July General Jaime Antonio López Portillo, the director for human rights at the Secretaria de la Defensa Nacional (Sedena) responded by stating that 12 soldiers had been convicted during the current administration (which started on 1 December 2006) of a variety of human rights offences ranging from murder to kidnapping and torture. López Portillo did not give chapter and verse on each case, which aroused renewed suspicions amongst human rights activists.

The human rights activists are now spinning López Portillo's statement into an admission by the army that there have been only 12 successful prosecutions of soldiers for human rights abuses since 1996. This is not exactly what López Portillo said, but nor does what López Portillo say negate that claim.

The more serious charge of the human rights activists is that the army is refusing to give any details about even the successful convictions. What were the charges? What was the evidence? How were the suspects treated? What did they say? What were the sentences? Have the sentences been carried out or are they in abeyance subject to appeal?

What human rights activists in the US would like is answers to all these questions. The Mexican army, and the government, cannot allow themselves to be dictated to on these issues, without triggering attacks from anti-US nationalists.

The US government is aware of how sensitive the issue is. One way forward could be a joint committee of senators from both countries, with a Mexican majority, to review the Mexican military justice system and make suggestions for its improvement.  

Leahy stressed in his statement on 5 August that he continued to support the  Iniciativa Mérida: “the military strategy alone is not a solution in the long term, nor is it yet clear what it can achieve in the short term. Mexico needs effective police forces and a justice system that works. And as long as the demand for drugs in the US and the flow of guns to Mexico continue at these levels it will be difficult to neutralise the cartels."

Gang killings
The steady pick-up in gang killings in the border city of Ciudad Juárez underlines Leahy's doubts about the whole security strategy. At least 15 people were killed between 4 and 5 August in Ciudad Juárez despite the presence of 8,000 soldiers and federal policemen in and around the city.

On 5 August, five people were found dead in a SUV parked on one of the city's main roads. The gangsters taunted the authorities by leaving the vehicle outside a building with 24 hour CCTV. So far this year, over 1,000 people have been killed in Ciudad Juárez. In the whole of last year, this figure stood at 1,600 people.

• Leahy

“Leahy stressed in his statement on 5 August that he continued to support the  Iniciativa Mérida: 'the military strategy alone is not a solution in the long term, nor is it yet clear what it can achieve in the short term. Mexico needs effective police forces and a justice system that works. And as long as the demand for drugs in the US and the flow of guns to Mexico continue at these levels it will be difficult to neutralise the cartels.'"

ARGENTINA | Bolivian gas. Argentina is pushing for the modification of a natural gas accord signed with Bolivia in 2006. The country's ambassador in La Paz, Horacio Macedo, told the local daily La Razón this week that Argentina needed to know what volume of gas it was actually going to receive from Bolivia in order to justify the completion of the Gasoducto al Noreste Argentino (GNEA) envisaged in the accord. Bolivia promised to supply 7m cubic metres of gas per day under the 2006 accord until the GNEA came on-stream (this was estimated as 2011) when this would jump to up to 27m cmd. This is highly optimistic as Bolivia has never managed to satisfy the demand for 7m cmd (supplying, irregularly, between 2m cmd and 5m cmd) since the contract was signed.

URUGUAY | Plan Ceibal. President Tabaré Vázquez took the opportunity this week to announce the extension of Plan Ceibal, under which every state school child (369,727) and every teacher (16,000) receives a US$100 laptop free of charge. The government won a regional award for Plan Ceibal earlier this year. Vázquez completed the first stage of Plan Ceibal in October by presenting a laptop to the final primary school child but now the government is targeting secondary education and the Universidad del Trabajo del Uruguay (UTU). The timing of the announcement suggests Vázquez is finally doing his bit to bolster support for José Mujica, the candidate for the ruling Frente Amplio (FA) in elections on 29 November, which he had been very reluctant to do before the first round. The FA leadership wanted Vázquez to be seen more with Mujica in an effort to tap into his popularity. Mujica was photographed alongside Vázquez inaugurating the Lí­ber Seregni park in Montevideo on 16 November.

The ruling left-wing Frente Farabundo Martí­ para la Liberación Nacional (FMLN) celebrated the first anniversary of the electoral triumph of El Salvador's first left-wing president on 15 March. Conspicuous by his absence was the man actually elected on that day one year ago - President Mauricio Funes. Vice-President Salvador Sánchez Cerén, a veteran guerrilla, publicly reminded Funes that “we won the elections together and together we will change El Salvador", adding that the FMLN would always “work with" Funes. At the moment, however, it is working with the right-wing Alianza Republicana Nacionalista (Arena), the very party whose 20-year stranglehold on power it was celebrating having broken, to overturn a presidential veto.

Some 30,000 FMLN supporters attended the anniversary celebrations in a large square in western San Salvador. Sánchez Cerén exhorted Funes to establish better communication between the government and the FMLN party leadership. He said that “unity between party and government" was essential or change would not materialise. Funes was not invited to the event but he said he would not have gone anyway as he has made it clear his loyalty is to the people and not one party in particular (which is why his approval rating remains so high). He released a statement thanking the people for electing him to usher in “a new type of inclusive governance", adding that he was perfectly prepared to strengthen ties with the FMLN - but also with other political parties.

The event, ironically, came at a time when the FMLN is conspiring with Arena to overturn Funes' veto of a bill to increase the maximum prison sentence for minors aged 16-18 from seven to 15 years. Between them they fell one vote short of the 56 required for a two-thirds majority to overturn the veto after failing to convince two smaller right-wing parties to back them. Instead, the FMLN and Arena decided to send the bill to a legislative commission for further analysis while they seek to win over another deputy. They agreed that the supreme court would rule on whether the bill was constitutional. Funes had vetoed it on the grounds that it contravened the UN Convention on the Rights of the Child: he received a letter from the Inter-American Commission on Human Rights (IACHR) describing his veto as “important".

US resolutely behind Funes
The US is full square behind Funes, who has made clear his preference for modelling himself on Brazil's moderate left-wing president, Lula da Silva, while the FMLN favours closer ties with Venezuela's President Hugo Chávez . Funes met US President Barack Obama in Washington last week [WR-10-10]. Shortly after his visit, the chairman of the House of Representatives foreign affairs subcommittee on the Western Hemisphere, Eliot Engel, addressed a hearing on 'US Policy toward the Americas in 2010 and Beyond' almost a year on from the Summit of the Americas.

Engel highlighted seven key policy steps for the Obama administration to pursue. These included oft-trodden ground, such as “a re-assessment of our counternarcotics policies" and “renewed focus at the Organization of American States (OAS) on the closing of democratic space in the region". But, one of the seven 'steps' jumped out: it called for “special US attention to key countries such as El Salvador and Paraguay". Engel admitted it “might seem odd" to single out these two small countries. Beyond stating that they were key partners who want to have strong relations with the US (how many Latin American countries do not want this?) he said little to justify this special attention. Reading between the lines, however, the implication was that the US took its eye off the ball in Honduras and that El Salvador and Paraguay could be next.

El Salvador's main national daily La Prensa Gráfica was understandably keen to follow up on Engel's remarks and carried out an interview with him days later. He did not elaborate much on his comments, stating that El Salvador was important as it was geographically close to the US, where many Salvadoreans were living. He did say, however, that “Venezuela is a destructive force in the region", and implicit in his comments was the suggestion that, unless the US “nurtured these important relationships" with El Salvador and Paraguay, the strong internal opposition facing these two left-wing governments could propel them into Chávez 's orbit - like Honduras.

Forging ties with Cuba
While Funes has kept his distance from Chávez , he made it a priority to re-establish diplomatic relations with Cuba when he came to power last June. On 13 March El Salvador became the last country in Latin America to renew ties with Cuba -severed some 50 years ago - when its foreign minister, Hugo Martí­nez, inaugurated a new embassy in Havana. Cuba opened an embassy in San Salvador in January.

 “Cuba and its people deserve to be recognised as Latin American brothers," Martí­nez, the first Salvadorean foreign minister to visit the country, said. Martí­nez, who met President Raúl Castro for an hour to pave the way for an upcoming visit by Funes, kept out of the debate over the Cuban dissident Orlando Zapata, who recently died after a long hunger strike, but he referred to it obliquely, calling for “respect for sovereignty and self-determination of peoples." He also avoided mentioning joining the Venezuelan-inspired Alba integration bloc. Instead, he extolled the virtues of the nascent Community of Latin American and Caribbean States [WR-10-08].

• Honduras
  President Funes hosted his Guatemalan and Honduran peers Alvaro Colom and Porfirio Lobo in San Salvador on 15 March. Funes and Colom promised to work to win recognition for Honduras in the Organization of American States (OAS) and the Central American Integration System (Sica). Funes said he would send his foreign minister to Nicaragua to win over President Daniel Ortega. Funes also said the three presidents would undertake to increase the tax take in their countries to 18% of GDP (it is currently below 14% in all three). He said this “fiscal pact" was necessary to show the US they were worthy of support to fight the scourge of drug-trafficking and organised crime [WR-10-10].

President René Préval needs to “take a more visible and active role" in the reconstruction of Haiti after January's devastating earthquake. That was the damning verdict of a report compiled by the US Senate Foreign Relations Committee released last week. The report concluded that Haiti was at “a significant crossroads" and that the government's procrastination meant that “the sense of urgency [and] commitment to prevent a return to the dysfunctional, unsustainable ways of life past" had “subsided" in line with the immediate crisis. The release of the report coincides with the publication of the annual global Failed States index (FSI) compiled by the US NGO Fund for Peace and the bimonthly Foreign Policy Magazine, which brands Haiti “a failed state" (see overleaf).

“The government has not done an effective job of communicating to Haitians that it is in charge and ready to lead the rebuilding effort," the report, which was based on “field research and interviews with key players in the recovery process", claims starkly. “Key decisions remain in flux […] Rubble is still strewn all over the streets, the majority of buildings are damaged if not collapsed, and informal tent settlements - in penurious conditions - have sprouted everywhere," the report continues. It argues that the dilapidated state of the presidential palace is symbolic of the prevailing apathy. Prime Minister Jean-Max Bellerive responded to the report brusquely: “We've kept a united nation during this period; that is leadership," he said.

The report comes just days after the Interim Haiti Reconstruction Commission (IHRC), co-chaired by Bellerive and the UN special envoy Bill Clinton, formally began work and approved the first reconstruction projects funded with donors' money: US$45m in direct budgetary support; a fund of US$20m for small and medium-sized businesses supported by the Mexican and Canadian tycoons Carlos Slim and Frank Giustra respectively; and US$10m from the Bill Clinton Foundation to construct shelters in the western towns of Léogane and Petit Goave. Clinton said he was working with Bellerive on a project to clear the streets using a clean technology to burn waste to produce energy, which he said would create thousands of jobs.

Financial assistance
In fairness to the government, the international community has not come close to fulfilling pledges of financial assistance to Haiti. The Secretary General of the UN, Ban Ki-moon, this week criticised the slowness of the arrival of this assistance, required by the government to implement its ambitious 'Action Plan', which is designed to convert Haiti into a an emerging country by 2030.

The report accepts that assistance has been slow in coming, which suggests that the frustration it expresses with Préval over the slow progress of reconstruction is compounded by a concern that he is not wholly interested in expediting the organisation of elections for November this year. This runs the risk of creating the sort of political instability which has dogged Haiti for decades, discouraging donors still further.

Richard Lugar, a senior member of the Senate committee, issued a statement: “If elections are not held before President Préval's mandate expires, Haiti may be confronted by a vacuum of power at every level of its government. Haiti does not need to add a political crisis to the death and destruction caused by the 12 January earthquake," he said (see sidebar).

• Failed States Index

Haiti was the only country in Latin America to fall into the red “critical zone" in the sixth straight annual Failed States Index (FSI). This means it amassed an aggregate score of more than 90 out of 120: some 200 variables are grouped into 12 social, economic and political indicators, including inter alia internal displacement; demographic pressures; delegitimisation of the state; uneven development; economic performance; public services; human rights and the rule of law; factionalised elites; and external intervention. For each indicator, a score of between one (the best) and 10 (the worst) are awarded. Five countries in the region fell into the orange “in danger" zone: Colombia, Bolivia, Nicaragua, Ecuador and Guatemala. Seven finished in the yellow “borderline" zone: Honduras, Cuba, El Salvador, Peru, the Dominican Republic, Mexico, Paraguay and Brazil. Four - Panama, Costa Rica, Argentina and Uruguay - fell into the light green “stable" zone, with one - Chile - in the dark green “most stable" zone.
    The FSI is compiled by use of software dubbed 'Conflict Assessment System Tool (Cast)', which the Fund for Peace claims stores thousands of open-source articles and reports in the international and US media and other public documents and independent studies collected over the course of the year, and scores them on their meaning relative to the 12 indicators. The index is used by, among others, the business community to assess political risk and make investment decisions. It satisfies the thirst for league tables among state and non-state actors alike. Its title - Failed States Index - is designed, in the words of the Fund for Peace, “to stimulate debate and develop ideas to promote greater stability worldwide".
    The FSI has not established a reputation for itself like the annual corruption perceptions index (CPI) compiled by the Berlin-based NGO, Transparency International. The CPI, unlike the FSI, triggers a widespread reaction in Latin America, where it is either praised by governments that perform well or criticised for being subjective, generalised and at variance with a dynamic monitoring of developments. The FSI, meanwhile, leaves itself open to charges of subjectivity as it gives no indication of the relative weight of US to international sources in the reports and articles fed into the Cast database.

Failed States Index 2010

Rank*	Country	FSI**
1 (11)	Haiti	101.6 (-0.2)
2 (46)	Colombia	88.2 (-1.0)
3 (53)	Bolivia	84.9 (+1.4)
4 (65)	Nicaragua	82.5 (-0.1)
5 (69)	Ecuador	81.7 (+0.5)
6 (72)	Guatemala	81.2 (+0.6)
7 (76)	Honduras	80 (+2.8)
8 (77)	Cuba	79.4 (-1.2)
9 (82)	Venezuela	78.7 (+0.8)
10 (85)	El Salvador	77.2 (+1.7)
11 (92)	Peru	76.9 (-0.2)
12 (93)	Dominican Republic	76.8 (-0.9)
13 (96)	Mexico	76.1 (+0.7)
14 (106)	Paraguay	72.1 (+0.1)
15 (119)	Brazil	67.4 (-1.7)
16 (130)	Panama	59.3 (-0.4)
17 (138)	Costa Rica	52 (-0.5)
18 (148)	Argentina	45.8 (+1.1)
19 (154)	Uruguay	41.3 (+0.1)
20 (155)	Chile	38 (+0.5)

*Rank in region. Parenthesis indicates global rank.
** Score out of 120. Parenthesis indicates movement on 2009.

• Elections

Possibly in response to pressure from the Senate Foreign Relations Committee, President Préval named 28 November as the date for elections. But, his decision earlier this year to push through an extension of his mandate from February to May 2011 in the event that elections cannot be organised on time incensed the political opposition, which has staged protest marches across the country demanding his resignation. Préval rejected as “unacceptable" the Senate Committee's call for a revamp of the inefficient and corrupt provisional electoral council (which is in charge of organising the elections) in consultation with the international community.

Brazil's presidential election is starting to resemble an episode of the 'Wacky Races' cartoon series, with both camps preferring to play dirty tricks on each other rather than debating actual policy proposals. The supreme electoral court (TSE, in the Portuguese acronym), meanwhile, has not been consistent with its rulings to prevent the deterioration in standards of the run-off campaign.

Dilma Rousseff's camp continues to accuse her opponent of wanting to privatise the state-controlled energy company Petrobras, despite the fact that President Lula da Silva's administration - of which she was a senior member - benefited from the privatisations carried out by the previous opposition government, not least because many companies privatised were bought by pension funds controlled by the ruling Partido dos Trabalhadores (PT). José Serra's camp, meanwhile, continues to capitalise on Rousseff's declared support for the legalisation of abortion, despite maintaining that this should not be an electoral issue.

The tale of Petrobras's privatisation
The government-appointed president of Petrobras, Sergio Gabrielli, used the company's press office to issue a note accusing the preceding federal administration of Serra's Partido da Social Democracia Brasileira (PSDB) of having planned the privatisation of Petrobras. “If it had been up to the previous government of [the PSDB former president] Fernando Henrique Cardoso, Petrobras would have died. The plans of the then-president were to break up Petrobras and sell it off," Gabrielli stated.

Gabrielli also attacked the concession model - which allowed foreign companies to invest in the exploration of Brazilian oil fields - introduced by the Cardoso government when it decided to break Petrobras's monopoly over oil drilling in the 1990s. “If this model had not been reversed [by the Lula administration], Petrobras's exploration activity would have been extinguished, it would not have been able to search for new oil reserves, its refineries would have been dismantled," he claimed.

Gabrielli's was a clear attempt to co-opt nationalistic sectors of the electorate by echoing Rousseff's claims that a prospective Serra administration would privatise Brazil's recently discovered sub-salt oil reserves - for which the Lula administration has proposed the creation of a new state company to control.

Cardoso responded by saying that the declaration was “purely electoral". Furthermore, the use of Petrobras's muscle, or that of any state-owned company or government department, to court voters is illegal. Brazilian legislation clearly forbids government agents - which Gabrielli in effect is - of using their posts for electoral purposes. That norm, however, had already been torn to pieces by Lula, who unashamedly used the government apparatus to campaign for Rousseff. The TSE has done very little apart from issuing fines to Lula and Rousseff, until finally awarding Serra the right to answer Rousseff's claim that he “coordinated" the privatisation of steel-maker CSN, which is untrue since he entered the Cardoso government two years after the company was privatised in 1995.  

Gabrielli's assertion is also wrong on several practical fronts. The opening up of Petrobras's capital allowed the company to invest in drilling without government money, while the concession model allowed it to enter into partnership with foreign companies to gain expertise and increase its profits. In this sense, Cardoso's assertion that “we made Petrobras the giant it is now" has some basis. Significantly, the Lula administration kept the concession model and even auctioned some sub-salt fields for exploration by foreign companies - including while Rousseff served as Lula's mines and energy minister - because Petrobras alone did not have the necessary means to finance the endeavour on its own.  

The abortion controversy
The issue of abortion continues to play a big role in the election, with a group of bishops linked to the Brazilian Confederation of Bishops (CNBB, in the Portuguese acronym) ordering the printing of 20m leaflets asking voters to reject candidates that support the legalisation of abortion. The leaflet left no doubt the bishops were referring to Rousseff by reminding voters that the PT, as a party, defended the legalisation of the practice in its programme. Rousseff had publicly been pro-abortion in the past, but backtracked after becoming presidential candidate.

Controversially, the TSE ordered the federal police to seize the 1m leaflets already printed and prevented the bishops from printing further material, despite the fact that, as an institution that does not receive public funds or have links with the government, the CNBB did nothing illegal. However, it turned out that the printing company used by the CNBB is partially owned by a PSDB member, Arlety Kobayashi, who also happens to be the sister of a senior member of Serra's campaign team, Sergio Kobayashi. The coincidence strongly suggests that the PSDB could have been behind the leaflets, but it is impossible to know if that was the reason the TSE decided to confiscate the leaflets because it classified its ruling proceedings.

More double standards
In the same way that the privatisation issue reveals the double standards of the PT, the abortion leaflet shows the PSDB and Serra are also not consistent with their declarations. Although the fact that the PSDB was behind the leaflets, as the PT claims, would not be illegal per se, as long as the leaflets were not produced with campaign funds, it would show that the PSDB is using dirty tricks to hit Rousseff. After all, PSDB leaders called for abortion not to become an electoral issue, not least because many in the party have been pro-abortion, while Serra himself introduced the free distribution of the morning-after pill in the public health service while serving as Cardoso's health minister.

Significantly, Serra once accused Rousseff of either being involved in corruption or of being “incompetent" following allegations - currently under investigation - that her right-hand woman who succeeded her as minister of the presidency, Erenice Guerra, demanded kickbacks from businesses interested in providing services for the federal government. Under such strict standards, Serra should also have been aware that someone so close to him as Kobayashi was up to no good by printing controversial material against his opponent, and prevented it from going on. Serra attempted to deflect responsibility by saying the matter concerned a private company and a civil society institution. However, the affair leaves it in doubt whether he would be able to control his closest aides in the presidency.

Meanwhile, the CNBB apologised for creating controversy by mentioning the PT in its anti-abortion protest as it claims to be an apolitical institution. At the same time, the TSE's decision also revealed double standards in its rulings because it did not act to confiscate pro-Rousseff leaflets issued by the Universal Church of the Kingdom of God, whose leader, Edir Macedo, was granted the license to buy and broadcast the national television channel TV Record by Lula. This allowed conservative critics, such as Reinaldo Azevedo, from the current affairs magazine Veja, to point out that the court was behaving like a “tribunal d'exception", because of its inconsistency.

• The neutral Silva

Marina Silva, of the Partido Verde (PV), declared she will remain “neutral" in the run-off campaign. Silva came in third place in the first round, amassing almost 20% of the vote. PV politicians were left free to back the remaining two candidates, Dilma Rousseff and José Serra, although they are not allowed to use the party apparatus in the run-off campaign. Silva revealed that Serra did not “satisfactorily answer" her calls for commitment to her political project. Rousseff seemed more open to include the PV's platform in her campaign, but Silva remains wary of Rousseff, having clashed with her on several occasions while both served in President Lula da Silva's cabinet.

• PMDB defects

Sectors of the government-allied Partido do Movimento Democratico Brasileiro (PMDB) have turned their backs on Dilma Rousseff despite the party's official support for her, not least by providing her vice-presidential candidate, lower chamber deputy Michel Temer. PMDB regional leaderships in the state of Rio Grande do Sul have joined that of São Paulo, Santa Catarina and Paraná and declared their support for Rousseff's opponent, José Serra. Party leaders in Pará and Bahia are also refusing to work on Rousseff's campaign, although they have maintained their “formal support" for her candidacy out of respect for Temer, who complained that Rousseff has only recently reached out to him after “hiding" him for most of the first-round campaign.  

President Dilma Rousseff this week travelled north-east, where 70% of the electorate voted for her in October 2010, to reassure local governors that the pending US$30bn  budget “consolidation" would not affect the region.  

In her previous role as minister of the presidency, Rousseff made investment in the impoverished region her top priority, and at the 12th Forum of North-Eastern Governors in Aracaju (Sergipe) this week, she assured the assembled 10 governors  -  comprising the nine regional administrators, all government-allied, plus the governor of Minais Gerais, Antônio Anastasia, of the main opposition Partido da Social Democracia Brasileira (PSDB) - that investment under the government's flagship Growth Acceleration Program (PAC), as well as the significant federal social expenditure in the region, would be ringfenced from the cuts. Given all the lofty promises to protect key expenditures, it has become something of a parlour game in Brasí­lia as to what exactly Finance Minister Guido Mantega will include in the so-called “consolidation" package, details of which have yet to be unveiled (having being delayed more than once).

In her longest public speech to date since her 1 January inauguration (47 mins),  Rousseff reassured her hosts that the PAC; the public housing scheme 'Minha Casa Minha Vida'; World Cup-related investments; and other schemes financed by the National Development Bank (Bndes), would not be cut. She stressed that the  cuts could not be compared to the drastic adjustment (23%) imposed by her predecessor Lula da Silva soon after taking office in January 2003, and would not affect economic growth. She emphasised that without eliminating the extreme poverty that afflicts the region, Brazil cannot claim to have progressed.

Resuscitating Brazil's health
More notably, Rousseff also greenlighted the governors' discussions about a revival (of sorts) of the controversial financial transactions tax, the CPMF (see box). In November, the president-elect declared that fixing Brazil's ailing public health system would be one of her main priorities and hinted at the revival of the levy to fund it. Astutely, Rousseff has indicated that her government will not propose any new tax itself, but says that it would not oppose moves by legislators to push an existing 2008 proposal, the so-called Contribuição Social de Saúde (CSS), through congress. The CSS would be levied at 0.1% on all financial transactions to generate an estimated R$15bn (US$9.0bn) annually. The ruling coalition has a sufficient majority to approve it, but the executive would also need the state governors onside. Rousseff has the (nominal) support of 16 of the 27 state governors (inclusive of the federal district).

The coalition Partido Socialista Brasileira, which did well in October's elections, is one the main proponents of the CSS. It has six state governors. The 10 opposition governors - eight from the PSDB and two from Democratas - are more tepid, seeing the CSS as a tax on the middle-class. Nonetheless, the prospect of additional revenues will be tempting for state administrators given the imminent federal-budget squeeze. One alternative posited by the government is that any new health tax be levied instead on alcohol, cigarettes and fuel.

The CPMF
The CPMF (Provisional Financial Contributions Tax), levied at 0.38%, was first introduced in 1993 on a temporary basis but was subsequently extended, evolving into a useful source of revenue for the federal government. It generated some R$40bn (US$24bn) a year, of which R$12bn (US$7.2bn) went to the health sector. It was thrown out by the opposition PSDB and its allies in the senate in December 2007 in a political manoeuvre against the Lula government (which was seeking to extend it to 2011). Lula had argued strongly for its extension, pledging all the revenues for the health sector. The defeat was a real setback for Lula and prompted him to push to ensure at all costs that his successor would have a decent majority in the senate, which he never enjoyed.

• Budget

Constitutional Amendment 29 (EC-29), approved in 2000 but never applied, sets mandatory budget expenditures on health for the federal, state and municipal governments, whereby states would dedicate 12% of their tax revenues towards the health sector and municipalities 15%, while the federal government would adhere to a specific formula. The new health minister, Alexandre Padilha, wants congress to finally legislate for the EC-29. Total health expenditure in Brazil is nudging a high 9.0% of GDP, on World Health Organization figures. Weak management, more than lack of funding, is a key problem. 

President Néstor Kirchner's campaign to root out the criminal element from Argentina's police forces appears to have hit a snag: top cabinet members have panicked at the emergence of evidence pointing to criminal connections reaching into government house and the defence ministry.

In late November, Eduardo de la Cruz, chief prosecutor of Buenos Aires province, announced that about 700 calls had been placed between telephones linked to the investigation of serious crimes and the defence ministry building. That was just the beginning. The very next day he announced that another 3,300 such links had been found with the Casa Rosada, the presidential palace, which also houses the interior ministry, the ministry in overall charge of internal security. These call logs covered a fairly lengthy period, beginning in 1997 (which means that they cover part of the Menem era and the de la Rúa and Duhalde presidencies). The calls are associated with the investigation into 200 criminal cases, embracing kidnappings, murders, armed robberies, threats and false arrests.

Military sources readily admitted the possibility of such links, and defence minister José Pampuro promptly ordered an investigation. Elsewhere, justice minister Gustavo Béliz preferred to play down the revelation, noting that a clear picture would only emerge after a detailed analysis of the evidence (which involves tracking down a shifting population of officials with access to the phones listed). Prime minister Aní­bal Fernández, however, dismissed the data provided by de la Cruz as `nonsense' and, while acknowledging that Kirchner had ordered an investigation, pre-empted its outcome, predicting that `the results it will produce will be nil.'

The prosecutor's scenario
Prosecutor de la Cruz is quite clear about what he believes he has found: networks of contacts in government house and the military that `provide protection, logistics, arms and intelligence to criminal organisations.' Members of his team connect this with the discovery of military-issue weapons in criminal armouries. They say the investigation has led to a private security organisation headed by a retired army officer, and to two police officers.

His claims dovetail with those of an investigation conducted by the newspaper Clarí­n, according to which an inordinate number of kidnap investigations have been foiled by mistaken arrests, in many cases traceable to `leads' produced by `police intelligence' and `repentant' policemen under investigation for other criminal offences. The report tallies the outcome of investigations into 10 of the most publicised recent kidnapping cases: 137 people arrested, only 23 still in custody — and virtually all of these for secondary involvement in the events. The conclusion: that the investigations were being deliberately diverted into dead ends.

De la Cruz is angry at the aspersions cast by the prime minister and his colleagues on the methods used to collect the data on telephone links. These are the product of VAIC (for Ví­nculos por Análisis Informático de las Comunicaciones: Links via Computer Analysis of Communications), a software package developed by the provincial police's complex crimes IT unit to replace their older Excalibur system. Introduced in October last year, it has been billed as the most advanced in Latin America, capable of high-speed analysis of telecoms links as well as geo-location.

VAIC is credited with having uncovered the innards of mobile telephone theft, a booming crime industry, which has served to draft legislation regulating the sale of mobile phones. It is also credited with having decisively aided the investigations into two major kidnappings (the Echarri and Astrada cases) and two high-profile murders (the Schenone and Garcí­a Belsunce cases). It is links from these and other cases that have led to the defence and government house connections. `They can't say that VAIC works for some investigations but not for others,' says de la Cruz.

Police-linked crime rampant
The same ministers who have been airing their doubts about de la Cruz's data have been claiming that recent outbreaks of criminal activity may actually be the handiwork of policemen. First, a spate of kidnappings in the province of Buenos Aires was described by prime minister Fernández as a `message' to that state's security minister, who was stepping up his purge of police ranks. As many as 23,000 members of the force are under investigation for a rage of irregularities, and 4,000 already face court proceedings.

It is worth mentioning that provincial security minister Juan José Alvarez has recently resigned to take up a seat in the federal congress, after a very public spat with President Kirchner when the latter accused the provincial police of being linked to kidnappings. Indeed, some high government officials have suggested that the de la Cruz charges may even be a political manoeuvre engineered by Alvarez against Kirchner. If so, Kirchner would be held responsible only for not having corrected, since mid-May, a situation built up over six or more years. De la Cruz himself has suggested that these `embedded' links with crime could date back to groups linked with repression during the years of military rule. During President Raúl Alfonsí­n's administration in the early 1980s, a member of the presidential security team was found to have been directing a kidnap outfit from inside the Casa Rosada.

In early December, prime minister Fernández suggested that a string of armed robberies in shops and restaurants in two districts of Buenos Aires city might be `reprisals' by members of the federal police who had come under investigation. In both districts the local police commissioners had until recently served in the force's internal affairs division. Fernández's view has been echoed by justice minister Béliz and internal security minister Norberto Quantí­n.

Béliz has also openly hinted at official collusion with criminals. Alluding to the district of Villa Urquiza, where neighbours took to the streets to protest an upsurge in criminal activity, he said, `There have been cases of criminal gangs that carried out hold-ups in the neighbourhood, who have been arrested only to walk free 48 hours later — not once, but three, four or five times.'

This panorama of corrupt police forces with friends in high places and running out of control has led to calls for the military to be called in to act against crime; a course of action which, as we have been reporting, has been tried out in several Latin American countries, so far without lasting effect. Defence minister Pampuro has dismissed any possibility of this happening in Argentina, because `the army is barred by law from any participation in internal security.'

Excessive force
As if the above police-related problems were not enough, an NGO devoted to campaigning against police abuses, Correpi, has been demonstrating to draw attention to the high number of killings by the country's various police forces: more than 130 in the first 11 months of the year. Their tone is decidedly political: according to Correpi, the government is using the police for `social cleansing'. Of the killings they have tallied, 47.9% took place in the province of Buenos Aires, 12.99% in Santa Fe, 9.38% in Córdoba, 8.37% in Buenos Aires city, and 3.82% in Mendoza.

The poor results of the Fox administration's México Seguro offensive provoked an irritated reaction from the US in the form of a minor diplomatic 'reprisal' and independent moves by two governors of border states to take matters into their own hands. It also moved the Mexican congress to demand formal explanations from the executive on what it has been doing. The government has promised to 'radicalise' its campaign, but up to the time of writing has not spelt out how.

On 26 July, the US ambassador to Mexico, Tony Garza, renewed previous State Department warnings against travelling to Mexico, claiming that more than 100 violent deaths had occurred on the border with the US since June. He alluded specifically to the killing of 18 policemen in Nuevo Laredo, eight of them in July, and said they made it clear that 'Mexico needs to do much more to bring safety and security to our common border.' Two days later, a convoy of about 10 vehicles drove up to a house in Nuevo Laredo and opened fire upon it with heavy-calibre guns, rifle-launched grenades and smoke bombs, reportedly later abducting four of the house's occupants. Garza promptly announced that the US consulate in Nuevo Laredo would be closed for a week starting 1 August.

As there had been no reported threats to the consulate, the step has been seen by Mexican officialdom and media as a means of putting pressure on the government to take more decisive action. [In mid-August, after the consulate had been reopened, Garza added to the ill-will by remarking, 'Some have said that I ordered the shutdown to punish the Mexican government for its failure to control violence in the region. And in a sense that's true.']

Governors take action
Garza's action was not the only initiative by US officialdom which contributed to increase tension between the two countries. On 12 August the governor of New Mexico, Bill Richardson, declared a state of emergency in four border counties of his state (Doña Ana, Grant, Hidalgo and Luna), ostensibly in response to drug-related violence, illegal immigration, smuggling, cattle rustling and the threat posed to livestock by infected Mexican cattle straying over the border. He immediately allocated US$750,000 to enable the deployment of more law enforcement personnel, and announced that a further US$1m would be distributed to border towns by a new field office of the New Mexico Office of Homeland Security to be established in Columbus.

Richardson also called on the Mexican government to raze the semi-abandoned town of Las Chepas, close to Palomas, which has become a staging post for migrants headed for the border. His office said that the state government of Chihuahua had promised to support Richardson's initiative - but the latter publicly criticised Richardson for indulging in 'generalisations' and failing to seek joint solutions to the problems through established channels.

Three days later the governor of Arizona, Janet Napolitano, also declared a state of emergency in four border counties and allocated US$1.5m in emergency funds to the strengthening of law-enforcement there, to confront 'violent gangs, coyotes and other dangerous criminals'. She announced a campaign starting with a 30-day 'focused enforcement effort' by local police in the border towns of Nogales, Bisbee and San Luis, supported by the sheriff's office of Santa Cruz county. 

Napolitano's move differed from Richardson's, however, in that she followed up on 19 August by meeting the governor of Sonora, Eduardo Bours, and agreeing on a number of joint or coordinated actions on both sides of the border. They set up a bilateral body to coordinate the joint effort, the Arizona-Sonora Border Security Council. All three governors concerned said they were acting because their federal authorities were not doing enough, but political motivation cannot be discounted: both Napolitano and Bours represent opposition parties. Still, the Napolitano-Bours entente is arguably one of the most important contributions to lowering bilateral tension over the border issue: Arizona is the port of entry for the largest number of illegal immigrants crossing over from Mexico.

Another state-level initiative was that of Eugenio Hernández, governor of Tamaulipas, the Mexican border state of, in which is located Nuevo Laredo (the city that by the latest tally has suffered 110 fatalities since the beginning of the year as a result of the turf war between the drug gangs). He announced the investment of M$30m (US$2.8m) in a security plan which includes the creation of a state border police, equipping police patrols with GPS equipment, installing closed-circuit television monitoring throughout Nuevo Laredo, and modernising the emergency telephone system.

Response from Mexico City
The Fox administration's response to the latest developments has followed two different paths: one of them is to pass the buck (or at least part of it) back to the US; the other, to announce an intensification of its campaign against the warring drug gangs.

Immediately after The Nuevo Laredo raid and the closing of the US consulate, interior minister Carlos Abascal strongly hinted that the US bore a share of responsibility for the violence along the border. He said, 'It is worrying and a motive for attention that the drug traffickers should be using heavy weapons in their war. We have remarked upon this with colleagues of the United States, in order to strengthen our cooperative links, because this armament is not produced in Mexico.' By early August the message had become more explicit. Presidential spokesman Aguilar said, 'The government of Mexico has on several occasions pointed to the accumulation of high-technology weapons entering Mexico to end up in the hands of the drug traffickers and other expressions of organised crime, and that those weapons come from the US.'

On 1 August, President Vicente Fox 'gave instructions to deepen the [México Seguro] operation, radicalise its actions and raise its level of efficacy,' according to an announcement made the following day by presidential spokesman Rubén Aguilar. He said this did not entail declaring a state of siege or emergency, or 'militarising' the operation. He added that details would be provided later by the public security ministry.

It was not until 18 August that the government announced it was extending the operation into the state of México (Edomex), which surrounds the capital. This did not come from the security ministry but from chief federal prosecutor Daniel Cabeza de Vaca - who added that details of this extension, said, were still being worked out between federal and state authorities. This clearly will not affect the situation on the border, and the outgoing governor of Edomex, Arturo Montiel, says it is only disguised electioneering, since his administration has largely succeeded in keeping organised crime 'in check'. Montiel hopes to run for the presidency next year, for the opposition PRI. Edomex is not among the areas listed by the federal government as facing public security threats, defined by presidential spokesman Rubén Aguilar as 'some border areas' and Acapulco.

BRAZIL | Warning on 'hidden Amazonian agenda' of NGOs. On 9 May, General Maynard Marques Santa Rosa, secretary of policy, strategy and international affairs at the defence ministry, told the foreign affairs and defence committee of the chamber of deputies that military intelligence had detected the presence of 100,000 NGOs in the Amazonian region, and had strong suspicions that many of these groups were engaging in illegal activities.

 

'These organisations,' he said, 'clamour for the defence of the environment and Indian rights, but many have hidden interests, such as drug trafficking, gunrunning, people trafficking, money laundering and even espionage.' General Marques called for a review of the legislation governing the activities of NGOs, saying that Brazil 'places no restrictions' on them. He did not offer any solid corroboration of his claims.

The spectre of international designs on Amazonia is a recurring theme in Brazilian politics, and tends to be taken seriously by many across the ideological spectrum. So far, though, attention has focused on foreign governments and transnational enterprises. Though NGOs have been criticised for their stances on both the environment and Indian rights, this was the first high-level claim that they were involved in criminal activities.

PARAGUAY | 'Anti-terrorist law' clears lower chamber. On 3 May the lower chamber of Paraguay's congress approved the Ley de Hechos Punibles Contra los Pueblos (known locally as the 'ley antiterrorista' or antiterrorist law). Under the law criminal offences can be deemed as 'terrorist' and 30-year prison terms can be given for 'terrorist association' - five more years than the maximum penalty in Paraguay.

The law, which went through on the strength of the votes of the ruling Colorado party and Patria Querida, has been criticised by its opponents as too vague and it has led to fears that judges could deem acts as 'terrorist' which should be dealt with under other provisions of the penal code.

As elsewhere, the US has pressed for the passage of an antiterrorist law, which would presumably have been applied to those who have been contributing to Hezbollah and have been imprisoned on charges of fiscal or financial offences. The new law stipulates prison terms of five to 15 years for financing terrorist activities.

PARAGUAY | Marijuana eradication drive under way. Senad, Paraguay's antidrugs agency, reports that in the first four months of the year its agents have destroyed marijuana plantations with an estimated production potential of 2,715 tonnes, and seized 4.9t of leaf pressed and packed for distribution. The eradication drive took place in the departments of Amambay and Canindeyú, which lie northeast of Asunción , next to the Brazilian border. Agents located and destroyed 176 makeshift camps of marijuana growers, and 56 leaf presses.

 

ARGENTINA | Drug seizures reach new high. The Gendarmerí­a (militarised border police) reported that seizures of marijuana in the first four months of this year reached 32.1 tonnes, well above the 25t seized in the whole of 2006 and higher that the previous record haul of 31.5t of 2003.

Officials say the increase is due to two factors. The first is the establishment of 'strategic controls' in areas close to Argentina's northern borders. The second, is that Paraguay - source of most of Argentina's imported marijuana - has just had a bumper harvest, which has lowered prices and increased demand in Argentina.

The pervasive influence of drug-trafficking gangs on crime, and particularly violent crime in Guatemala, is not only being openly admitted by officialdom: it is generating such fear among senior officials that a top law enforcement officer would rather see members of Los Zetas, the infamous Mexican gang, arrested, extradited or deported than risk the perils of holding and trying them for two recent massacres committed in Guatemala.

On 11 February, President Álvaro Colom highlighted the extent to which the drugs trade was contributing to Guatemala's spiralling crime rates. 'Of all the homicides committed last year,' he said, '26% were related to the drugs trade and 16% to the settlement of accounts [...] More than 40% of all crime is linked with the drugs trade, with much of the remainder indirectly related.' Colom said that intelligence services had detected the presence of 52 members of Los Zetas (the gunmen who have taken over much of Mexico's Gulf cartel), of whom 23 had been captured.

Days earlier the institute of forensic science (Inacif), had reported that there had been 433 homicides in January, of which 85% were committed with firearms. Officials who usually try to find reasons to play down such statistics noted that the January total was 25% higher than that of the same month in 2008. This was picked up by the media, which tends to use daily averages as an indicator of crime trends. The daily average of homicides in January was 14, or almost 18% less than the average for the whole of 2008, when 6,200 homicides were reported.

Colom had warned that Guatemala faced 'persistent aggression from organised crime _ the harder we hit organised crime, the harder their reactions will be.' This notwithstanding, he said, the government is fighting organised crime 'head on' and he went on to highlight the 'most important role_ played by Cicig [the UN-backed international commission against impunity].'

Cicig frustrated
The decision by Cicig's chief, Spanish jurist, Carlos Castresana to issue the supreme court with an ultimatum, thereby risking an institutional row, is just one sign of ongoing frustration as the UN-backed commission struggles to carry out its mandate. On 6 February, Castresana dropped in on the acting president of the supreme court, Heliú Higueros, 'to express his concern about the delay in the creation of the [special] courts' which Cicig had recommended as a key tool in the fight against organised crime. A supreme court source said that Castresana had threatened to go to congress and demand a fast-tracked law to force their creation if the supreme court did not start acting within 15 days.

This is not Cicig's only complaint against the judiciary, however, with officials incensed by the lenient treatment of former public prosecutor Álvaro Matus, head of the division of 'crimes against life'. Cicig had formally accused Matus of conspiracy and failing to carry out his responsibilities. A court threw out the first charge and chose to indict him only for the latter, as well as the additional charge of abuse of authority, then freed him on bail of US$1,900. Castresana decried the move as 'shameful'.

Fear of Los Zetas
As noted by President Colom, the Guatemalan authorities have arrested 23 suspected members of Los Zetas — 12 of them Mexican, and 11 Guatemalan recruits. Five Mexicans - including Daniel Pérez ('el Cachetes') considered by the Guatemalan authorities to be number-two in the hierarchy of Los Zetas - were arrested in connection with the killing of 12 people in the eastern department of Zacapa in March 2008. Another four Mexicans were arrested last December in connection with the killing of 17 people in a shootout in the northwestern department of Huehuetenango, which borders on Mexico. In early February yet another two Mexicans, together with three Guatemalans, were arrested as suspected Zetas in the north-central department of Alta Verapaz.

On 14 February the director-general of the Policí­a Nacional Civil (PNC), Marlene Blanco, revealed that she had received three death threats which had unmistakably come from Los Zetas (one threat, received via telephone, was delivered with a Mexican accent; a radioed message purported to be from Daniel Pérez, the jailed Zetas leader). Three days later a visibly rattled Blanco called publicly on the judiciary and the foreign ministry to speed up the extradition or deportation of the jailed Zeta suspects.

She took her plea to congress, where she complained that, in the absence of a top-security prison, she had had to assign 69 police officers to guard the remand centre in Guatemala city where 'el Cachetes' and his followers had been confined. This, she said, is guarding the detainees against any mishap in prison as well as ensuring that they are not sprung by comrades on the outside.

The Mexican authorities have filed requests for the extradition of 'el Cachetes' and two other Zeta suspects arrested in Guatemala, but Blanco is urging the government to deport the remainder.

Tangled web
With the case of the three Salvadorean legislators murdered in Guatemala unsolved two years down the line, a Salvadorean political connection has been uncovered by the Guatemalan investigators. Edwin Marroquí­n, head of the public prosecution team handling the case has recently ordered the arrest of former Salvadorean legislator Roberto Carlos Silva Pereira as one of the 'intellectual authors' of the crime. Silva Pereira is currently under arrest in Arizona, awaiting extradition to El Salvador, where he is wanted for charges of money laundering and corruption. The Salvadorean government has agreed to give precedence to a Guatemalan request for extradition to stand trial for the 2007 murders.

The investigators say that Silva Pereira planned the crime with former Guatemalan congressman Manuel de Jesús Castillo and his associates, Carlos Gutiérrez (alias "Montaña 3"), and Carlos Amí­lcar Orellana (alias “El Chejazo").  The crime itself was carried out by two groups of people: several Guatemalan PNC officers and seven members of the criminal gang known as the Banda de Jalpatagua, involved in drug trafficking, hijacking trucks and robbery.

Four of the police officers involved were soon arrested, but shortly afterwards were murdered inside the prison where they were confined (another officer is still on the run). Also in custody are Castillo and his associates as well as the seven members of the Banda de Jalpatagua.

Silva Pereira's presumed motive was revenge: the murdered legislators had been among those who voted to lift his parliamentary immunity so he could be tried for money laundering and corruption. The whole affair is seen as a clear illustration of the links woven between members of the political establishment (of both countries), the police and organised crime — the web of impunity Cicig is tasked with unravelling.

PARAGUAY-BOLIVIA | Military link to drugs trade? On 13 October the badly burnt body of a Paraguayan marine NCO, Cristián Báez, was found in Esmeralda, in the Bolivian department of Tarija: his wallet with his identity papers had been left behind. Báez had been stationed at the naval border post of Fortí­n Anselmo Escobar, which oversees the area where the Paraguay and Pilcomayo rivers meet — one of the many virtually unknown 'triple border' areas, since the Pilcomayo river marks the boundary with Argentina.

Bolivian investigators say the killing bore the signature of a drug-gang 'execution'; the area where the body was found is on one of the known drug-trafficking routes. Before being assigned to Anselmo Escobar, which is considered a punishment posting, Báez had served a three-month sentence for 'breaches of discipline' at the military prison of Viñas Cué. Paraguayan investigators are looking into the possibility of 'narco' connections extending to the military.

PARAGUAY-ARGENTINA | Large haul of cannabis in border provinces. In mid-October, in three separate operations in northeastern border provinces, Argentine police seized 3.3 tonnes of cannabis smuggled in from Paraguay, presumably down the Paraná river, another main drug-trafficking route. The largest haul, 2.3t, was interdicted in El Dorado, Misiones.

A further 377 kilos were seized from a boat beached close to Posadas, the capital of Misiones. Further south, in Ita Ibaté, Corrientes, the river police intercepted several vehicles found to be carrying 595 kilos of cannabis.

The Argentine justice ministry reports that since the beginning of this year Argentina has intercepted almost 100t of drugs.

ARGENTINA-BOLIVIA | Tracking down the cocaine connection. Two Bolivian nationals were arrested on 22 October during a police raid on a cocaine processing lab in Tostado, a city in the northwest of the central Argentine province of Santa Fe. Both of them hailed from Yacuiba, Tarija, the Bolivian department that recently made headlines as a result of the presumably drug-linked murder of a Paraguayan marine NCO (see above).

Police, who came upon the two Bolivians as they were processing a batch of cocaine, say that cocaine base smuggled in from Bolivia was refined into cocaine hydrochloride in Santa Fe, then distributed locally and in the provinces of Córdoba (centre) and Buenos Aires. Buenos Aires, Córdoba and Santa Fe are Argentina's most populous provinces, accounting jointly (with the inclusion of the federal capital) for about 55% of the country's total population.

URUGUAY | Interdiction of new cocaine route. Four Colombians and an Argentine were arrested by Uruguayan police after the discovery of a scheme to send cocaine to Europe in waterproof containers attached to the hulls of cargo ships passing through Montevideo on their way to Europe.

Acting on intelligence received from an undisclosed source, the police raided a rural property and a workshop in Montevideo, where they seized 25.5 kilos of cocaine already loaded into a watertight plastic container designed to be attached below the waterline of a ship, plus a small sub-aqua vehicle and diving equipment. The ministry reckoned that the intercepted haul would have a value of about US$1m on the streets of Europe.

One result of the investigation was the realisation that, for all the advances made by the Mexican drug cartels, Colombian traffickers remain active and operating abroad on a substantial scale.

In 2009 Trinidad and Tobago (T&T) consumed just under 10% of Latin America's gas and produced 19.8% of the total. Over the next five years, however, other countries in the region will produce more, so T&T's share of regional output will drop by about a percentage point. By 2014, however, T&T will account for almost 11% of the region's natural gas consumption.

Even though its market share will fall, T&T's gas production will increase substantially. In 2009, it produced about 43bn cubic metres (cm), or 1.51 trillion cubic feet (tcf). By 2014, production should be running at 56bn cm. Exports should increase by about 5bn cm by 2014, to around 28bn cm. Most of these exports will be in the form of LNG.

T&T has about 500bn cubic metres of natural gas reserves. South America, the Caribbean and Mexico has a total of just over 8 trillion cubic metres but 60% of these proven reserves are in Venezuela.

Production in T&T has been rising, but rather more slowly in recent years. The big strategic decision was taken a decade ago to invest heavily in LNG plants.  The country has benefited from a large amount of foreign investment into the sector, with BP Trinidad and Tobago (BPTT) leading these efforts. Other important players in the natural gas sector include British Gas (BG) and the US firm Chevron. In October 2009, BPTT brought the Savonette field on stream, at a rate of 600m cubic feet per day (mcf/d).

T&T is the largest supplier of LNG to the US and one of the largest LNG exporters in the world. In 2008, it exported 264bn cf of natural gas to the US, about 75% of total US LNG net imports, but this was only 1% of the total US natural gas supply. US LNG imports from T&T in 2008 were almost half the amount received in 2007, reflecting the general decline in total US LNG imports in 2008. This trend continued into the first half of 2009, with imports from T&T near year-earlier levels.

T&T's only other big market for LNG is Spain, which imported 2.09bn cubic metres in 2007. Puerto Rico was the next biggest market, taking 740m cubic metres. The sluggish US demand has prompted T&T to go after new markets. Some are regional (such as Brazil) but most LNG shipments go to Europe and Asian markets.

The Atlantic LNG Company, a consortium led by BP, BG, and Repsol-YPF, operates four LNG trains at Point Fortin, on the south-western coast of Trinidad. The first LNG train was completed in March 1999, with subsequent trains completed in 2002, 2003 and 2006. The four trains have the capacity to produce a combined 14.8m metric tons (710bn cubic feet or 20.1bn cubic metres) of LNG per year. There have been discussions between Atlantic LNG and the T&T government about the construction of two new trains. Besides exporting LNG, T&T is also looking at developing its petrochemical industry further to cash in on its gas deposits.

Other Caribbean: Other Caribbean countries, notably Jamaica, are looking at using natural gas as an alternative to oil. In the Dominican Republic, AES operates the Andrés facility, an LNG regasification terminal that feeds two gas-fired power plants. In August 2000, Puerto Rico began importing LNG to supply the EcoEléctrica facility, a 540-MW natural gas-fired power plant.

The latest opinion polls show that Hispanic voters in the US, who could be decisive in several key states, are breaking 60:40 in favour of the Democratic challenger, John Kerry. In 2000, they split 62%:38% for Al Gore in the race with President George W Bush. 

In the current election, both campaigns are spending heavily on trying to reach Hispanic voters in 18 key swing states. The opinion polls point to President Bush not winning in three states he took last time: Arizona, Nevada and Florida. These are all states where there is a significant Hispanic minority. In Florida it appears that Kerry is still significantly ahead of Bush: Florida has 27 votes in the electoral college. Arizona has 10 and Nevada five.

Even after the Republican Party convention in New York, several opinion polls in the crucial 18 states where the election will be won or lost put Kerry significantly ahead of Bush. As Kerry has California's 55 electoral college votes and Bush has Texas's 34, states such as New York (31 votes); Ohio (20); Illinois (21); Florida (27), Pennsylvania (21) and Michigan (17) are all crucial. California is the best example of Hispanic voting muscle: the state was solidly Republican in presidential elections, from 1968 to 1988. In 1999, minorities, led by Hispanics, outnumber White Anglo Saxons for the first time. The Hispanics had been galvanised by the ill-considered decision by Pete Wilson to attempt to prevent undocumented migrants being eligible for public services. Hispanics account for a third of the state's 34m residents. The state has not voted Republican in the past four presidential elections. 

The Democrats' drive to get the Hispanic vote out for Kerry is being led by a so-called '527' political group, America Votes. The '527' groups are not affiliated to party campaigns and are not limited to federal laws limiting political committee donations to US$5,000 per person. America Votes has raised US$98m. Of this US$33.8m has come from three men: George Soros, the hedge fund manager and philanthropist; Steve Bing, a film producer and Peter Lewis, who runs Mayfield, the US's third largest car insurer. 

The big question is whether the Hispanic votes will turn out this year. In 2000, their turnout was 46%, well below the 57% national turnout. Some activists claim that this year the Hispanic turnout will jump to 80%. Interestingly, the most Hispanic state in the US, New Mexico, which has a Chicano governor, Bill Richardson, a prominent Democrat, has tilted away from the Democrats towards Bush. In 2000, Al Gore won New Mexico (and its five electoral college votes) by 336 votes out of 600,000 cast. The latest opinion polls show that Bush is leading by 45% to 42%, with 8% of the electorate undecided or unwilling to say. Around 42% of New Mexico's population is Hispanic. 

The biggest effect of the Democrats' drive for Hispanic votes is probably being felt in Florida. The opinion polls consistently show Bush trailing in the state, even though his brother, Jeb, is the governor. In 2000, Bush famously won the state (and the presidency) by 537 votes out of 6m. In that election 678,000 of the 1.2m eligible Hispanic voters actually voted. 

Opinion polls show that Bush's new regulations to restrict family visits to Cuba are unpopular with the vociferous Cuban-American minority in southern Florida. In 2000, this group split 82%:18% in favour of Bush. They are now tilting towards Kerry. One problem for Kerry is that a Cuban American Republican, Mel Martinez, is running for a vacant senate seat against an Anglo-American Democrat, Betty Castor.

Mexico's economy minister, Sergio Garcí­a de Alba, said that Mexico was worried by the US$5.8bn third-quarter loss Ford declared on 23 October. Garcí­a was quick to add he did not expect the cutbacks Ford is implementing in North America would affect the company's three plants in Mexico. More at risk may be Chrysler's plants in Mexico.

What is undeniable is that Mexico's motor industry, the country's biggest foreign exchange earner, above even oil, is now inextricably linked to the US economy. In the first nine months of this year Mexico's carmakers exported 1.13m of the 1.48m vehicles they produced. 

Compared with the first nine months of 2005, production was up by 31% but exports were up by 41%. Just over 1.04m of the total vehicles exported went to North America. Less than 50,000 of these vehicles went to Canada, so virtually all of the vehicles Mexico exports to North America go the US. In the first nine months of 2006, Mexico shipped 997,000 vehicles (cars and trucks) to the US; this was up 38% on the same period of 2005.

The problem Mexico's motor industry faces is that the big three US car companies, GM, Ford and Daimler Chrysler, all have major problems with their North American operations. All three are cutting back costs and restructuring their expensive US operations. All have shifted some production to Mexico, where labour costs are much lower. 

Motor industry analysts have fretted about the possibility of one of the big three US carmakers going bust. The most vulnerable is probably Chrysler, which is now owned by the German vehicle manufacturer, Daimler-Benz. On 25 October, Daimler executives did not deny that the company was contemplating spinning off or selling Chrysler after revealing that DaimlerChrysler's quarterly loss came to US$1.5bn. Splitting Chrysler from Daimler could easily result in Chrysler going bust. Another German car manufacturer, BMW, gave away its loss-making British subsidiary, Rover, in 2000. Three years later, an independent Rover was hopelessly bust and its motor-manufacturing operations ceased. 

Chrysler, like all the US motor manufacturers, has plunged into losses. Higher petrol prices have meant that Sports Utility Vehicles (SUVs) and pick-ups have become harder sells. Seven years ago Chrysler's Jeep Grand Cherokee and its Dodge Ram pickups were best sellers. US consumers have switched to smaller, more efficient vehicles. Chrysler was hit disproportionately hard because 75% of its sales are of SUVs and pick-ups.

Chrysler's third-quarter losses were mitigated by its assignment of 100,000 vehicles into something its calls an order bank. These are cars that are neither assigned to dealers nor held as inventory. It is not clear that Chrysler will be able to sell these vehicles at a profit. 

If Daimler were to sell Chrysler, the most likely buyer would be the Renault-Nissan combo. An alternative buyer could be a Chinese car company. Both of these options could have severe implications for Mexico. Nissan is already well established in Mexico and if it takes over Chrysler there is no guarantee that it would continue with Chrysler manufacturing operations in their current form. 

When Nissan merged with Renault, Renault's small Mexican manufacturing business was wound down. A Chinese takeover would be even more worrying. There is no guarantee that a Chinese company would not shift production back to China. So far Mexico has managed to head off any shift by the US motor industry to produce vehicles for the US market from China. If one Chinese company proved that exporting vehicles from China to the US was feasible, the outlook for the whole Mexican industry would become problematic.

In Mexican terms the biggest carmaker is GM which built 380,182 vehicles in the first nine months of 2006. The second-biggest vehicle producer in Mexico is now Nissan which built 296,097. The third-biggest carmaker is Ford (258,096) followed closely by Volkswagen (256,103) and then Daimler Chrysler (240,809). 

What all these companies do is use Mexico as a manufacturing platform for exporting, to the US principally. In the first nine months of 2006 domestic car sales (including imports) were up by only 0.7% at 799,676. Yet exports were up by 42% at 1.138m. Imports of new vehicles into Mexico were 462,000 for the first nine months of 2006. This was down 2.5% on the same period of 2005. 

César Flores, the president of the Asociación Mexicana de la Industria Automotoriz, said that he expected the industry to do 1.2m in domestic sales this year; produce 1.9m vehicle and export 1.6m. 

Mexican policymakers, such as Garcí­a de Alba, expect Mexico to benefit from the restructuring of the US motor industry. In June Ford leaked detailed plans on how it would implement its initial plan to cut 30,000 jobs and close factories in the US but expand and upgrade production at its three Mexican plants. In the plan, the three Mexican plants that will get the investment are: Cuautitlán, (Estado de Mexico); Hermosillo (Sonora) and the company's engine plant in Chihuahua. 

The Ford plan, known as the "Way Forward", was announced in outline in January, and called for a completely new plant to be built in North America, probably in Mexico. If the plan is implemented, Ford's production capacity in Mexico will double to 850,000 units a year. The plan would also create 150,000 new jobs in Mexico. In October, Ford's chief executive, Alan Mulally, said that "Way Forward" would now involve the loss of 44,000 jobs in the US and the closure of 16 factories.

Ford has yet to announce how much it plans to invest in expanding its operations in Mexico, where labour is cheaper, but informed leaks suggest that the figure will top US$9bn. The investment should attract tax credits from Mexico worth about US$500m. Ford said in the 'Way Forward' document that the Mexican investment would lead to a 300% increase in the use of Mexican-made components and would also increase Mexico's motor exports by US$18bn a year. 

Ford claimed, after the leak, that 95% of the company's investment over the next six years will continue to go into its US plants with only 5% going to Mexico. Even so, the shift should save the company about US$1.8bn a year. The 'Way Forward' plan calls for a new US$1.4bn plant that could produce 280,000 vehicles a year. The new plant would be designed to enable flexible working practices that allow managers to match output more quickly to demand. 

Hermosillo opened in 1986 and produces sedans. "Way Forward" envisages an investment of US$1bn in this plant which would have its capacity increased to 305,000 vehicles a year. Garcí­a de Alba said on 23 October that Hermosillo had already secured new investment to enable it to produce Fusions and Lincoln Zaphyrs for the US market.

The older Cuautitlán plant builds Super Duty pick-ups and Ikon small cars. Under 'Way Forward' the plant's capacity would be increased to 220,000 vehicles a year. The Chihuahua plant would get the biggest investment (US$2.3bn).

The attraction of expansion in Mexico is clear. Mexican autoworkers are paid, on average, just under M$200 (US$17.4) a day. US autoworkers, according to the Union of Autoworkers, earn US$27.3 per hour. 

In the third quarter, Ford lost US$2bn on its North American operations as its sales fell from US$18.2bn in the third quarter of 2005 to US$15.4bn in the third quarter of 2006. For the year so far, the Ford Motor Company worldwide has last US$7.24bn. 

The problem facing the Mexican motor industry is that 80% of the country's vehicle output is exported, mostly to the US. If the US economy slows down, which is likely despite the US Federal Reserve Board's efforts to ensure a "soft landing" for the US economy, demand for Mexican-built vehicles will be affected.

The tyre industry in Mexico

The worry for Mexican economic policymakers is what has happened to the tyre industry in Mexico. At the end of 2001, three significant tyre producers, Euzkadi, Goodyear and Uniroyal shut down because their output was not competitive. The closure led to a major fall in tyre production. In 2000, Mexico produced tyres worth US$905m. In 2002, tyre output was down to US$426m. To be fair the tyre industry has recovered since. In 2005 output was back up to US$639m. The problem for the industry is that tyre imports now swipe almost two-thirds (63%) of the national market. On top of this tyres are also smuggled into Mexico. In San Diego, used tyre markets sell tyres for US$1 each. These tyres are invariably shipped to Mexico. The Mexican tyre industry reckons that 3m used tyres are sold in Mexico every year. The value of the Mexican tyre market has continued to rise, as vehicle production has grown. The problem for Mexican tyre makers is that they have not been able to increase their share of the market significantly.  What Mexico's tyre makers are lobbying the government for is to impose an anti-dumping duty on tyre imports from China, South Korea and India. The industry claims that it cannot compete with tyres from these countries, which are, the Mexican industry claims, exported at below cost. The Mexican tyre makers say that they have no problem competing with tyres made in the US; the European Union; the US; Brazil; Japan and Chile.

An opinion poll published in a Mexico City newspaper, El Universal, on 9 February had the Partido Revolucionario Institucional (PRI) all but 15 percentage points ahead in the congressional elections due in July. The PRI is on 39.9%, while the ruling Partido Acción Nacional (PAN), currently the biggest party in congress, is on 25% and the leftwing Partido de la Revolución Democrática (PRD) is on 15%.

Our view is that the poll is worse news for the PAN government than the PRD (the second biggest party in congress), even though the polls shows that the PRD's national support has halved since the 2006 elections. The PRD's comfort is that it is still popular and strong in Mexico City, the country's second most important electoral district. The PRD is also strong in the Estado de México, which is the country's biggest electoral district. Together, the Distrito Federal (i.e. Mexico City) and the Estado account for 66 of the 300 directly elected seats in congress.

There are also psychological reasons why the the PRD is less likely to be shaken by the poll than the PAN. The PRD is essentially an opposition party and has only exercised power in a few states, notably Mexico City. The PAN is much harder-headed and keener on holding and retaining power. The PRD is also used to seeing its support fluctuate wildly. The ruling PAN is not and it suffered badly in the last mid-term elections in 2003 and this crippled the second half of then-President Vicente Fox's term (2000-2006).

There is also a historical reason. In the last congressional elections in 2006, the PRD did much better than its historical level of between 15% and 20%. On the back of its populist presidential candidate, Andrés Manuel López Obrador, the PRD won 25% of the vote. López Obrador won just over 35% of the vote in the presidential elections and the winner of the presidency, Felipe Calderón Hinojosa, just under 36%.

Currently the PAN has 207 seats in the 500-seat congress and the PRD and its allies have 155. The PRI has 106, with the remaining seats split between the Greens, the Partido Nueva Alianza (PNA) which is loyal to the leader of the teachers' union, Elba Esther Gordillo, and the Partido Socialdemócrata. In the 2003 mid-terms, the PAN went down from 206 to 154 seats. Indeed, since 1997, all the mid-term elections have been appalling for the ruling party of the time. (In 1997 the PRI dropped from 300 seats to 238.)

The El Universal opinion poll put the PRI on 39.9%. This will not give it a majority in congress, but the party is only a step away from the 43% support that political scientists calculate would trigger the overrepresentation clause in the electoral law that would automatically give the PRI 251 seats in congress.

What is more likely is that the PRI will fall just short of this. Assume it gets 80 of the 200 proportional seats and then say 45% (thanks to the power of its electoral machine and the mistakes the other parties will make over picking candidates) of the 300 directly elected seats. That would give the PRI 135 directly-elected seats and thus 215 seats in total. It is perfectly possible that it could pick up the other 36 seats it needs for a majority, first though an alliance with either the Partido Verde Ecologista de México (PVEM), with whom it fought the last election, and the PNA, and then by attracting 10 dissidents from the other parties. Currently the PVEM has 17 seats in congress and the PNA has nine.

The outlook for the PRD's allies, Convergencia and the Partido del Trabajo is markedly different. All parties need to win 2% of the national vote to retain their registration. Convergencia depends on Dante Delgado, a popular figure in Veracruz, the fourth most populous state, to achieve this. The PT, its critics say, depends on subsidies from President Hugo Chávez of Venezuela to keep going.

The other small party is the PSD (which has four seats in congress). It has been popular with the middle classes in Mexico City, almost entirely thanks to its former leader, Patricia Mercado, a leading feminist.

The PRI's strong suit is that it is the country's only national party: the PAN is strong in the north and west but, since the loss of the Yucatán in 2007, weak everywhere else. The PRD is strong in Mexico City and has pockets of support in various states but tends to do worse in congressional elections than gubernatorial or presidential ones.  

PAN nomination: The PAN has decided to nominate Fernando Elizondo Barragán as the party's candidate for the important gubernatorial election in Nuevo León this year. The choice was made by the PAN's national executive committee, which had been musing, often pretty publicly, on its selection since before Christmas. Elizondo was interim governor of the state when Fernando Canales Clariond was picked by former president Vicente Fox to become his economy minister. Elizondo's nomination is controversial because the PAN refused to hold a primary to pick the candidate.

At Elizondo's formal nomination, one of his rivals, Mauricio Fernández Garza (a member of the Garza-Sada clan which dominate the industrial sector in Monterrey, the capital of Nuevo León, appeared in black. He said that he was in mourning for the PAN. Just as significantly, Canales Clariond did not attend the formal nomination.

Political advertising: On 31 January and 1 February TV broadcasts of both the US “Superbowl" and local soccer matches were interrupted by political advertising. Politicians immediately accused the TV companies of trying to undermine the congressional reform of the broadcasting law which now makes the Instituto Federal Electoral (IFE) responsible for all political advertising. Previously political parties and special interest groups could buy airtime directly from broadcasters. The broadcasters and their supporters fear that the change will mean that there will be less political advertising. Elections are immensely lucrative for Mexico's dominant broadcasters, Televisa and TV Azteca. The broadcasters, the advocates of reform argue, wanted to annoy viewers by interrupting the sports, so much that they would protest to the IFE and get the practical effects of the reform reversed.

Yadira Tamayo, the president of the Comisión Especial para Reforma del Estado in the lower chamber, claimed that the broadcasters' action might also put people off voting. The interior minister, Fernando Gómez-Mont, officials from the IFE and the main broadcasters are now trying to broker an agreement.  

On 9 February the IFE warned the two main broadcasters and the satellite channel, Sky, that it would issues fines over the political adverts. The IFE says that all the broadcasters contravened its instructions.

As we have argued before, most recently in January, we agree with President Felipe Calderón Hinojosa that Mexico is not a failed state. In an interview with Spain's El Paí­s published on 27 March he argued, strongly, that the US was wrong to categorise Mexico as a failing state. Calderón pointed out that the economy is working normally in Mexico, children go to school and most parts of everyday life go on as usual.

However we disagree with Calderón and his government's claim that the violence which killed at least 11,583 people in Mexico in 2010 is mostly localised. It is true that a handful of states, Chihuahua, Sinaloa and Guerrero, top the murder league, but worryingly for the government, other states are now also in the mix. Nuevo León has been in the top five murder states for most of the past year; killing in Tamaulipas surged in 2010. The big worry for the government is that other states, such as Morelos or Michoacán, will join them. It is worth noting that in 2010 gang killings in Michoacán fell from 371 to 259. All the figures are from Reforma's Ejecutómetro.

What the surge in killing shows is that the drug trade in Mexico is unlike the drug trade in South America. In South America, there is a balloon effect: when the drug trade is squeezed, it moves elsewhere. This does not seem to be happening in Mexico. Michoacán may be a special case, because one of the dominant gangs in the state, La Familia, has been virtually eliminated. Mexican gangs have risen and fallen even before Calderón launched his war on organised crime in 2006.

President Calderón appears conscious that his power is starting to ebb. This is why what he says and does now, with his reducing authority, is so important and will shape the circumstances his successor has to confront. Calderón has done two important things in the past month. The first is to suggest, effectively, that the only way the Partido Revolucionario Institucional (PRI) can be prevented from returning to power is if the anti-PRI parties unite behind an independent. The second move Calderón has made is over relations with the US.

He has forced the US ambassador, Carlos Pascual, out. What is more interesting is that Calderón has held back from criticising the US over the supposed sting operation 'Fast & Furious'. Calderón is letting the political outrage in the US build. On 29 March Charles Grassley, a Republican senator, said that he was not happy with the US Bureau of Alcohol, Tobacco and Firearms and its explanation of 'Fast & Furious'. By holding fire, Calderón is keeping the pressure firmly on the US and, more importantly, preventing relations with the US becoming an issue in next year's presidential elections in Mexico.