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Jamaica's most wanted man, Christopher 'Dudus' Coke, the reputed leader of the notorious 'Shower Posse', was taken into custody in Kingston last week following a month long manhunt which left more than 70 dead - one of the bloodiest episodes in the country's recent history.   His swift transfer to the US to face charges of narcotics and arms trafficking has prompted positive noises from Washington, suggesting a willingness to repair relations with the government of Prime Minister Bruce Golding, which have been severely tested over its handling of the US extradition request. However, this apparent improvement in Golding's international credibility has yet to transfer to the domestic sphere.

Coke was picked up by the Jamaican police on 22 June, apparently en route to hand himself to US officials at the embassy in Kingston. His motivation was no doubt safety-driven given the precedent of his father, Lester Coke, a founder of the 'Shower Posse', who died in a 1992 prison fire while awaiting extradition to the US - believed by many to prevent him talking about links between criminal gangs and key political figures. 'Dudus', whose stronghold Tivoli Gardens lies within Golding's political constituency of West Kingston, was widely believed to have a power sharing agreement with the Prime Minister,   attributed to the government's nine month long refusal to comply with the US extradition request. Similarly, his father was considered an ally of former prime minister Edward Seaga (1974-1980; 1989-2005) who represented the same constituency.

Coke's transfer to the US, which followed his waiver of an extradition hearing, led the US to “commend" Jamaica for its work. This bore marked contrast to its earlier public condemnation of the Golding government which featured in its March 2010 International Narcotics Control Strategy Report (INCSR). The report noted that Golding's stalling on the extradition request “raised serious questions about [the government's] commitment to combating transnational crime" — a warning that Jamaica was risking 'decertification' by Washington. Following Coke's arrest, the IMF also announced that Jamaica had met initial targets under the agreement and could now receive some US$94m - again quelling earlier doubts that Jamaica might run into trouble with its US$1.3bn standby loan agreement, the first for the Golding government.

Despite Golding's efforts to appear committed to tackling crime (see sidebar), this apparent endorsement has yet to translate into support on the domestic front. While fears of violence following Coke's surrender have yet to materialize, Golding, who received ample criticism both locally and internationally for the violence sparked by the search for the alleged drug baron, has aroused controversy for extending the temporary state of public emergency put in place during the manhunt until 22 July. Civil rights groups and the Jamaican Bar Association warn that the measure, first invoked on 23 May, could have negative implications for human rights. Meanwhile, opposition senators announced that they would be tabling a no-confidence motion against the attorney-general and justice minister, Dorothy Lightbourne, for having delayed Coke's extradition.

• Anti-crime bills

Among the measures taken by the government of Prime Minister Bruce Golding to illustrate its commitment to tackling crime, six 'anti-crime' bills were passed on 23 June. The bills, which have been stuck in parliament since 2008, tighten provisions on bail, parole, firearms and the powers of arrest and detention.

He enraged the government of President Cristina Fernández the first time he did it and now he's at it again. Vice-President Julio Cobos used his position as president of the senate on 14 October to cast the deciding vote in a crucial debate over pensions. Cobos was reviled by the government after performing the same role in July 2008 in a deadlocked vote on agricultural export taxes, which marked the first significant legislative defeat for Fernández or her husband and predecessor Néstor Kirchner in five years. Cobos said he was acting in the national interest, but he had a personal motive: to improve his prospects ahead of next year's presidential elections. Fernández, who called Cobos a “squatter", was forced to take the politically unpopular decision of vetoing the law and will need to find another way of courting Argentina's 5.5m pensioners.

The bill passed by the senate would increase pensions to 82% of the Arg$1,500 (US$381) minimum wage (a 37% increase from the current pension of Arg$895 a month to Arg$1,230). It had been approved by the lower chamber in August. The opposition argues it will cost Arg$18.9bn (US$4.7bn) a year and is affordable; the government says it will cost Arg$40bn (US$10.05bn) and is not.

The combustible chief of cabinet, Aní­bal Fernández, immediately leapt onto Twitter to accuse the opposition of passing “the bankruptcy law" which he said was tantamount to “state suicide" and would be vetoed. He was right in one sense: President Fernández vetoed the law. “I, as president, cannot allow the state to be bankrupted," she said. She said that her veto was taken on behalf of all Argentines and added that pension increases would continue every six months as her government had established. Pensions are increased by law in March and September, and have been raised by 25.1% this year (three times the official rate of inflation but close to private estimates of inflation).

The pension law could now go back to congress but the opposition will not be able to muster the two-thirds majority required to override the presidential veto. By forcing Fernández to make use of it, however, the opposition put the government in the awkward position of being seen to reject a measure that would have benefitted a good chunk of her support base. This suggests the opposition is getting more politically astute after fighting a principled, but abstruse, institutional dispute with the government for months earlier this year, which failed to catch the public's imagination.

The pension law was eminently political rather than economic. The government argues that the opposition has simply not explained how the pension increase will be financed. The opposition insists the increases could be covered by taking an axe to other parts of the budget (singling out government subsidies) or by increasing social security payments. However, the question is not really whether there is enough money in the social security agency (Anses) but what to do with it. The opposition was hoping to land a double blow on the government: to claim credit for the populist law; and, through the resulting increased financial commitment, prevent the government from ramping up spending in the run-up to presidential elections in 2011, thereby damaging the re-election prospects of Fernández or Kirchner. The government nationalised the private pension funds in 2008 precisely so that it could have access to more cash for public spending.  

Presidential contest heats up
Cobos' vote was also hugely symbolic - a dramatic reaffirmation of his determination to seek the presidency for the Unión Cí­vica Radical (UCR). “I am enduring all sorts of abuse and aggression but I will keep acting in the same way," Cobos said, while casting doubt, because of the veto, on the government's professed commitment to social issues. Cobos needed to reassert his presidential credentials in the face of the rise of Ricardo Alfonsí­n, the son of former president Raúl Alfonsí­n (1983-1989), in the polls.

From having no candidate with any chance of winning the presidency, the UCR suddenly has two serious contenders. Cobos retains considerable support in the provinces through having cast the decisive senate vote on agricultural export taxes in 2008 in support of the powerful farming unions. There is distrust of Cobos in the party, however, for having broken away to back the Kirchners in 2007. Some Alfonsinistas even argued that the government deliberately allowed Cobos his latest victory in the senate to provoke a rift within the UCR. A showdown with Alfonsí­n in party primaries could be divisive, but it should not split the Acuerdo Cí­vico y Social coalition between the UCR and the Partido Socialista (PS). Hermes Binner, the popular governor of Santa Fe, has committed himself to backing either man. The main powerbroker in the PS, Binner would be the likely running mate for Cobos or Alfonsí­n.
 
The biggest imponderable ahead of the elections is who emerges to represent the pro-Kirchner and anti-Kirchner factions in the Peronist movement. Until recently it was taken for granted that either President Fernández or Kirchner would run for the former. But, Fernández only enjoys some 36% support, according to the most recent opinion poll by Poliarquí­a for the national daily La Nación , and Kirchner 32%. Both the electoral floor and the ceiling for the Kirchners are pretty similar and there must be a concern that they would not win the 40% of the vote (and 10-percentage point advantage over the nearest challenger) to win in the first round. When the governor of the province of Buenos Aires, Daniel Scioli, who outperforms both of them in polls, intimated that he might run, however, cold water was quickly poured on his prospective candidacy.

The powerful leader of the highly political trade union Confederación General del Trabajo (CGT), Hugo Moyano, recently appointed leader of the PJ in Buenos Aires province, backed the presidential couple to the hilt during a rally celebrating Peronist 'Loyalty Day' at the weekend (see sidebar). Moyano even deemed himself influential enough to comment that Scioli's place was to run for governor again, eliciting a declaration a day later from five provincial governors loyal to the Kirchners that they would not back his presidential candidacy.

Scioli has never publicly dissented with the Kirchners despite being given ample opportunity (Kirchner publicly humiliated him recently by insisting he reveal who was “tying his hands" and preventing him from tackling insecurity problems in the province of Buenos Aires). He might just be tempted, however, to join the anti-Kirchner Peronismo Federal (PF). Former president Eduardo Duhalde (2002-2003) seems keen to coax him away from Kirchner, but others think he must openly split from Kirchnerismo and then get in line behind other presidential aspirants such as Felipe Solá and the governor of Chubut, Mario Das Neves.

• Loyalty Day
  Peronismo Federal (PF) held its own celebrations for 'Loyalty Day' in the north-western city of Salta. Several prominent attendees accused the Kirchners of deserting their working class support base by following up on the pensions veto by staging their rally in the stadium of River Plate football club. River, nicknamed 'the Millionaires', is traditionally supported more by the upper-middle class, while Boca Juniors, the other Buenos Aires football giant, is considered the club of “the people". It could be the Kirchners were trying to curry favour with the urban middle class, amongst whom they have consistently failed to make inroads.

President Ricardo Martinelli's popularity is in freefall. A recent reform by his pro-business government to the 1963 mining code, opening it up to foreign government investment, has triggered unrest on a scale comparable with that sparked by his misjudged attempt at weakening trade union and environmental legislation (the so-called Ley Chorizo), last July. Martinelli was forced to backtrack and repeal the law then, and he is once again on shaky territory, offering hasty reassurances which have yet to convince.

Martinelli first announced his interest in boosting Panama's largely dormant metallic mining sector last March [WR-10-14]. While an October 2010 report by the economy ministry put Panama's copper reserves alone at some 47.2bn pounds, worth an estimated US$141.6bn in situ [WR-10-44], previous governments have resisted the move given public opposition. The change to the law on 10 February was approved by 42 votes in the 71-seat legislature after tense debates. It was linked to efforts by Canada's Inmet mining company to secure financing from two foreign governments (Singapore and South Korea) for the Cobre Panama mine, Panama's second largest copper reserves (20bn pounds). Opposition to mining development, however, has traditionally focused on the Cerro Colorado, believed to hold the biggest copper reserves (25bn pounds, worth US$75bn) which, critically, lies within the indigenous Ngí¤be Buglé comarca (political administrative region).

While protests have taken place across the country, unrest has been most pronounced in the Ngí¤be Buglé comarca (which spans some 8% of national territory) and, in particular, the Chiriquí­ and Bocas del Toro provinces. The latter notably was the site of the July violence which resulted in at least two dead amid clashes with police and forced the U-turn over the Ley Chorizo [WR-10-10].

Martinelli has sought to avoid a repeat of the police violence, which subjected his government to international criticism and prompted damning reports by the human rights ombudsman and a local NGO. He has also issued a decree which explicitly pledges not to allow mining development in the country's five indigenous comarcas for the duration of his mandate (which ends in 2014). These assurances ring hollow, however, given the June 2010 presidential decree eliminating much of the political autonomy of the Ngí¤be Buglé comarca which allowed the central electoral authorities to call elections in October 2010, a move widely held to be an attempt at installing pliant local officials [WR-10-44].

Indigenous groups have set 25 February as the deadline for the repeal of the new law. With the majority of the population similarly opposed to mining (see sidebar), and Martinelli's approval rating at an unprecedented 41% (down from its usual 60%-70%), he could well be forced to reconsider the reform.

Another U-turn
President Martinelli has also recently been forced to ditch another unpopular initiative - a proposal to amend the constitution to allow for consecutive presidential re-election. It is not clear why he chose to pursue the idea given widespread opposition; in 1998 former president Ernesto Pérez Balladares (1994-1999) held a referendum on the subject but was soundly defeated and the issue has met with opposition ever since. It was ultimately the prospective political damage to Martinelli's alliance with a key coalition partner, the Partido Panameñista (PP), which proved decisive. By the time a deputy for his Cambio Democrático (CD) put the bill to the congressional committee in early January (which was rejected), it was unlikely Martinelli himself backed the motion. The initiative would have reneged on the deal he made in 2009 whereby Vice-President Juan Carlos Varela, who is the PP party president, abandoned his presidential bid to join the Martinelli ticket in exchange for the PP heading up the coalition ticket in 2014. Even if the motion had been approved, it would have lacked support in congress; the CD has 28 seats, while the PP has 21.

• Opposition to mining

While the most recent poll by Dichter & Neira, published last week, showed 67.7% of respondents opposed the development of mining activity, the actual level of rejection is likely much higher given that the poll, which surveyed 1,200 people nationally, did not cover the five comarcas where opposition to mining is most pronounced. The issue has also reportedly exposed strains within President Ricardo Martinelli's ruling coalition: Vice-President Juan Carlos Varela has refused to sign the ministerial resolution dated 26 October 2010, allowing the initiative to be put forward in congress.

VENEZUELA | Tracking down the bombers. A Caracas court has ordered the arrest of three rebel military officers — retired General Felipe Rodrí­guez and lieutenants Germán Valera and José Colina — accusing them of involvement in the bombings of Spanish and Colombian diplomatic premises last February. At the time, the incidents were blamed by the opposition on pro-government elements. The issue of these warrants was followed by the arrest of four civilians also accused of involvement in the bombings.

Police sources have said that they suspect this group of being behind most of the 37 acts of terrorism they are investigating, including the murder of four members of the opposition's security services suspected of being double agents.

Though they rarely make headlines abroad, bombings have continued in Venezuela. On 9 December three workers at an education ministry healthcare centre were injured by an explosion. The following day an incendiary device was hurled at the doors of a church in Los Teques, a city south of Caracas. There were no casualties, but considerable material damage.

BOLIVIA | Tension rises on drugs front. A major combined military-police operation has been launched in the coca-growing area of Chapare, Cochabamba, in search of those responsible for a series of attacks on patrols of the FELCN eradication force. Ambushes and booby-traps have claimed the lives of four members of the security forces over the past couple of months.

Evo Morales, the former presidential candidate who rose to prominence as a leader of the coca growers, claims that the attacks are the work of agents provocateurs seeking to provide justification for large-scale military intervention in the Chapare. He says the US embassy is behind this. His line of argument has been strengthened by a recent statement by Rogelio Pardo, the US assistant undersecretary of defence, to the effect that there is evidence of the presence of `narcoterrorism' in Bolivia, and that in consequence the US would assist the Bolivian military.

It also comes just as the embassy has come out against reported government plans to jettison the coca-eradication programme and concentrate instead on fighting the processing and trafficking of cocaine — a shift that has been summarised by officials as opting for `zero cocaine' instead of continuing to pursue the unattainable target of `zero coca'. The embassy has reiterated its own slogan, `coca is cocaine', and US officials have reminded Bolivia that open toleration of coca growing would contravene international conventions.

ECUADOR | Fallout from Colombia spat kills Southcom deal. The recent spat with Colombia over the provenance of missiles used by the Farc guerrillas has had an unforeseen consequence: the annulment of an agreement signed between Ecuador and the US Southern Command whereby the latter would build three depots — at Lago Agrio, Guayaquil and Austro — ostensibly to store supplies to deal with natural disasters. This came after congress raised objections to the agreement, in the wake of opposition claims that the row over alleged arms trafficking and the installation of the depots were part of a plan to involve Ecuador more closely in the Colombian conflict. Formally, congress had said that the agreement was unconstitutional, inasmuch as it had not received legislative sanction. Unwilling to face a challenge before the supreme court, the government opted for cancelling the deal.

For the record: Colombia did not produce any proof of its claims that a rocket used by the Farc had come from an Ecuadorean military arsenal, nor did it apologise — but both governments decided to bury the issue.

Whether it is on the formal agenda for the Summit of the Americas or not, the issue of immunity for US troops will almost inevitably be raised when the rulers of the hemisphere meet in the Argentine seaside resort of Mar del Plata in November. Notice of this was served in late August by Argentine foreign minister Rafael Bielsa. The immediate motive for this was the debate over the current presence of US troops in Paraguay for exercises; not so much the fantasies about the establishment of a US base but the fact that Paraguay granted immunity to the visiting forces [SSR-05-07].

In May the Paraguayan senate voted to grant diplomatic immunity to members of the US military taking part in 13 scheduled exercises over the coming year-and-a-half. In late June the senate followed this up by authorising the entry of US troops for a series of exercises due to take place between July and December. These would involve 204 members of the US military in all, in batches of 10 to 32 at a time. The first group, seven strong, arrived in Asunción on 3 July to run a course on counterinsurgency and antidrug operations.

Official statements, while equivocal, appeared to indicate that this was not an 'Article 98' or bilateral immunity agreement (BIA) shielding US personnel from surrender to the International Criminal Court (ICC), which only two South American countries have signed: Bolivia and Colombia. The Brazilian government has publicly lamented the 'lack of transparency' in Paraguay's move, and both Brazil and Argentina have let it be known that they would have expected Paraguay to consult them on the matter, particularly when the launch of the exercises was followed by a visit to Asunción of US Secretary of Defense Donald Rumsfeld.

Bielsa said on 26 August, in discussing the issue of regional cooperation on defence (see page 10), that this matter 'poses certain sensitive questions, such as the kind of immunity granted [to US troops involved in joint exercises]. This will be one of the issues for the Summit of the Americas.'

Argentina's stance on the matter could not have been better illustrated than by the 6 September vote in the lower chamber of congress authorising the entry of troops from 12 countries for a year-long cycle of joint military exercises over the coming year - which again refused to grant US troops the immunity Washington had been demanding.  

This meant that all the exercises involving the US will be held outside Argentina. Interesting to note is the fact that Argentina is exempted from the sanctions that have befallen all other hemispheric states refusing to sign BIAs, because since the Menem presidency it has enjoyed the status of 'principal non-Nato ally' of the US.

Under the American Service members' Protection Act (ASPA), not signing a BIA renders a country liable to the suspension of US military aid not related to antidrugs efforts. Since last year, that also includes Economic Support Funds (ESF), loans granted in conjunction with military aid to 'allies' of the US. All South American non-signatories of BIAs save Argentina have seen their US military aid cut (Chile has not been affected because it has not yet ratified its accession to the ICC).

Argentina will be taking part in 17 joint exercises with 12 other countries (Bolivia, Brazil, Chile, Colombia, Dominican Republic, Ecuador, Panama, Paraguay, South Africa, Uruguay, US, Venezuela) between now and September 2006. Six exercises involving US troops will take place in countries other than Argentina; the most important of these are Cabañas (Brazil), Panamax (Panama), Halcón (Puerto Rico) and Unitas (international waters).

The US has been pressing hard for Latin American and Caribbean countries that have signed and ratified membership of the International Criminal Court (ICC) to sign BIAs (SSR-04-08).

US critics of this policy cite two main arguments. One is that it actually works against US security interests, in that the denial of military aid to countries being wooed as allies may push them towards other sources of military assistance (such as Europe, Russia and China, already providers, although on a scale much lower than that of the US).  

The other is that surrender to the ICC is a highly hypothetical situation, since the ICC would only act if there were no remedy in US courts, and troops engaging in exercises are usually protected from even local prosecution by agreements akin to those covering diplomatic missions.

The problem with the latter argument is that even countries as strongly allied to the US as Colombia have been chafing at the immunity agreements. In May, several Colombian legislators and law officers demanded a review of such bilateral agreements after the third major criminal case in four years involving members of the US military [SSR-05-05].

The case in point was that of the early-May arrest of Warrant Officer Allan Tanquary and Sergeant Jesús Hernández, as they were apparently seeking to sell 31,000 rounds of ammunition on the black market. The two were initially identified as 'part of the support team providing cooperation with Colombia at the [US] embassy', which would have given them diplomatic immunity. The fact that they were not actually posted at the embassy, but at the military base of Tolemaida, made little difference: they were still shielded by two other immunity agreements between Colombia in the US; one dating back to 1974 which covers members of the US military performing official duties in the country, and the more recent 'Article 98' BIA.  

The two previous cases involved drug-trafficking; one by a group of US servicemen, the other by the wife of a colonel posted at the US embassy. Those involved in all three cases, placed beyond the reach of the Colombian courts, were sent back to the US.

The US had been trying hard to confine the November summit's agenda to a subject that does not lend itself to much political posturing: 'Creating Jobs to Fight Poverty and Strengthen Democratic Governance.' One of the aims was to limit the opportunities for Venezuelan President Hugo Chávez to turn the event into a stage for another anti-US tirade. As with other summits, in this one what happens on the sidelines may matter more than the official agenda.

PERU | New attack in Huallaga coca region. On 14 June a police convoy was ambushed when returning to Tocache after patrolling an area of the coca-growing region of the Upper Huallaga. Three police officers and a public prosecutor were killed and the other policemen were injured in the attack. Prime minister Jorge del Castillo said the ambush was proof of the "alliance between subversion and drug-trafficking" in the southern part of San Martí­n department.
On 16 December Sendero Luminoso guerrillas had pre-empted the launch of a large-scale government offensive against them [SSR-06-11] in the Apurí­mac-Ene valley, ambushing an antinarcotics police patrol and killing five officers, two government officials and a civilian. The attack took place near Machente, on the rim of the jungle, in Ayacucho department; an area declared in a state of emergency and placed under military control in 2005. On 12 January, Sendero struck again, killing two police officers in another ambush, in the vicinity of Churcampa, Huancavelica, close to the boundary with Ayacucho. It was carried out by an estimated 10 men armed with firearms and grenades: two police officers were killed, while a third escaped unharmed. The attackers made off with the victims' assault rifles.

VENEZUELA | Chávez denounces 'soft coup' plot. On 6 June, President Hugo Chávez , in response to the series of demonstrations against his government's decision not to renew the broadcasting licence of Radio Caracas Televisión (RCTV), said that a US-inspired plan for a 'soft coup' against him was under-way. He said this consisted of staging successive low-intensity actions, intended to ignite the atmosphere until the point is reached when an incident provokes a social explosion, whihc would unseat the government. He added, however, that such a plan could only prosper in countries where the government did not have the popular support he enjoys.

On 4 June, prior to university students gathering to protest against the closure of RCTV, an explosive device was detonated at the journalism school in the Universidad Central de Venezuela (UCV) in Caracas. It caused minor damage and no casualties. Another device found nearby did not explode.

ECUADOR | Drive to curb firearms. Following the killing of a boy in Guayaquil by a stray bullet in late May, President Rafael Correa announced the launch of 'Ecuador Sin Armas' [Ecuador Without Weapons], a drive to confiscate illegal weapons, shut down clandestine arms factories and ban the import of firearms. The armed forces believe that there are about 360,000 privately held firearms in Ecuador, of which only 120,000 are licensed. Most of the firearms in circulation are made in Ecuador: they cost far less than imported ones (a .38 revolver made locally costs about US$70; an imported one, about US$600). 

There are about 134 legal gun manufacturers in the country, the bulk of them in San José de Chimbo, Bolí­var province, a traditional gunsmithing centre. But there are many more clandestine ones "whose whereabouts," said Correa, "everyone knows."

In the first four months of the year the police in Guayaquil reported the seizure of 476 firearms in the course of its normal anticrime operations. The police drive to confiscate illegal firearms began in early June in Guayaquil. On 3 June the interior ministry announced a ban on all imports of firearms save those for exclusive use of the police and armed forces. Gasepol, a company owned by the national police, has been entrusted with producing electronic chips to affix to all legally held firearms. The drive to tag these firearms is to be launched by the armed forces' logistics directorate in the second half of July.

The Peruvian government has been reporting rare successes in its campaign against the Sendero Luminoso (SL) guerrillas on their two fronts, the valleys of the Upper Huallaga and of the Apurí­mac-Ene rivers. The SL remnants still up in arms have been obliquely admitting that the military drive has made an impact, and that they are embroiled in a political struggle with their former comrades.

On 27 February the joint command of the armed forces reported that its forces in the Apurí­mac-Ene valley (VRAE) had captured Cerro Tincuya, a mountain from which, it said, 'the delinquents had been harassing the patrols in the area and particularly the aircraft supporting them'. The military acknowledged that in this operation one marine had been killed and another two had been injured. An earlier communiqué said that the military had inflicted 'casualties' on the guerrillas (without any further details).

On 7 March a patrolling unit of the antidrugs police came across a group of 10 to 15 armed men apparently positioned to ambush an army vehicle in Machente, Ayacucho (a locality often described as the gateway to the VRAE). A firefight ensued. The police later reported that one of the gunmen, presumed to be SL guerrillas, had been captured and that five rifles (four FAL, one Ruger), a carbine and two submachineguns had been seized. No casualties were reported.

That the VRAE remnant of the SL, led by Ví­ctor Quispe ('Camarada José), is feeling the impact of army action had been admitted in a communiqué issued by its political governing body, the Comité Central Regional Principal del Centro. Dated 9 February and published in the Diario Internacional website, it  reacts to the creation of a new military region in Vizcatán saying, 'The party [...] envisages a period of guerrilla warfare with constant displacement, leaving aside the security zones and changing tactics and methods.'

That same communiqué refutes the government's claim that SL has become wholly involved in drug trafficking, and also attacks former comrades campaigning for the release of SL founder Abimael Guzmán ('Presidente Gonzalo'). This campaign has been visible nearby, in Huanta, Ayacucho, where hundreds of leaflets signed by the Movimiento Democracia y Desarrollo para el Pueblo (an organisation set up by former SL guerrillas) called on 25 February for a 'political solution' and an amnesty for jailed senderistas, starting with Guzmán.

The Huallaga front
In the Upper Huallaga, the smaller SL remnant commanded by 'Camarada Artemio' is seen by the authorities as reduced to very sporadic attacks and selective assassinations. On 25 February a bombing attack that toppled a 30-metre power pylon in Tingo Marí­a, Huánuco, was attributed to SL by a spokesman for the Frente Policial Huallaga, who recalled that blowing up power pylons was a frequent SL tactic in the 1980s and 1990s. On 9 March an army patrol captured three SL fighters carrying dynamite and apparently intent on blowing up another pylon.

Police sources told the media that the deaths of several of the SL's 'military leaders' in the Upper Huallaga area had led to turf wars between low- and middle-ranking drug traffickers. This, plus a drive by Artemio to eliminate suspected collaborators with the police, had led to 20 assassinations so far this year. A local public prosecutor, Edison Salas, said that not even at the peaks of terrorist activity in the 1980-2000 period had there been so many killings in such a short timespan.

Both Costa Rica and Nicaragua are appealing for international intervention following allegations of a Nicaraguan incursion into Costa Rican territory. The area in question involves the San Juan River which the Nicaraguans had begun dredging to boost water levels for a new hydroelectric project and which previously had been the source of a longstanding maritime dispute between the two which the International Court of Justice (ICJ) resolved in 2009.

In early October, a party of Nicaraguans led by Edén Pastora (a former hero of the Sandinista revolution), recently put in charge of the controversial dredging of the San Juan River), landed on Calero Island, within the Costa Rican department of Limón. According to the Reyes Reyes family, Pastora offered to buy their 210-hectare farm.

When they refused, Pastora's party, identified by the farmers as members of the Nicaraguan military, beat up the farmhands, killed all the pigs and slaughtered cows for their own consumption. The Reyes Reyes family fled and sought the assistance of Congressman Claudio Monge, of the opposition Partido Acción Ciudadana (PAC), who travelled to the area and, after interviewing the farmers, announced that he would be denouncing the Nicaraguan action to the judiciary. Monge said that the family had been 'expelled' from their farm and that the Nicaraguans had begun to clear the ground to dig a canal to divert water from the Colorado River, inside Costa Rica, to the San Juan River.

Costa Rican Security Minister José Marí­a Tijerino ordered an aerial reconnaissance which revealed that a Nicaraguan dredger was anchored off Calero Island and that it was pumping sediments onto it. It also detected the presence of 'about a dozen apparent workers', presumed to be Nicaraguans from the dredger, were ashore. On 21 October, after a meeting of the national security council, the Costa Rican government sent a diplomatic protest note to Nicaragua describing the episode as 'an unacceptable violation of Costa Rican sovereignty' and demanding assurances that it would not be repeated.

Tijerino announced that a contingent of police officers would arrive on the scene the following day 'to guarantee respect for national sovereignty'. He did not mention the strength of the contingent, which different media have put at 70 to 150 and described as wearing camouflage uniforms and carrying M-16 rifles and M-60 machineguns. By the time they arrived, the Nicaraguans had left, but they were able to verify that river sediment had been dumped over some 2,500m2 of wetland, and that trees had been cut down. Tijerino said, 'We trust that this is the product of a particular person's initiative and not of a directive from Nicaragua's high authorities.'

Pastora's version
The Nicaraguans are sending out mixed messages. On 22 October, the Nicaraguan daily La Prensa published statements by Pastora admitting that he had made an incursion into what he described as part of 'Nicaraguan territory'. René Núnez Téllez, president of Nicaragua's national assembly, said that the Costa Rican deployment of a police contingent was 'a provocative attitude [since] we are working within our own territory.'

This was rebutted by General Oscar Balladares, chief of staff of the Nicaraguan army, who stated that his service 'has not nor will it ever conduct an incursion into any neighbouring country'. Regarding the Calero island area, he said, 'There is no dispute or misunderstanding or controversy which would have made [such an incursion] necessary.' The general added that the Costa Rican government had every right and the legal power to send police to the area. Along the San Juan River area, he said, Nicaragua has a detachment of more than 300 soldiers 'long devoted to guarding the river'.

Pastora, then provided another explanation. He told the Costa Rican TV program Extranoticias TV42 that the incursion had been an anti-drugs raid on the Reyes Reyes farm, where his party had seized fuel, go-fast boats, rifles and satellite phones, and had found a group of undocumented Hondurans. He also said, 'This is Nicaraguan territory; they have believed that it was Costa Rican territory but it is no man's land; nobody has demarcated the border there.'

Neither side are backing down over the issue however. On 24 October, Costa Rica's public prosecution service began a formal investigation into the environmental impact of the Nicaraguan dredging operation. Tijerino said that police would continue to conduct regular aerial reconnaissance in the area of the incursion. Supplies were airlifted to their base camp at Barra del Colorado Sur.

While the Nicaraguan government initially sought to keep a distance from Pastora and his claims, on 27 October it issued a response which not only “categorically denied" any violation of Costa Rican sovereignty but went on to claim that the Costa Ricans themselves had illegally crossed the border (albeit without providing details).

On 1 November, the Costa Rica government called on the Organization of American States (OAS) to hold a special meeting to present its case. The Nicaraguans have responded by insisting they will take the issue once again before the ICJ at The Hague. The ICJ had previously issued a ruling in 2009, which was accepted by both sides, establishing that the San Juan River belonged in its entirety to Nicaragua, but granted Costa Rica the right of free navigation for commercial purposes.

The San Juan scheme
The dredging of the San Juan River is intended to increase its flow to serve a project to build a 250MW hydroelectric power plant near El Castillo. This is part of a government plan codenamed Soberaní­a ('Sovereignty'). One prominent Nicaraguan scientist has said that the scheme is based on outdated calculations of the flow, and that downstream of the dams the San Juan River could end up reduced to an unnavigable level.

Salvador Montenegro, director of the aquatic resources research centre (CIRA) at the Universidad Nacional Autónoma de Nicaragua, says that the studies for the project are based on a flow level of 500 cubic metres per second determined in 1977. Since then deforestation, running at about 77,000 hectares a year, has considerably reduced that flow, so downstream of El Castllo, where a huge dam is planned, the flow will not be navigable until some 30 kilometres away, when the San Juan starts receiving the waters of the two big Costa Rican affluents, the Sarapiquí­ and San Carlos rivers.

The plan for a hydroelectric plant at this location, presented as Nicaragua's big opportunity to shake off its excessive dependency on imported fuel (currently covered by Venezuela), is not an initiative of the Ortega government. Studies began in the 1970s, when the dictator Anastasio Somoza Debayle was in power. By 1978 the Somoza government was actively seeking financing for it, but these efforts were interrupted by the internal conflict that culminated in the Sandinista revolution of 1979.

• Cooperation

The Nicaraguan authorities initially did not confirm Pastora's claim about an anti-drugs raid, but on 24 October announced that they had formally requested Costa Rican assistance (and that of Interpol) to capture members of a Nicaraguan gang known as Los Tarzanes, linked with Honduran traffickers arrested on 1 October, who in turn are thought to be connected with international traffickers operating in Colombia, Costa Rica and Honduras. Costa Rica promptly communicated its willingness to help.

Date: 26 September 2010

Type: Legislative elections for the unicameral National Assembly (AN)

Main contenders: Partido Socialista Unido de Venezuela (PSUV); Partido Comunista de Venezuela (PCV); Patria para Todos (PPT); Un Nuevo Tiempo (UNT); Primero Justicia P(MPJ); Podemos; COPEI; Acción Democrática (AD); Movimiento al Socialismo (MAS).

President Hugo Chávez , who deliberately makes every election a plebiscite on himself, is in full battle mode in 2010, just the way he likes it. His aim is to retain at least two thirds of the unicameral national assembly (AN) ahead of fresh presidential polls in 2012, for which he has already declared his candidacy. Despite his current difficulties (see below) it would be a grave mistake to underestimate Chávez   - he is usually one step ahead of the game and he spent much of last year planning for the 2010 polls. The constitutional reform referendum of February 2009 and the Electoral Processes law of July 2009, which independent electoral analysts calculate will work in favour of the president's ruling Partido Socialista Unido de Venezuela (PSUV), were two significant steps on the way to the 2010-2012 electoral period.   It's worth bearing in mind that the impressively well organised PSUV dominates the country and though the opposition made progress in key urban areas (including Caracas) in regional elections in November 2008, it is still a long way off anything like the local and national reach of the PSUV, not least because of its inability to forge a stable common platform and find a leader capable of matching Chávez .

Is the Revolution in trouble?
Just over a year ago, critics of President Chávez forecast that the oil price collapse would mark the beginning of the end for him, but were disappointed when he turned the crisis to his advantage, taking the opportunity after a successful February 2009 referendum to repeal the two-term limit on elected posts to accelerate the Bolivarian Revolution and consolidate his increasingly autocratic grip on power with fresh nationalisations, fast track approval of new legislation (including the controversial new Electoral Law) and a renewed assault on the opposition media. For a while, it seemed as though Chávez could ride out a year of recession without too much difficulty. From late 2009, however, it suddenly looked as though the tide was turning against the wily Venezuelan leader.

Chávez was caught out on several fronts from the third quarter of 2009, most of them economic. Having faced down the opposition over a new education law in August, the government was ill-prepared for a long drought that led to water and electricity shortages. This eventually forced it to impose widespread rationing programmes from September-October 2009, irritating an electorate already enduring higher inflation and unemployment, as well as rising public insecurity. Around this time the president was also forced to admit that some of his flagship oil-funded social programmes had failed to deliver, and the government was also confronted with the reality of a rapidly stagnating economy - which had stalled as the massive public fiscal stimulus of the previous half decade was withdrawn. Previously the government had flooded the country with oil boom cash.The fourth quarter brought a mini banking crisis and revelations of corruption in Chavista circles, fresh tensions with neighbouring Colombia and the US, followed by weak GDP figures (-2.9% year-on-year in 2009). Late 2009 opinion polls suggested the president was in trouble.

Chávez approached the New Year head on, with a surprise devaluation on 8 January, which was spun (badly) as an effort to boost the domestic productive sector. The move, accompanied by government strong-arming of retailers to prevent excessive price rises, was ill received and even government supporters acknowledged it was a thinly disguised move to raise cash for the coming electoral period. The government also expanded the energy rationing programme, to the mounting despair of both consumers and the struggling private sector. The opposition, and more notably pro Chavista groups, publicly questioned what the government had done with an estimated near US$1trillion in oil revenues over the previous decade, openly accusing senior officials of mismanagement and corruption.   To make it worse, problems with the implementation of the power rationing scheme in Caracas led to a quick cabinet reshuffle in mid-January, followed in short order by another a fortnight later, as more heads rolled.

In the meantime, the government moved once again against the opposition media, forcing six cable TV channels, including the well known anti-Chávez Radio Caracas Televisión Internacional, off the air on rather dubious legal and technical grounds. Resulting protests led to two deaths on 25 January, as Venezuela's restive university students once again joined forces with the opposition in the country's main cities. The opposition also seized on Chávez 's early February appointment of Cuba's notorious minister of technology and communications, Ramiro Valdés to fan fears of the 'Cubanization of Venezuela', something long resented by Venezuelans, according to opinion polls.

Opposition spys a gap

In this scenario, the opposition, which boycotted the last parliamentary elections in 2005, a major tactical mistake, sniffs an opportunity. According to a February poll by IVAD, six of every ten respondents felt the country was in a bad way in February 2010 and the president's approval rating has fallen around 10 percentage points over the past year. It is still at a daunting 58.3%, however. More notably, more people directly blame Chávez himself for the difficulties in the country, with only 48% saying they had confidence in him.

Of the IVAD respondents, 39% intended to vote for Chavista candidates in the legislative vote, while 34% were opposition-leaning.   As in the 2006-2008 electoral period, both the government and the opposition will battle it out to capture a greater slice of the sizeable minority of apathetic voters and disaffected Chavistas (the so-called 'ní­-ní­s' [neither- nors]), estimated at 1.8m, this year. In the February 2009 referendum, of a high 11.7m turnout, Chávez received 54.9% of the vote (6.3m votes), against 45.1% for the opposition   (5.19m). This was a record in numerical terms for the opposition.

Gerrymandering

Logistically, it won't be easy for the opposition. Under the new Electoral Law, which supersedes the political participation and electoral statute laws, the number of national assembly deputies elected directly in 2010 will increase from 60% to 70%, while 30% rather than 40% of deputies will now be elected by proportional representation in accordance with electoral lists. The law creates a parallel electoral system: two different parties will be able to nominate the same candidate, once as an individual and once via a party list, to enhance their chance of being elected. The PSUV says the system will give the people, rather than parties, a greater say in who is elected. The opposition claims the PSUV is conspiring to preserve its majority as it stands to benefit from the law at the expense of smaller parties.

As part of this reform, the National Electoral Council (CNE), dominated by Chavistas, finalised its redrawing of the country's electoral boundaries in mid January 2010, divvying up districts in eight of the most populous (and overwhelmingly pro-Chávez ) communes in high density areas in a manner that will put the opposition at a clear disadvantage. The districts in question lie in eight states, including Barinas and Lara, held by the PSUV, along with Amazonas, Carabobo, Miranda, Táchira, Zulia and the Capital District, all opposition held. Together, these eight account for 60% of the electorate. The six opposition-held states account for 38% of the AN seats up for grabs in September, or 63 seats. The other 16 states were not altered, prompting the opposition to complain that the CNE was using two sets of rules. Yet there is little that the opposition can do against this blatant gerrymandering.

The challenge now for the opposition, which is still a heavily reactive force, is to put together a common electoral front (not to mention a policy programme) behind single district candidates. Eleven main opposition parties, including Copei, Primero Justicia and Un Nuevo Tiempo, last year united under the 'Mesa de la Unidad Democrática' (MUD). In November 2009 the MUD said it would hold primaries in April, with lists to be defined by January. Past efforts to select unitary candidates have been fractious. In contrast, the PSUV is much more advanced in its process. In mid February, the PSUV indicated a willingness to cede spaces on its lists to its somewhat disgruntled allies, including the Partido Communista and Patria Para Todos, following acrimony over PSUV dominance of the lists ahead of the regional elections in 2008.

• Changes

In September, a reduced 162 seats will be up for grabs in a new 165-seat AN, down from 167 previously (with three standing seats for indigenous representatives). Under the new electoral law, 110 of the 165 seats will be directly elected, with 52 via lists from the 24 states. Political parties have between 1 April and 30 May to hold primaries.

• Conspiracies

Chávez 's most wild-eyed opponents claim that he is preparing to declare an 'autogolpe' and cancel this year's legislative polls. Given his near total control over the main state institutions, including the army, he hardly has any need to do so.

The issue of whether spouses should be able to succeed their partners is stirring up passions in the country, even though Marta Sahagún, the wife of president Vicente Fox, has repeated her statement, that she does not want to run for the presidency in 2006. The Instituto Federal Electoral (IFE) said on 5 October that it was undesirable for spouses to succeed one another in elected executive positions.

The statement, by the president of the IFE, Luis Carlos Ugalde, comes at a time when the issue is preoccupying a lot of Mexicans. The leftwing party, the Partido de la Revolución Democrática, got itself into a tangle when Maricarmen Ramí­rez, the wife of the current governor of Tlaxcala won the primary for the PRD nomination to succeed her husband. The PRD's national executive was deeply unhappy about this and tried to replace her. She was vindicated by the top electoral court and the PRD, grudgingly, accepted her as the party's candidate.

There is still a lingering uncertainty over whether Marta Sahagún, the wife of President Vicente Fox, will decide to run for the presidency in 2006. She has repeatedly said that she will not. Most recently in late September when the electoral court upheld Ramí­rez's right to run. Sahagún called for a national debate on the issue.

Kicking off this debate, Ugalde said that the electoral law should be clarified, which would involve constitutional as well as legal reform. Ugalde admitted that the issue was tricky because on one side there was the principle that everyone should have the same rights but on the other there was the principle of fairness: spouses clearly had an edge over potential rivals.

Under the law as it stands, upheld by the supreme electoral authority in the Tlaxcala case, spouses can succeed each other and most relations (with the notable exception of sons succeeding fathers) can succeed each other. Ugalde said that he felt that there was a consensus in the country that family succession was undesirable and that congress should do something about it.

The pickle the PRD got itself into in Tlaxcala was almost comical. At one point in early September the national executive of the PRD was opposing its official candidate, Maricarmen Ramí­rez, and committed not to running a candidate in alliance with Convergencia in the forthcoming election. Her candidacy was supported by the top electoral authority in the country, the Tribunal Electoral del Poder Judicial and quite a considerable slice of the local PRD. All 14 perredistas standing for the local congress are, for example, behind her. The party machine in the state, however, is behind Gelacio Montiel Fuentes, a federal deputy, whom Ramí­rez beat in the primary. He appealed to the national PRD to cancel her candidacy because her husband was the state governor. 

The PRD's national committee eventually overruled its national executive on 3 October and reinstalled Maricarmen Ramí­rez as the party's candidate. The vote was 103 to 73. The committee also asked Alfonso Sánchez Anaya, the current governor and Maricarmen's husband, to resign. He has consistently refused to do so. 

The row in Tlaxcala means that the PRD is in lose-lose position. If Maricarmen wins, it will have been without much help from the party. If she loses, it will be because the party undermined her. The only comfort for the PRD is that the other parties are equally split: a dissident Prií­sta is running for the PAN and so should take votes away from the PRI candidate, Mariano González Zarur, who won the senatorial selection in 2000. It is worth remembering that Sánchez Anaya himself is a defector from the PRI.

The crisis in Tlaxcala and the hamfisted way the PRD's president Leonel Godoy tried to sort out the problem has weakened his position. Godoy made no secret of his belief that Maricarmen should not run. He had threatened to resign if he was defeated on the issue. 

Third case
Martha Elena Garcí­a became the third woman to announce that she would seek to succeed her husband in an executive post. Her husband is Antonio Echeverrí­a, the governor of the state of Nayarit. What is significant about Nayarit is that Echeverrí­a, from the Partido Acción Nacional, beat the incumbent Partido Revolucionario Institucional in 1999 after being backed by all the main opposition parties. The next gubernatorial election in the state is due on 3 July 2005.

Felipe Calderón Hinojosa, the president-elect, made his first six cabinet appointments, naming his economic ministers, on 21 November. On 24 November he followed this by naming the six ministers who will run the spending ministries in his government. As we went to press, on 27 November he was due to name his law enforcement, security and foreign policy team. Calderón takes office on 1 December.  

Both tranches of ministers had unifying themes. The economic ministers are all privately-educated technocrats. The spending ministers were all members of Calderón's Partido Acción Nacional.

The economic ministers also share the quality of having close personal links to Calderón. Two, Agustí­n Carstens, the new finance minister, and Luis Tellez, the new telecommunications minister, were Calderón's classmates at Mexico's most prestigious private university, the Instituto Tecnológico Autónomo de México (ITAM). The surprise appointment, Georgina Kessel, also has an ITAM connection. She taught at ITAM when Calderón did his master's degree in economics. Her current job is head of the mint (Casa de Moneda).  

Calderón has also appointed another old classmate, this time from law school, Javier Lozano, as labour minister, while Rodolfo Elizondo, who continues as tourism minister, is an old political friend and one of the few members of Fox's cabinet to back, publicly, Calderón's campaign for the presidential nomination for the PAN. Fox and his men had wanted Santiago Creel, his interior minister, now a senator, to be the PAN's presidential candidate. Eduardo Sojo, who moves from the nebulous job of being the cabinet minister responsible for public policy to running the economy ministry, and thus in charge of all trade negotiations, is also an old friend of the president-elect's.  

Kessel's appointment is the most surprising and interesting. She has a low profile, though people who have worked with her say that she is more than competent. Her appointment suggests, however, that President Calderón will not push for a major reform of the energy sector. She has little experience of negotiating with congress: if the state oil company is to be reformed, congress will have to be convinced that what the government is proposing is appropriate.  

What makes Kessel's appointment doubly odd is that Luis Tellez was energy minister in the second half of the last Partido Revolucionario Institucional government of President Ernesto Zedillo (1994 to 2000). As a former prií­sta, and chief of staff to President Zedillo, Tellez would seem to be better placed to negotiate reforms with congress where the PAN does not have a majority.

Kessel is primarily an academic, though she has also advised the chairman of the anti-trust agency and worked on the Plan Puebla Panama. This was President Fox's great scheme to accelerate the development of southern Mexico and Central America. Kessel was also the first female president of the Comisión Reguladora de Energia. Despite the title, this job was more about managing the regulation of the energy market than about energy policy.

Some well informed commentators in Mexico say her appointment suggests that Calderón may be thinking of winding up the energy ministry. This is the only cabinet job he himself has done. The suggestion is that the energy ministry will be converted into a regulatory organisation and more power will be given to the operating companies (all state owned): Petróleos Mexicanos; the Comisión Federal de Electricidad and the Compañia de Luz y Fuerza.  

The leftwing opposition, the Partido de la Revolución Democrática (PRD) was dismissive of the economic appointments. José Guadalupe Acosta Naranjo, the PRD's secretary general, said that some of the appointments were "repayments of campaign debts." The PRD claims that big Mexican companies, which backed Calderón, such as Telmex and Citigroup's subsidiary Banamex, will now have a major say in economic policymaking.  

Tellez, in particular, is accused of having helped the banks with public money following the banking crisis at the beginning of Zedillo's administration. Others say that the appointment of Tellez is a signal that Calderón is serious about weakening Telmex's grip on the telecommunications market.

Tellez has had a varied career. One of his early jobs was as deputy agriculture minister where he helped to push through the constitutional reform to Article 27. This ended the primacy of the ejido, the communal landownership scheme set up by Mexico's greatest 20th Century president, Lázaro Cárdenas.  

After Kessel, the most interesting appointment is probably Lozano, the new labour minister. He is another former prií­sta who served for a year as director general of the Comisión Federal de Telecomunicaciones, the telecoms regulator. His career in the PRI stalled when the party was defeated in 2000: he had expected to get into congress, instead he had to set up a consultancy. He was one of the first prií­stas to defect to Calderón, long before Calderón was thought to have any chance of winning the PAN nomination, let alone the presidency. Lozano likes cutting deals so may well be able to push through a labour reform, another piece of unfinished business bequeathed by President Vicente Fox. The rumour in Mexico City is that both Telmex and Televisa, the two key companies in the broadcasting and telecoms industry, opposed his nomination as communications minister.

The spending ministers

The most interesting appointment of the six ministers chosen to run the spending ministries is Josefina Vázquez Mota as education minister. Elba Esther Gordillo, the ambitious head of the teachers union, the Sindicato Nacional del Trabajadores de la Educación (SNTE), had expected to have veto over who would be the new education minister. Calderón, however, asserted himself, putting himself on a collision course with Gordillo, the SNTE and her Nueva Alianza which has a crucial nine members of the lower chamber of congress in which Calderón's PAN does not have a majority.  

Gordillo's henchman, Rafael Ochoa, the secretary general of the SNTE, claimed that Vázquez Mota had only been awarded the education ministry as a consolation prize because of infighting in the Calderón team. Vázquez Mota shook up Calderón's campaign at the beginning of the year and steered him to victory. She had been in charge of anti-poverty programmes, as social development minister, in the Fox administration. She has, as Ochoa pointed out, no connections with education.  

In Calderón's government, Vázquez Mota's old job, social development minister, and thus responsibility for the key Oportunidades programme, goes to Beatriz Zavala, now a senator but previously a former president of the social development committee in the lower chamber of congress. The former governor of Jalisco, Alberto Alberto Cárdenas Jiménez, becomes minister of agriculture, rural development and food. José Ángel Córdova Villalobos, another former congressman, becomes health minister. Abelardo Escobar Prieto carries on in the cabinet as agriculture reform minister. José Luis Luege Tamargo, also continues as environment minister. Calderón is due to announce his law and order and foreign ministers on 27 November. Francisco Ramí­rez Acuña, a controversial and authoritarian governor of Jalisco, is expected to become interior minister.

López Obrador: The defeated candidate in the presidential election, Andrés Manuel López Obrador, declared himself "legitimate president" on 20 November. López Obrador, who lost narrowly to president-elect Felipe Calderón Hinjosoa in the 2 July elections, claimed that the result of the election was fraudulent. His supporters claimed that over 1m people packed the Zócalo for the ceremony. Independent observers doubt that there were many more than 100,000. What is clear is that López Obrador drew fewer people to his inauguration than to his initial protests, in the summer, against the elections.

The ceremony was showy, with icons of the Left such as students and indigenous people well represented. López Obrador has taken as his symbol the open-winged eagle of President Benito Juárez, the great nineteenth century president of Mexico. López Obrador claimed that "democracy is the people, for the people and with the people". He accused "a neo-fascist conspiracy" of depriving him of victory in the elections. The Partido Revolucionario Institucional indirectly endorsed some of the points López Obrador made when its leader in the lower house of congress, Emilio Gamboa, suggested that President Vicente Fox should not attend the inauguration of his successor. Gamboa said that without Fox the ceremony was likely to have fewer protests. Fox has already been unable to deliver his final state of the union address to congress (on 1 September) and was forced to deliver the traditional independence "grito" in Hidalgo rather than Mexico City on 15 September because of protests by López Obrador supporters.  

Poll

According to a poll in Reforma, 56% of Mexicans oppose López Obrador's decision to declare himself "legitimate president" and 61% say that this move will damage the country. What should be worrying for López Obrador is that only 19% support his move and only 16% think that the self-proclamation stunt will benefit the country. A thumping 20% don't care and 17% view the self proclamation as "irrelevant." Only 11% of Mexicans, according to an opinion poll in late November, believe that any attempts to thwart the inauguration of Calderón are warranted.  

*reappointment from Fox's cabinet ** moved from another cabinet position

Calderón reins in the finance ministry

The new finance minister, Agustí­n Carstens, did not get to pick his lieutenants. The rumour is that Carstens wanted Alejandro Warner to be his deputy minister responsible for spending. Calderón imposed one of his close colleagues, Ernesto Cordero, into that job. The appointment is significant because Carstens has been warning that the 2007 budget will be tight. Cordero will settle spending priorities.  

Cordero, like Calderón, is a long-serving Panista. Cordero was head of planning at the energy ministry when Calderón was, briefly, energy minister.  

Werner will now be responsible for revenue raising. Like Cartens himself, Werner has served in the Banco de México and at the IMF. His brother, Martí­n, was a deputy finance minister during the Zedillo government. Martí­n Werner is currently a managing director at Goldman Sachs.

On 27 January the central bank (Banco de México) said that the economy would go into a major recession in 2009, forecasting a real GDP contraction of anything between 0.8% and 1.8% year-on-year. In recent years, the bank's gloomier forecasts have tended to be more accurate. The latest forecast came despite the bank's mid-January decision to cut interest rates, for the first time in three years, by half a percentage point to 7.75%.

Independent economists are downgrading their forecasts on an almost daily basis as the scale of the economic crisis in the US becomes more apparent. When the Mexican government drew up its 2009 budget in September 2008 it expected 3% real GDP growth in 2009; by the time the budget secured congressional approval in October it had reduced this forecast to 1.8%. At the beginning of January 2009, when the government launched its anti-crisis stimulus package (Acuerdo Nacional en Favor de la Economí­a Familiar y el Empleo - see below), the finance ministry was still expecting real annual growth of between 0.2% and 0.3% in 2009. Now, however, the central is expecting a contraction.

Despite the downgrade, the central bank forecast may still be on the optimistic side. The bank made little effort to disguise its surprise at the speed and scale of the US crash. It had been expecting the Mexican economy to have grown by 2% year-on-year in 2008. It now reckons that the economy went into recession in the final quarter of 2008 and ended up with growth of 1.5% year-on-year, at best. In October, the last month for which there are official statistics, GDP contracted by 0.88% year-on-year.

This was the first year-on-year contraction since 2001, the official statistics agency, Inegi, reported. The most depressed industries are mining (which includes oil production), electricity and construction. All of them have been declining for the past six months. The services sector has, so far, suffered much less. It fell by 0.2% year-on-year in December. Agriculture is having the worst time of all: its output was down by 4.7%, year-on-year.

There are clear indications that things got much worse in November and December. December was, for example, an awful month for retail sales (down 10.7% year-on-year according to the retailers association, Antad). Sales at department stores fell a staggering 22% year-on-year, despite a raft of special offers. On Antad figures, for 2008 as a whole, retail sales (which exclude the country's biggest retailer, Wal-Mart de México), were down by only 1.7%, underling the speed of the deceleration in the final quarter.

The car industry also had a rotten December and is bracing itself for worse to come. In December new car sales were down 20% year-on-year, and production was down by 3.5%. For 2008 as whole the industry had a respectable year. Production rose 4% year-on-year (to 2.10m vehicles) and exports rose 3% (to1.66m vehicles). The only problem is that domestic sales, which include imports, fell 6.8% year-on-year, to 1.03m vehicles. Eduardo Solí­s, the president of the Asociación Mexicana de la Industria Automotriz, is forecasting that production will fall by 20% overall in 2009.

The general assumption is that the recession in 2009 will be the steepest in Mexico since 1995, when the economy contracted 7% annually after a botched devaluation at the end of 1994. In the last US recession in 2001, Mexico contracted 0.3% year-on-year.

Some influential businessmen, notably Carlos Slim Helú, Latin America's richest man and the chief shareholder in Telmex and América Movil, have forecast that the recession will be the worst in 30 years.

Too exposed?
Mexico's main problem is that it is horribly exposed to what happens in the US. Trade (imports plus exports) were equivalent to 62% of total Mexican GDP in 2008. In the US trade is about half that, in GDP terms.

Demand and economic confidence in the US has fallen off a cliff. The US government is doing its best to kick start the economy but the comparatively small size of the government as a % of total US GDP (the government accounts for around 20% of US GDP) means that even substantial increases in government spending can easily be nullified by cutbacks in the private sector. In European countries, or in Brazil, the government has a much bigger role in the economy, so the public sector can have a more immediate effect on demand.

In Mexico, successive governments' enthusiasm for privatisation has reduced the public sector's role in the economy even further. Of course, the state oil monopoly, Petróleos Mexicanos (Pemex), is still hugely important, but its weak financial and operational position means that it cannot pull the economy out of recession single-handedly. The current government is stepping up investment in Pemex, but the increases are unlikely to have much effect on the overall economy. This makes Mexico different from Venezuela. Even the most glowering critics of President Hugo Chávez of Venezuela accept that if oil prices were to recover, Petróleos de Venezuela (Pdvsa) would lead the economy out of any slowdown.

The economic news from the US is unbrokenly bleak. Figures from the Cámaras Industriales de México show that Mexico's manufactured exports fell for the third consecutive month on a year-on-year basis in December. In value terms they fell to US$2.09bn, compared to US$16.09bn in December 2007, down 11.5% year-on-year.  This was the biggest ever fall recorded by Inegi. Over 85% of Mexico's manufactured exports go to the US.

Although Mexico trade deficit is still small, it is growing fast. In 2008, it came to US$16.8bn, despite record oil export prices in the first half of the year. The government's oil hedge will protect oil revenues in 2009, but the decline in manufactured exports will have a major effect. If remittances and foreign investment weaken further, the country could run into balance of payments problems again.

The big problem for Mexico is that the US private sector appears to have lost its collective nerve. At the end of January, The Wall Street Journal reported that none of the 13 US commercial banks which had received a combined US$148bn in bailout cash from the US government had increased their loans since taking the aid. Overall, they had cut back on total lending.

This lack of confidence in the US is having a similarly negative effect on Mexico. In December 2008, Mexican bank lending fell by 1.88% month-on-month. If this pace of decline continues (implying a 25% fall in bank lending over a year) the Mexican economy could be in for a much rougher time than even the central bank expects.

Another straw in the economic wind is the sharp deterioration of credit quality in Mexico. Overdue consumer loans are starting to rise: in November they accounted for 8.49% of the total; rising to8.75%, in December even though overall consumer lending fell by 2.7% to M$472.8bn (US$33bn).

Government starts to panic
As the scale of the crisis becomes more apparent, the government is becoming less assured. On 27 January it announced, after widespread protests (led by fishermen and farmers), that it would not increase the price of diesel at the rate previously announced. Diesel prices were slated to rise by M$0.20 a month from February (on top of an earlier increase in January), but will now only rise by M$0.05 a month. The finance ministry estimates the cost of the change at M$9.6bn (US$670m), which will be met by economising elsewhere. The Left argues that the government should rescind the increase altogether and cut diesel prices.

What is clear is that the government is not committing the financial resources the US has done to mitigating the effect of the crisis. Arguably, as the local banking system appears to be in better shape than many of the banking systems in other members of the Organisation for Economic Cooperation and Development (OECD), the Mexican government does not need to spend as much as US and European countries do.

Stimulus package
On 7 January, President Felipe Calderón Hinojosa announced a M$60bn (US$4.4bn) economic stimulus package. The key elements in the package included a cut in the price of cooking gas and a freezing of petrol prices, in additionl to measures aimed at preserving jobs. The finance ministry claimed that the package, formally known as the Acuerdo Nacional en Favor de la Economí­a Familiar y el Empleo, would boost GDP by about 1% (or M$120bn) this year.

The bulk of the money for the package is coming from the M$100bn windfall produced in 2008 by higher-than-budgeted oil prices. The package has been endorsed (grudgingly) by the private sector, most trade unions and most local governments.

Some tax economists argue that the government's recent switch from a conventional income tax (ISR) to the new Impuesto Empresarial a Tasa Unica (Ietu), which is calculated on sales rather than profits, will have a depressing effect on business activity. The Ietu was initially set at 16.5% in 2008 and was due to rise to 17% in 2009 and 17.5% thereafter. The finance minister, Agustí­n Carstens, argued that the government would be wrong to cut the Ietu because Mexico's tax take is already so low as a percentage of GDP. (Stripping out oil revenues, which account for almost 40% of the government's fiscal income, Mexico's tax take is barely in the teens as a percentage of GDP).

The biggest expense in the stimuls program is the freezing of petrol prices and the 10% cut in cooking gas prices. These moves will inject M$45.4bn into consumers' pockets, the finance ministry says.

Mexico's petrol prices have been rising because of the weakness of the peso against the dollar: Petrol in Mexico costs the equivalent of US$2.66 a gallon. In the US the price is around US$1.75 a gallon. Mexico imports most of the fuel it uses while exporting lower-value crude oil. Mexicans grumble that they had to pay more for fuel when oil prices were rising (in 2007 and the first half of 2008), but saw no relief when oil prices halved in the second half of 2008. This was because the peso promptly started to slide against the US dollar.

Altogether, the package has 25 elements. Besides the moves to reduce energy costs, the government is also offering companies support to avoid redundancies. The plan envisages M$2bn fund to help companies retain staff they would otherwise sack because of the effects of the global economic crisis, with another M$2.2bn to support companies taking on temporary workers.

The employers organisation argues that the package could have been better and clearer. Ricardo González Sada, the president of the Confederación Patronal de la República Mexicana (COPARMEX), said that the big omission was the absence of a fiscal stimulus policy, as has been introduced by the US, China, Japan and Spain. He noted that even the IMF is recommending that governments throw a minimum of 2% of GDP into the economy. He noted that the government itself admits that its package will not stimulate the economy by more than 1.4% of GDP.

Sada also argued that the government should do more to prevent the Ietu deterring business investment. He suggested that the Ietu should only be levied after investment, wages and interest payments have been made.

Confidence in Mexico is plummeting as the effects of the US crisis start to bite. On 8 January the national statistics agency (Inegi) and the Banco de México published the consumer confidence index for December 2008: the index stood at 84.1 (100 was the level of consumer confidence in 2003), a staggering 20.4 points down on the year earlier level.

The main factor driving down consumer confidence is the jobs outlook. According to the national social security agency (IMSS), in December 2008 the number of people working in the formal (social security paying) economy fell by 327,136.  In  calendar 2008 there was a net loss of 29,589 formal jobs as a whole. In January 2009, for the first time in five years, there was a 1.7% year-on-year fall formal employment level, the equivalent of 242,000 jobs. Now there are about 14m people working in the formal economy.

The grim December and January data reversed Mexico's previously decent employment data. While the US lost 553,000 jobs in November 2008, Mexico managed to create 375,000 in the first 11 months of 2008. However, in November 2008, despite the start of the Christmas rush, only 38,000 jobs were created. In April 2008, usually an average sort of month for job creation, 80,000 new posts were created. The Asociación Mexicana en Dirección de Recursos Humanos fears that Mexico will only create 200,000-250,000 jobs in 2009. Mexico currently has 1.98m unemployed people, or 4.2% of the workforce. With expected real GDP growth of only 1.8% in 2008, the labour market outlook is clouding.

Inflation: In January, consumer prices rose 0.23% on a monthly basis, bringing the 12-month inflation rate to 6.28%. In December 2008, monthly consumer prices rose 0.69%, bringing the annual inflation rate to 6.53%, the highest in eight years. In 2007 annual inflation was 3.76%.

Underlying inflation, which excludes volatile fresh food prices, rose 0.43% month-on-month in January 2009, bringing the 12-month rate to 5.76%. Core inflation, which covers 100 basic products, was 8.06% for the 12 months to January: this was down, however, on the final result of 8.32% for 2008.

Intervention: On 4 and 5 February the Banco de México surprised traders by intervening in the foreign exchange market to halt the decline in the peso against the US dollar. The central bank and the government argued that the peso had been under attack from speculators who were trying to push it to M$15 to the dollar. Between 9 January and 4 February, the peso fell 7% against the dollar. Over the same period the Euro/Dollar exchange rate fell 4.5% while the Brazilian Real and the Korean Won had weakened by less than 1% against the US currency. The central bank's intervention was reasonably successful. It pulled up the peso by about 2.2% against the dollar. The finance minister, Agustí­n Carstens, said that the government may repeat the move in the future.

Remittances: Remittances in 2008 came to US$25.14bn, down 3.6% on 2007. Nonetheless, the figure was considerably higher than many had expected. The finance minister, Agustí­n Carstens, had forecast an 8% fall in remittances in 2008. One reason remittances were a bit higher was that the peso was so weak and remittances senders in the US realised that they got more bang for their buck by sending the money home than by keeping it in the US.

Tequila: Tequila production in Mexico rose 10% annually in 2008 to reach a record volume of 312m litres. Tequila exports rose 1.7% annually.

Trade: In 2008 total merchandise exports were valued at US$291.8bn, whiel imports were valued at US$305.6bn. The trade deficit in 2008 rose 67% year-on-year to US$16.8bn, the highest for 14 years, despite the surge in oil prices in the first half of the year.

Consumer confidence: Consumer confidence in Mexico is now at its lowest level since records began, according to Inegi. It reported that confidence was down to 81.9 points at the end of January. In January 2008, the index was 20.8 points higher.

GDP contraction: The consensus GDP forecast of private sector economists polled by the central bank is -1.16% in 2009.

The question of where Mexico's drug trafficking gangs are getting their weapons has become a key issue for the governments of both the US and Mexico. On 29 March, a Mexican newspaper, La Jornada, published a series of leaked US State Department cables, which claimed that most of the heavy weapons used by the gangs came from Central America.

The cables sum up the product of three US-Mexican conferences on arms trafficking between March 2009 and January 2010 in Cuernavaca, Morelos, Phoenix, Arizona, and Tapachula, Chiapas. Each of these meetings was secret and it is not clear what subjects were on the agenda. What is clear from the cables is that US diplomats concluded afterwards that weapons and drugs are flowing north into Mexico, even though the Mexican government policy line is that the US is allowing the gangs to equip themselves in the US where the gun laws are lax and where demand for drugs is strong.

One background cable (09MEXICO880) said that the officials from the Immigration and Customs Enforcement (ICE) and the US Bureau of Alcohol Tobacco and Firearms (ATF) had found that the gangs were demanding ever more powerful weapons, including light anti-tank weapons and heavy machine guns. The agencies said that powerful rifles such as the Barrett 0.50  and AK-47s were also being used by the gangs. The US study found that 90% of these heavy weapons were not coming from the US, as the gangs' traditional weapons did. Most were coming from military arsenals in Central America. The US did admit that 90% of the gangs' usual weapons, pistols and rifles, came from the US. This cable did not identify which countries were supplying the Mexican gangs.

Another US cable (10MEXICO77), which reported on the conclusions of the final bilateral meeting on weapons' trafficking, in October 2009 in Tapachula, also argued that the weapons were flowing north across Mexico's poorly policed southern border. This conference was attended by representatives from the Belize police and Guatemala's attorney general's office and, according to the cables, agreed to set up monitoring programmes along parts of the southern border. John Feeley, who was the US chargé d'affaires before the current US ambassador Carlos Pascual arrived, said that while 30,000 US officials from various US agencies monitored the 3,926km US-Mexican border, the 925km border between Mexico and Guatemala was patrolled by just 125 Mexican immigration officers.

The US, judging from the apparent tone of the leaked cables, was unhappy with Mexico's response to the suggestion that weapons were flowing north rather than south. The cables noted that the Centro Nacional de Planeación, Análisis e Información para el Combate a la Delincuencia, which was the part of the federal Procuradurí­a General de la República responsible for monitoring the flow of weapons north, refused to share information with US officials or,  apparently, with other Mexican agencies.

Presunto Culpable: A court in Mexico City has overruled the banning of a controversial documentary 'Presunto culpable' (Presumed Guilty) which has been wowing audiences in the city. The documentary illustrates flaws in the Mexican justice system, analysing the conviction (and sentencing to 20 years in jail) of José Antonio Zúñiga for a murder he almost certainly did not commit. There was no forensic evidence, or motive, to link him to the crime and the witness evidence was sketchy in the extreme.

“This is something we should have done a long time ago and the time has come."
Haiti's Prime Minister Gérard Latortue upon issuing an arrest warrant for former president Jean-Bertrand Aristide on corruption charges.

“We live in a country that has still not overcome a very significant polarisation […] There needs to be greater political plurality so that the people have more options."
El Salvador's Facundo Guardado, former guerrilla commander, after forming a new left-of-centre party 'Concertación Socialdemócrata' to challenge the orthodox leftwing FMLN.

“As service employees in the hotel and hospitality industry leave Grenada for employment in other Caribbean countries, construction workers, roofers and electricians among others have been arriving in Grenada in droves seeking employment in the reconstruction of the country's ravaged infrastructure." 
Grenada's Prime Minister Keith Mitchell on the aftermath of Hurricane Ivan.

In another example of Venezuela's oil diplomacy, left-wing mayors in both El Salvador and Nicaragua signed agreements with the state-owned Pdvsa oil company to receive fuel under favourable terms. Much like Pdvsa's US subsidiary, Citgo, which is providing cheap heating fuel to impoverished US communities, the deal has the effect of enhancing Venezuela's standing and undermining the elected governments of these two countries. Both governments are close to the US.

The San José Pact

Currently Mexico and Venezuela supply 160,000bpd of oil to Central American and Caribbean countries on relatively easy terms under the San José pact, first signed in 1980 but renewed annually. However, the launch of Petrocaribe, Venezuela's offer of subsidised oil to Caricom countries in September last year, has shaken up the competition between Venezuela and Mexico for influence in the region. Now Venezuela appears to be turning its attention towards Central America.

El Salvador

On 20 March mayors representing the leftwing Frente Farabundo Martí­ para la Liberación Nacional (FMLN) signed an agreement with President Hugo Chávez in Caracas. Under the terms of the deal Pdvsa will supply cities headed by the FMLN with oil at preferential rates. The cities must pay 60% of the bill within 90 days at a 2% rate of interest, but the remaining 40% can be paid over 23 years at a 1% annual rate of interest. Chávez did not specify the exact amount of oil he would be supplying but said it would be approximately 100,000bpd a month.

The deal was a further boost for the FMLN after its strong showing in the legislative elections on 12 March and irritated President Tony Saca. Following the deal Saca warned the mayors not to raise false expectations by promising cheap oil to Salvadoreans living in their municipalities. He said that buying and selling oil was not the principal concern of mayors in El Salvador and they would need to build processing plants and a refinery to make it work. This is all envisaged under the agreement. Carlos Ruiz, mayor of Soyapango, who represented the mayors, said the deal should benefit about 22 cities and towns in the country.

Nicaragua

The El Salvador deal was clearly modelled on an earlier agreement struck between Pdvsa and the Frente Sandinista de Liberación Nacional (FSLN) mayor of Managua, Dionisio Marenco, in September 2005. Marenco, acting in his capacity as head of the association of municipalities in Nicaragua (Amunic) said on 18 April that a deal should be signed by the end of the month to supply oil at similar rates to the El Salvador agreement to 153 municipalities across the country. He will lead a delegation of mayors from Amunic to Venezuela to negotiate the deal on 25 April.

Petrocaribe

Meanwhile, also on 18 April, the president-elect of Haiti, René Préval returned from a five-day visit to Cuba to announce that Haiti would soon be joining the Petrocaribe initiative. While Préval was in Cuba he met Adán Chávez , the Venezuelan ambassador to the island and brother of President Hugo Chávez . 

High oil prices have exacerbated the severe energy shortages from which Haiti suffers; with only 30 megawatts available in the capital, Port-au-Prince. Some neighbourhoods in the capital only have electricity for four hours a day. Préval said Cuba agreed to send technicians to help resolve the power blackouts - although Cuba is yet to solve its own power problems - and to send more doctors to boost healthcare in Haiti.

On 19 April Antigua and Barbuda's Prime Minister Baldwin Spencer described Petrocaribe as "a sustainable energy initiative that would result in significant environmental and social benefits" to a meeting of the Organisation of Eastern Caribbean States. 

Petrocaribe is still far from being realised, however, and there remains confusion over the status of Trinidad and Tobago and Barbados; the only two Caricom countries to have refused the deal, but who now seem to have changed their minds.

* Towards the end of 2005, Citgo, the US oil company owned by Venezuela's state-owned Pdvsa, began offering cheap oil to poor people in the US in what critics described as a ploy to boost President Hugo Chávez 's image in the US. Citgo officials insisted the discounted heating oil programme was simply a corporate initiative. Donations by Citgo to Maine, Massachusetts and New York now total an estimated US$38m.

She argued out that most leading indicators were pointing to a growth rate well above the 5.2% the authorities are forecasting. She said that the increases in cement production, the number of construction permits issued, electricity production, bank credit and the amount of drinks produced all pointed to strong growth. 

Del Cid noted that the jump in interest rates had yet to have an effect on consumption and the demand for credit.

The central bank estimates that the effect of the free trade agreement between Central America and the US (Cafta-DR) will be significant; in 2006, Cafta-DR accounted for 0.24 of a percentage point of the 4.9% growth rate in that year. This year the bank estimates that Cafta-DR will produce 0.67% of the 5.2% forecast for this year. Del Cid noted that in the first four months of 2007 exports were running 26% ahead of the same period of 2006. 

Private sector economists are much less optimistic. They doubt that the economy could escape the effects of the slowdown in the US, the country's biggest export market.

Inflation: In May inflation turned negative: consumer prices fell by 0.27%. In April prices had risen by 0.23%. In the first five months of the year inflation was 2.52%. In the past 12 months inflation was 5.47%, slightly down on the 5.8% recorded in 2006.

The Cariforum participating states (Caricom countries plus the Dominican Republic) are on the brink of signing an Economic Partnership Agreement (EPA) with the European Union (EU). However the deal remains controversial, with some countries threatening to delay the signing process.

The Cariforum-EU negotiations are part of a wider effort incorporating the 78-member African, Caribbean, and Pacific (ACP) group of countries to implement Article 37 the 2000 Cotonou Agreement which commits the signatories to reaching WTO compatible trading arrangements. One of six ACP regions negotiating with the EU, Cariforum comprises Antigua & Barbuda, The Bahamas, Barbados, Belize, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Suriname, and Trinidad & Tobago.

The EPA is intended, in the words of Cariforum, to “support and promote such objectives as sustained growth, enhancement of the Caribbean's role in the international community, facilitation of Caribbean structural transformation, and the adjustment of Caribbean economies in a manner and at a pace conducive to economic and social development".

For Cariforum, one of the key requirements is that the EPA must be more than just a Free Trade Agreement (FTA) - it must recognise “the centrality of development". Nevertheless, Cariforum also recognises that “the development dimension [...] must [...] transcend notions of asymmetry [...] If market access opportunities are to be seized by the Caribbean, supply-side constraints must be overcome."

An “Information Paper" describing the agreement, issued in July, also emphasises the centrality of development to the EPA; in the first paragraph, it states: “This is a new kind of free-trade agreement as sustainable development is the presiding principle governing the whole agreement." It adds that the parties to the agreement retain the right to determine their own level of environmental protection and social regulation, although this freedom is qualified by “the affirmation of a shared ambition to legislate for high standards and to implement them".

In an attempt to provide balance, the agreement includes an undertaking not to lower social or environmental standards in order to derive trade or investment benefits while on the other hand affirming that labour standards cannot be used for “protectionist trade purposes".

Cariforum liberalisation commitments cover 61.1% of imports from the EU in value over 10 years; 82.7% over 15 years (84.7% of tariff lines) and 86.9% over 25 years (90.2% of tariff lines). The main exclusions and long phase-in periods for sensitive products include agricultural products, fishery products, food preparations, beverages, ethanol, rum, vegetable oils, chemicals, furniture, and apparel. For agricultural products, most sectors have been excluded from liberalisation or subject to long transition periods (20 years or more).

The EU has agreed to phase out export subsidies on all agricultural products for which Cariforum has agreed to eliminate customs duties.

EU liberalisation commitments are based upon the introduction of a Duty and Quota Free Access (DFQF) regime from 1 January 2008. Rice will be DFQF from 31 December 2009, with quotas of 187,000 tonnes in 2008 and 250,000 tonnes in 2009 compared with the former quota of 125,000 tonnes. For sugar, access will be DFQF from 1 October 2009. For now the Sugar Protocol remains in force which allows 60,000 of sugar imports at zero duty. Between 1 October 2009 and 30 September 2012, sugar imports from the Caribbean will be subject to a minimum price of 90% of the EU reference price.

Meanwhile the Most Favoured Nation (MFN) clause in the agreement is intentionally asymmetric. The EU agrees to give ACP countries any additional benefits that it might concede in later negotiations with any third parties. The ACP countries will only have to extend to the EU any more favourable terms they may subsequently grant to “a major trading country".

On the fraught question of bananas, a joint declaration is included at the end of the agreement which acknowledges the importance of the sector for several Cariforum countries, and which recognises the benefits of substantial tariff preferences as well as setting out potential uses of funds to help the Cariforum banana industry adjust to new challenges.

As regards services, the EU has committed to opening its market to Cariforum service suppliers and investors, including allowing short-term business visitors, sellers of goods, investors, and graduate trainees, although in some sectors, EU Member States retain the right to apply economic needs tests.

Companies with a contract to provide services in 29 sectors will be able to send certain types of employees to the EU to provide these services for up to six months at a time. Skilled self-employed service providers operating in 11 sectors will also be able to enter the EU for six month period to provide services.

Objections
The Cariforum-EU EPA was initialled on 16 December 2007, and it is intended that the Cariforum countries will sign the agreement on 2 September. However, the agreement is between individual countries and the EU and some Cariforum members have increasingly shown signs of wavering. For example, Guyana, has announced a period of public consultations, with its president Bharrat Jagdeo, one of the stronger critics of the deal. Another sceptic is Sir Ronald Sanders, a former Antiguan ambassador to the UK and trade negotiator.

A recent report on EPAs in general, commissioned by France's President Nicolas Sarkozy in his capacity as rotating president of the EU, has lent weight to the objectors' case. The report by Christiane Taubira, a member of the French national assembly, is - in the words of Ronal Sanders - “a devastating indictment of the tactics - pressure, paternalism, and threats - employed by the [EU] Commission to impose its point of view and interests".

The main objections to the Cariforum-EU EPA include the following:

*The development component in the EPA is subordinate to trade liberalisation.

*The EPA agenda includes investment, competition policy, and public procurement, yet these are issues that remain controversial at the World Trade Organization (WTO) and are far from settled. It is thus not acceptable for the EU to impose its wishes in this area on Cariforum. Sanders says: “Their implementation outside of a global framework in which special consideration is given to small, developing countries, will be a disaster for local companies and could lead to a re-colonization of Caribbean economies."

*The market access in services granted to Cariforum companies is undermined by the fact that visa policy is determined by individual EU countries, not by the EU Commission.

*Each of the Cariforum countries will sign an individual agreement with the EU. Therefore, once signed, any disputes under the EPA will be between tiny individual Caribbean countries and the might of the EU. Sanders says: “The EU would roll over them like a juggernaut."

*The EPA, through the Most Favoured Nation clause, will define Cariforum's external trade policy with all other trading partners.

*Under the EPA there will be 336 identified areas for implementation, alongside the 300 outstanding areas for implementation under the Caricom Single Market and Economy (CSME). In his speech to the opening ceremony of the Caricom heads of government conference on 1 July, Guyana's President Jagdeo asked: “Do we have the capacity to implement them? In case of conflict which one takes priority?"

Jagdeo's view is that the EPA should involve only what is necessary to reach a WTO-compatible agreement, as required by Cotonou. In other words, it should be a goods-only agreement.

The objectors have also seized on comments made recently by former chief economist at the World Bank, Joseph Stiglitz. In Ghana on 8 July, he advised the Ghanaian government to “take a cold hard look" at the EPA agreement being negotiated with the EU. Stiglitz's main point was that the EPA would not provide enough opportunities for businesses in less-developed countries (LDCs) “to develop to levels where they can compete favourably with their counterparts in the EU" - a point that, he added, is critical to a country such as Ghana.

The Prime Minister of Antigua & Barbuda, Baldwin Spencer, is due to host the signing ceremony, and he has been trying to encourage the waverers by holding out hopes of some renegotiation of the terms after the agreement has been inked. Speaking on 8 August, he said: “The opportunity presents itself even at the point at which we decide to sign, to be able to continue the process of dialogue that will allow for adjustments and revisions to be made."

The other tactic being used is straightforward peer pressure. Henry Gill, the director-general of the Caribbean Regional Negotiating Committee (CRNM), emphasised on 4 August that although there are individual agreements between the Cariforum countries and the EU, the way the documentation has been prepared means that if one country doesn't sign then “the likelihood is that it will hold up the whole agreement".

A progressive Washington-based economic think tank, the Center for Economic and Policy Research (CEPR), argued in a recent paper, published on 9 November (Honduras: Recent Economic Performance) that poverty and inequality decreased significantly during the administration of President Manuel Zelaya, with rapid economic growth of more than 6% for the first two years. The Zelaya government also increased school enrolment significantly by abolishing school fees and expanding the school lunch programme. More eye-catching and controversially, Zelaya also raised the minimum wage by 60%, drawing fierce opposition from employers and business groups. Furthermore, in 2008, the government used expansionary monetary policy to counteract the effects of the global credit crunch and recession. Since the 28 June 2009 coup against Zelaya, the central bank has seen its international reserves drop by 18.4%, because of trade restrictions and a drop in tourism. Because of the coup regime's lack of international legality, the central bank cannot access the extra reserves that the International Monetary Fund (IMF) has recently provided to its member countries to help counteract the global downturn. The CEPR forecasts that the economy will shrink by 2.6% this year, but warns that this may be a best-case scenario. Honduras is also enormously dependent on remittances, which peaked at more than 21% of GDP in 2006. The continuing decline in this source of income and foreign exchange will also hurt the economy.

On 14 March the Cuban central bank announced an 8% devaluation in the hard currency convertible peso, taking it back to parity with the US dollar. The move amounts to economic realism by the cash strapped Cuban authorities. It will boost exports (approx. US$2.8bn in 2009), tourism revenues (est. US$2.0bn annually) and the value of remittances (est. at up to US$1.0bn annually), and should also encourage more foreign investment in the island.
    However, it will also make the cost of basic (imported) essentials, many of which can only be found on the black market or in hard currency stores, more expensive. It may also reinforce the economic divide between Cubans with access to dollars (via remittances) and those without. The Cuban peso, in which public sector wages are paid, will remain at 24/25 to the dollar.
In theory the government led by President Raúl Castro, which is in the process of laying off half a million state workers in order to cut costs (many of whom it hopes will find employment in the nascent small entrepreneurial sector), ought to adjust public sector wages (approx US$20/mth) in order to compensate, though there is not much evidence that the government is minded to do so.
The central bank statement, published in the daily Granma, said that the move would stimulate export activity and, more optimistically, the process of import substitution. It should also allow the central bank to progress debt negotiations with foreign creditors. Limits on payments on foreign companies (first imposed in 2008) have been removed gradually. Curiously, the statement also said that a 10% tax on dollar exchanges (which mainly affects US dollar remittances) would remain in place - in December 2010 the government had said it was scrapping this levy.

International pressure on Brazil's nuclear plans appears to have eased from one quarter, with the news that the International Atomic Energy Agency (IAEA) has accepted Brazil's restrictions on inspection of its new uranium enrichment plant. But it is increasing elsewhere, as non-proliferation activists in the US pick up some of the arguments of those who had been painting Brazil as the new nuclear menace, and Greenpeace launches an attack on Brazil's plans to expand its use of nuclear energy.

The pressure from the IAEA had been accompanied by much media spin generated in the US by two sets of critics: those on the political right who found a new weapon against Lula in the argument that he was turning Brazil into the world's most recent nuclear menace, and those concerned about the proliferation of nuclear weaponry, within and without the government, who feared that 'letting Brazil get away with it' would provide a precedent that might be used by other countries - particularly Iran.

Much of the international media took this spin at face value, and Brazil ended up being portrayed as refusing IAEA inspection of its new installations, when it was actually refusing visual inspection of its centrifuges whose proprietary design it wished to protect. All the rest of the enrichment plant at Resende was from the outset open to inspection, including the conduits in and out of the centrifuges - which, the Brazilians, argued, would suffice for the IAEA to perform its core task of verifying that no enriched uranium was being siphoned off.

Where it all started
Brazil has the world's sixth-largest uranium deposits, with proven reserves of 310,000 tonnes (and two-thirds of its territory still unsurveyed). It currently spends US$20m-30m a year sending its uranium to Canada for gasification, then on to Britain for enrichment, then back to fuel the power plants at home. A project carried out by the navy's research centre at Aramar, the Centro Tecnológico da Marinha (CTM), resulted in the development of a centrifuge which, the Brazilians say, can enrich uranium at a fraction of the price they are paying for the imported fuel.

The CTM says it is nonsensical to imagine that this could be the first step towards a nuclear weapons programme, and not only because Brazil is barred from doing so by its constitution and several international treaties. There is a practical reason as well: its system is designed to enrich uranium up to 20%, while weapons-grade uranium would require a level of 93%. And, the CTM adds, it has been enriching uranium for the past 19 years. The IAEA inspects the CTM (without seeing the centrifuge).

This year a full-scale enrichment plant was installed at Resende which is almost ready to go onstream. The plan is to build up domestic enrichment until Brazil becomes self-sufficient in nuclear fuel sometime between 2008 and 2010 and enjoys an exportable surplus thereafter. The equation is an attractive one: the mined uranium currently fetches about US$15 a kilo while the enriched fuel costs ten times more. It was as the Resende plant's completion became imminent that the question of verification became an international political issue, in an atmosphere charged by US preoccupation with real or imagined 'weapons of mass destruction' in North Korea, Iraq and Iran.

This semi-public tiff with the IAEA has been going on for more than a year. Several times the Brazilians felt they had come close to an agreement, but on each occasion the IAEA ended up saying that it was not fully satisfied with the inspection facilities on offer. It was only in early October that a strong signal came from the US that the matter was close to resolution.

Visiting Brazil, US Secretary of State Colin Powell said the US fully accepted that Brazil has no desire, plans or interest in developing a nuclear weapon but rather aims to develop a nuclear-power programme for peaceful purposes, and that when inspectors from the IAEA returned to Brazil (to review inspection proposals for Resende on the ground) 'they'll find a way to resolve their outstanding issues'. Powell said that he did not believe 'the IAEA or the US or anyone else' wants to see Brazil give away any of its 'proprietary knowledge' on nuclear matters 'that [Brazil] believes it should hold close'.

On 18 October the IAEA team turned up, and two days later, according to Brazilian officials, agreed to a solution which would be announced later in the month. The formula: the screens around the centrifuges would have their top ends lowered and the bottom ones raised, so as to give a better view of the piping and connections going in and out.

This, however, was not the beginning of the end: within that same week two new critical broadsides had been fired at the Brazilian government, one still aimed at IAEA verification of the nuclear enrichment process, the other at the plans to build up the nuclear contribution to the country's electricity generation.

Insisting on fuller inspection
The first attack came in the magazine Science in an article authored by the Wisconsin Project on Nuclear Arms Control, an NGO. Its main message was that Brazil should submit to full, unrestricted IAEA inspection, among other things because it will establish a precedent for Iran and any other country wishing to build a uranium enrichment plant while remaining a member of the Non-Proliferation Treaty.

The article challenges Brazilian claims that its level of enrichment would not suffice to sustain a nuclear weapons programme. It says that at the declared level of enrichment, Resende would give Brazil the capacity to produce five to six implosion devices a year. By 2010, with the planned increases in capacity, it says, the capacity would rise to 26-31 bombs a year, and by 2014 to 53-63 bombs.

It also sounds a sceptical note regarding the Brazilian government's assurances that its nuclear programme has exclusively peaceful aims: these statements, it says, should be seen in the light of Brazil's nuclear history. Of this history, the article mentions that in the 1980s Brazil had a secret plan to develop a nuclear bomb, administered by the military and hidden from the IAEA. It mentions that in 1990 President Fernando Collor de Melo repudiated that programme, before leaping to the present and the refusal to allow access to the centrifuges.

The article, written and published before the end of the IAEA visit, concludes that the US has decided not to confront Brazil over this matter, choosing instead to try to persuade it to 'cooperate with the IAEA'. Hence, it ends urging 'the rest of the world' to help the US in its bid to make Brazil 'behave like a good nuclear citizen'.

Opposing anything nuclear
On 21 October the environmentalist organisation Greenpeace issued a communiqué condemning 'the relaunch of the Brazilian nuclear adventure'. It was not prompted by the latest developments in the IAEA verification saga but by a series of public statements made by Science and Technology Minister Eduardo Campos about plans for investment in a number of nuclear projects, and by an extensive report on plans in this area published by the newspaper Jornal do Globo.

The minister said, not for the first time, that the government intended to complete Angra III, the planned third nuclear generating plant at Angra dos Reis. He added that it also intended to build four additional ones. Completing the construction of the 1,300MW Angra III is expected to cost about R$7.5bn (US$2.6bn). The four additional ones, of 300MW apiece, would cost an extra US$2.8bn. The target is to raise the share of nuclear plants in Brazil's total electricity generation from the current 4.5% to about 5.7% by 2010 - by when, as noted, Brazil should be able to cover its own nuclear fuel needs.

Greenpeace is campaigning against this on two tracks. The first is to suggest that Campos has gone off on his own, against the opinion of other members of Lula's cabinet, 'again seeking to create a fait accompli, as last May, when he announced the export of enriched uranium and was disavowed'. The organisation maintains that the ministers of energy and the environment oppose Campos's plans.

The reference to May alludes to an incident during Lula's visit to China, when the president was reported to have reacted angrily to public statements made by Planning Minister Guido Mantega regarding plans to export uranium to China - not because of their content but because he had breached an instruction from Lula that ministers should confine their utterances to their own jurisdictions. Lula had actually already mentioned, at Beijing University, the possibility of a partnership with China in prospecting for uranium. 

What Campos said at the time was, 'Brazil is not in the uranium market because it imports enriched uranium.' He did note, though, that since 1982 Brazil has an agreement with China to cooperate in various fields of science and technology, including the nuclear sector. In November 2003, he said, China had expressed an interest in enlarging the scope of this cooperation in the nuclear field, but Brazil replied that that would have to wait until after the review of its nuclear development plan.

Greenpeace's second track is the argument that the Brazilian people don't want nuclear power. It refers to a survey it commissioned recently from the Instituto de Estudos da Religião (ISER), which showed 82.3% of respondents against the nuclear power plants. Indeed, notes Greenpeace, 85.4% said they would not vote for candidates supporting the construction of nuclear generating plants. Campos, says Greenpeace, 'ignores the fact that almost all developed countries are getting rid of the nuclear plants, deactivating those in use and desisting from building any new ones'.

Two-track response
Actually, Campos does more than that. He recently said, 'The nuclear programme is a strategic issue for Brazil. We now command the uranium enrichment cycle. We know that over the coming 20 years, 25% of all the electricity generated worldwide will come from a nuclear source, and Brazil could be one of the few countries supplying the fuel.' He notes that the US and France, which jointly cover about 55% of the world demand for enriched uranium, use the gaseous diffusion technology, which uses 25 times more energy than the centrifugation technique developed by Brazil. Russia, with another 30% of the market, uses centrifugation but, says Campos, uses machines that are smaller and less efficient than Brazil's.

But that is not his central argument. Even before Brazil can get round to enjoying earnings from exporting enriched uranium, it will need more nuclear-generated electricity. This is because the country's oil reserves will only last for another 17 years, and in the long run the scope for building more hydroelectric power plants will also run out. His ministry's stated target is to 'guarantee the supply of enriched uranium for the domestic and external markets'.