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In the same week that the European Union (EU) managed to strain relations with Latin America by adopting a controversial common immigration policy, it made a notable concession to Cuba, the only country in the region with which it previously had strained relations. The EU decided to drop the sanctions it imposed on Cuba in 2003, in the wake of a crackdown on political dissidents, in recognition of the “recent changes initiated by Raúl Castro".

If the EU had hoped that its conciliatory gesture would swiftly be welcomed by Cuba it was in for a rude awakening. The first (unofficial) response came less than 24 hours later: five dissidents were briefly detained, and reportedly beaten, after presenting a letter of complaint to the interior ministry office in Matanzas, east of Havana, calling for better treatment of a political prisoner. Then, in his customary contributions to the national daily, Granma, Fidel Castro, accused the EU of “enormous hypocrisy" by reaching out to Cuba at the same time as the European parliament approved a “brutal measure" on illegal immigrants which he said would punish Latin American countries, which are made up primarily of European emigrants.

The response was perplexing as the Cuban government has long claimed that definitively dropping the sanctions, which were suspended in 2005, would pave the way for reactivating political dialogue. Fidel's fiery reaction can be attributed to a clause inserted at the behest of the Czech Republic - which sees Cuba as an unrepentant Communist dictatorship - promising to review the situation in June 2009. Implicit in the clause is the suggestion that Cuba should reciprocate the EU's gesture by releasing more of the 73 political prisoners it summarily sentenced in 2003: 55 remain behind bars.

Cuban dissidents expressed their indignation at the EU's decision to drop the sanctions. Martha Beatriz Roque said by “turning a blind eye" the EU had effectively encouraged the Cuban government to continue violating the human rights of its people and imprison dissidents. The moderate opposition movement, Arco Progresista, however, approved of the EU's decision. Its leader, Manuel Cuesta Morúa, said that the Cuban government no longer had any excuse not to hold meaningful political dialogue.

Despite Fidel's fulminations, it is likely that Raúl will give a more measured response in the coming weeks. He appreciates that the EU, driven by Spain, is keen to recognise the tentative steps he has taken to embrace economic, if not yet political, change and in time he will respond pragmatically to its overtures. The US, which insists that Raúl's appointment does not constitute change, criticised the EU's openness to dialogue. Tom Casey, the the US state department spokesman said the EU's action gave “additional legitimacy" to the Castro regime. He also derided Raúl's reforms as “purely cosmetic".

If the EU is guilty of acting precipitately, the US response is short-sighted. Raúl's piecemeal reforms are meaningful. He has shed several Socialist tenets inimical to increasing production, his government's main objective. The latest of these was the elimination of the salary cap. From August state companies will have to reward hard workers with as much as 5% of their base salary, which could equate to 75 cents a month, to provide an incentive to increase production.

The recent deterioration in US-Bolivia relations sparked by the expulsion of US ambassador to Bolivia [WR-08-36], hit a new low this week when US President George W Bush threatened to suspend Bolivia's designation as a beneficiary country under the Andean Trade Promotion and Drug Eradication Act (Atpdea). The proposal was widely condemned and, three days later, in what was arguably a rebuke to Bush, the US House of Representatives approved a one-year extension of the act - which also includes Colombia, Peru and Ecuador.

Bush's announcement on 26 September regarding the suspension of Atpdea - under which the US concedes special tariffs to imported products from Bolivia, Ecuador, Colombia and Peru - was based on the argument that Bolivia was failing demonstrably in its counternarcotics efforts. On 15 September, the US had added Bolivia to its drugs blacklist, a move which the Bolivian government lambasted as political, and a reprisal for its expulsion of the US ambassador to La Paz, Philip Goldberg, on 10 September.

Foreign minister David Choquehuanca slammed the threat to suspend the trade preferences as “a new attack on Bolivian democracy", with the government quick to point to its figures showing that the expansion in coca acreage in Bolivia in 2007 was lower than in either Colombia (up 27%) or Peru (up 4.5%). This, nevertheless, contradicted figures from the UN Office on Drugs and Crime which showed Bolivia's coca acreage up by 5.1%, slightly higher than Peru.

The Bolivian government ´s condemnation of the move was shared by José Miguel Insulza, the secretary general of the OAS, and US allies such as Peru, whose foreign minister José Antonio Belaúnde asked the US to reconsider its proposal.

On 29 September, the US House of Representatives unanimously approved a one-year extension of the Atpdea for all the Andean countries. However, concerns remain in Bolivia, fanned by opponents of Morales, that Bolivia's benefits under the deal could still be suspended by either an unfavourable senate vote or a veto by Bush.

The president of the confederation of private enterprise (CEPB) and vociferous government critic, Gabriel Dabdoub, told the local press that 12,000 jobs would be affected directly and 85,000 indirectly. Fears regarding the effects of the suspension of the deal were also voiced by Rodolfo Ramos, general secretary of the federation of factory workers in La Paz. Ramos warned that some 350,000 workers throughout the country (of which 80,000 are based in La Paz and El Alto) would see their jobs go if the Bolivia's Atpdea preferences were discontinued. The sectors most affected would be textiles, leather and oil derivatives.

The Bolivian government, meanwhile, has done its best to downplay the threat, with Choquehuanca accusing opponents of scare-mongering and exaggerating the benefits of the trade preferences to “destabilise Bolivian democracy".

According to the minister for production and small business, Susana Rivero, only 16.9% of the US$376.8m worth of exports to the US in 2007 occurred under Atpdea. She added that the generalised system of preferences (GSP) was more significant as a trade mechanism, with exports under the GSP accounting for US$132m in 2007. Rivera also dismissed figures regarding the number of jobs at stake claiming that only 25,000 jobs are generated directly or indirectly through Atpdea.

• New markets
  President Evo Morales has mooted India, China, Vietnam, Iran and Venezuela (among others) as possible alternative markets if the Atpdea is suspended, maintaining that Bolivia refuses to “be blackmailed" by the US. The president of the national chamber of industry (IBCE), Daniel Sánchez, however did not appear convinced. He told the local press that “selling textiles to China is like offering ice to the North Pole."
  

COLOMBIA | Inflation controlled. Inflation reached 7.7% in 2008, driven by rising food prices, according to the national statistics agency, Dane. This exceeded the target of 3.5% to 4.5% set by the central bank, and the 5.7% figure recorded in 2007, but the government met with some success in its measures to curb inflation in the second half of the year after a runaway start.

PERU | Trade surplus dwindling. Peru registered a trade surplus of US$2.93bn in the first 11 months of 2008, according to the central bank. This compares unfavourably with a trade surplus of US$7.34bn over the same period in 2007. The reason for the shrinking surplus is the surge in imports. While exports expanded by 17% in the first 11 months of last year, imports were up 49%. The trade surplus for November was just US$37m as exports fell 12% on the same month a year earlier to US$2.075bn and imports grew by 15% to US$2.038bn. Peru's international reserves in 2008 increased by 13% on 2007 to US$31.196bn.

The ruling party, Lespwa, could secure a majority in the senate when the second round of elections is held on 7 June. This would present President René Préval with the opportunity to carry out a sweeping constitutional reform, which has been held in abeyance for 18 months. The reform would include allowing consecutive re-election.

Lespwa was the big winner in the first round of senate elections on 19 April, the final results of which were revealed by the provisional electoral council (CEP) this week. Although no candidate managed to win 50% of the vote to obviate a second round, all nine of Lespwa's candidates made it through to a run-off. The field was cut down from 78 candidates to 22. The two best-placed candidates in nine of the 10 departments will contest the second round. The remaining four candidates are competing for two vacant seats in Artibonite and Nord-Est.

Elections were cancelled in a tenth department, Centre, after polling stations were ransacked and an electoral official shot in the town of Mirebalais as supporters of Lespwa and the opposition party, Fusion, clashed. The department will restage the first round on 7 June. One-third of the 30-seat senate is elected every two years.

The turnout was dreadful. Only 11% of registered voters cast their ballots: the highest level of participation was 29% in the Nord-Est department but it sank as low as 2% in Ouest. Fanmi Lavalas, the party of former president Jean-Bertrand Aristide, who is in exile in South Africa, urged voters to boycott the elections after it was barred from fielding candidates by the CEP in February on tenuous procedural grounds.

Lavalas is accusing the government of excluding it from the electoral process because it would have provided a genuine threat to Lespwa. It is certainly in Préval's interests that Lavalas did not compete. Lespwa currently has six of the 18 seats in the senate. If it could get close to a two-thirds majority in the senate, it might allow Préval, with a bit of horse-trading, to reform the 1987 constitution.

The opposition-controlled senate has been a persistent thorn in Préval's side since he took office in 2006. It voted out his prime minister, Jacques-Edouard Alexis, after violent food riots across Haiti in April 2008. It has also stymied his proposed constitutional reform, which would allow a president to serve two straight five-year terms in office - currently there must be at least a five-year hiatus - and appoint his prime minister without needing the approval of congress.

The secretary general of the Organization of American States (OAS), José Miguel Insulza, initially expressed concerns about the exclusion of Lavalas from the electoral process, but the international community quickly set these aside. At a meeting just four days before the elections, donors from 28 countries and multilaterals pledged to provide US$324m in aid to Haiti over the next two years, of which US$41m is for budget support in 2009. The meeting was remarkable for the optimism displayed by key actors, from the US Secretary of State, Hillary Clinton, to the UN Secretary General, Ban-Ki Moon, and the president of the World Bank, Robert Zoellick. This was clearly designed as a show of support for Préval. It is worth noting that only a fraction of the US$1bn promised by donors at a similar meeting in 2004 was actually sent.

The Union of South American Nations (Unasur) met in Quito on 10 August. Its official agenda went all but unreported as it was hijacked by the debate over Colombian-US military bases. Colombia's President Alvaro Uribe had spent the previous week on a peripatetic tour of South America in an endeavour to, if not drum up support, win understanding for the accord with the US. Unasur heads of state failed to reach a consensus over the thorny issue, which they agreed to discuss at a special summit in Argentina at a later date. Venezuela's President Hugo Chávez , meanwhile, once again ratcheted up the tension with Colombia, indulging his taste for sabre-rattling: “the winds of war have started to blow", he said.

Chávez succeeded in persuading Chile's President Michelle Bachelet, the pro tempore president of Unasur, to put the issue of the bases on the summit agenda. It is likely to remain there for some time to come. Bachelet handed over the presidency at the meeting to Ecuador's President Rafael Correa, who is as committed as Chávez to securing a condemnation of the bases, which he claims are “a provocation for the region" and a threat to regional stability.  

Bolivia's President Evo Morales presented a proposal that Unasur should reject the installation of foreign military bases in the 12 member states. This was not approved. Instead, Brazil's President Lula da Silva led calls for the issue to be discussed by defence and foreign ministers on 24 August in Quito before a special summit of Unasur heads of state in Buenos Aires, which he hopes Uribe will attend. Chávez was happy to accept this compromise. Putting the summit back keeps the focus on the issue for several more weeks at least which suits his purposes.

Uribe had no intention of attending the Unasur summit in Ecuador, with which Colombia does not have diplomatic relations. He chose instead to conduct a mini-tour of the region in the week leading up to the event, taking in Peru, Chile, Argentina, Uruguay, Paraguay, Bolivia and Brazil.

Unsurprisingly, Peru's President Alan Garcí­a, who also failed to attend the Unasur summit, expressed his unequivocal support for Uribe's decision, while Bolivia's Morales was fiercely critical. Bachelet said she “respected the sovereign decisions of other countries in the region" - the same line taken by President Fernando Lugo of Paraguay.

The most important reaction was that of Brazil. Uribe was reticent about joining Unasur's Defence Council at the outset, because he did not want foreign interference in how Colombia fights its internal conflict, and only decided to enlist in March after being cajoled by Lula [WR-09-10]. A week before the two men met on 6 August, Lula had said he was “not happy" at even one Colombian base being used by the US. His foreign minister, Celso Amorim, expressed Brazil's concern that the military presence “seems to go well beyond what might be needed inside Colombia".

At the meeting itself, Amorim stressed that Lula said the accord was “naturally for Colombia's sovereignty". What changed in between is that the US national security advisor, General Jim Jones, visited Brasí­lia. He assuaged fears that the US would take an active role in counter-insurgency missions, arguing that US forces would only be used against drug-trafficking and on humanitarian missions in Colombia.

At the Unasur summit, Lula invited the US to engage in “a profound discussion" with Unasur about its relations with South America. The US President, Barack Obama, is so far showing little appetite, or interest, in discussing the issue of the bases, confining himself to highlighting the “hypocrisy" of those who demand more US action on Honduras while criticising US cooperation with Colombia. “We have had a security agreement with Colombia for many years now. We have updated that agreement. We have no intent in establishing a US military base in Colombia," he told the press on 7 August.

Venezuela-Colombia ties deteriorate
Uribe sent his deputy foreign minister Clemencia Forero, to represent Colombia at the Unasur summit. Forero was keen to emphasise that there would be no foreign military bases in Colombia. She said the bases would remain in Colombian hands with limited access for US military personnel “for coordinated action against drug-trafficking and terrorism (our italics)", even though the latter would appear to run counter to what Jones said in Brasí­lia.

In a thinly veiled swipe at Chávez , Forero said that Unasur and its Defence Council should consider other issues affecting regional stability, such as the activities of illegal armed groups and arms trafficking - an allusion to the Venezuelan rocket launchers which, Uribe recently announced, had been confiscated from the Fuerzas Armadas Revolucionarias de Colombia (Farc) [WR-09-30].

Colombia had notified Venezuela of the rocket launchers through diplomatic channels in early June but Uribe chose to make the issue public in late July after Chávez began condemning the US military base accord. It was at this point that Chávez froze diplomatic and trade ties. Although he has threatened to sever ties before (and he only briefly recalled the ambassador to Bogotá, Gustavo Márquez), Colombian exporters remain very anxious that he will carry out his promise this time.

Chávez ordered the suspension of the supply of petrol to the Colombian border markets of Cúcuta and La Guajira: some 4.5m gallons of petrol a month is being sold by Venezuela's state-owned Pdvsa under an agreement that expires on 21 August. More worryingly for Colombia's manufacturing sector, Chávez signed agreements worth US$1.1bn with Argentina's President Cristina Fernández in Caracas on 11 August, specifically to replace Colombian imports.

Chávez said Venezuela would acquire 10,000 cars a year from Argentina instead of Colombia. Only in April, Chávez and Uribe had discussed increasing two-way trade from US$7.4bn in 2008 to US$10bn by 2010 with extensive plans for joint economic projects. It was then that Chávez established a quota of Colombian vehicle exports at 10,000 units this year, much to the delight of Colombian car manufacturers. In June, Ambassador Márquez had even mooted a border-security accord including efficient security mechanisms, and shared intelligence, to combat drug-trafficking and violence of all sorts. Now Chávez is bleakly talking about rearming from Russia and the prospect of war. Uribe will be relying on the rhetorical flip-flopping continuing.

• Southcom

The US Southern Command (Southcom) carried out joint naval exercises under the “Southern Exchange" for three weeks in July: 1,000 marines and sailors from Argentina, Brazil, Chile, Colombia, Peru and Uruguay - half of the 12 member states of Unasur - took part, along with the US. The exercises barely got a mention in the regional press, obsessed with Colombian-US bases. Any discussion by Unasur of the presence of military forces from outside the region will need to include such exercises (although Brazil, for one, will not want them to end). It would also have to consider Venezuela's naval exercises with Russia.

Mexico's new system for vehicle checking, the Sistema de Aforo Vehicular (Siave), which is being introduced in border states, has slowed cross-border traffic. Mexicans crossing into the US have become inured to the two- or three-hour queues crossing the border often entailed. Coming back used to be much quicker, but now can take just as long. Motorists and local governments blame the introduction of the Siave.

The chaos has also deterred US citizens from crossing the border and prompted calls from border governor, such as José Guadalupe Osuna Millán, the governor of Baja California, for the federal government to think again. Osuna is a member of the Partido Acción Nacional (PAN) which runs the federal government. The federal government has dismissed such pleas on the grounds that the war against organised crime causes inconvenience for everyone. It also, bizarrely, claims that it is winning the war against organised crime.

Political commentators are now beginning to question the figures the government uses to substantiate such a claim. Sergio Sarmiento, a prominent TV personality and columnist, recently argued in Reforma that it is pointless for the government to claim that the murder rate is falling when the highways are full of masked soldiers, tanks and armoured cars. The government claims, through the Sistema Nacional de Seguridad Pública that the murder rate has dropped, nationally, from 17.6 per 100,000 inhabitants in 1989 to 10.8 in 2008. In Baja California the rate has dropped from 27.7 per 100,000 in 1989 to 16 in 2008.

• State funding

Under the Ley de Coordinación Fiscal, a third of the federal government's revenues are allocated to state governments. There is no provision to ensure that thrifty and effective state governments get a bigger proportion than spendthrift governments.

ECUADOR-PERU | Tax take. Peru's tax take rose 16% in the first two months of the year to NS$9.98bn (US$3.5bn), according to the tax agency, Sunat, which said the tax on profits was up 33% due to the economic recovery. The government is predicting “a cautious but optimistic" 5.5% growth in real annual GDP in 2010; the IMF expects a higher 6.5%.   
Ecuador's tax take increased 26% in the first two months of 2010 to US$1.21bn compared with the same period last year, authorities announced. The tax take was just under half the total of remittances returned by Ecuadorean expatriates in the whole of 2009: remittances fell 12% to US$2.495bn last year. The main source of remittances is Spain (46%) and the US (40%), the central bank announced.

ECUADOR | Human rights. President Rafael Correa said this week he had charged his foreign minister, Ricardo Patiño, to work with human rights specialists in Latin America to produce a report showing how the US violated human rights. “It legalised torture, or have we forgotten about that?" he said, after the US State Department published its detailed annual human rights report. This is the source of considerable resentment in the region, with governments in several countries arguing that the US lacks either the legitimacy or the moral high ground to be evaluating their performance.

One year after Manuel Zelaya was ousted as president of Honduras on 28 June 2009, the Frente Nacional de Resistencia Popular (FNRP), which sprang up to support Zelaya, formed an alternative truth commission to investigate the coup and its causes. Zelaya continues to get news coverage: his return, with full guarantees, is being billed as a prerequisite for the recognition of Honduras by many Latin American countries. Of more long-term significance one year on, however, is the national consolidation of the FNRP as a credible pressure group opposed to the reactionary political and economic elites that sponsored the coup and devoted to pushing for a constituent assembly to shake up the country's democratic institutions and increase citizen participation.

The alternative truth commission is made up of two Hondurans and eight foreigners, including the Guatemalan and Argentine Nobel Peace Prize Winners Rigoberta Menchú and Adolfo Pérez Esquivel respectively. It claims that the official truth commission installed by the government in May, under Guatemala's former vice-president Eduardo Stein, is intent on whitewashing the coup. Juan Barahona, who led thousands of protesters from the FNRP in a march in Tegucigalpa on 28 June, said the alternative commission would be implacable in its quest for the truth. He said the one positive legacy of the coup was the emergence of an apolitical popular resistance united by the need for a constituent assembly to which end he said the FNRP would collect 1m signatures.

In an emailed letter to his supporters from his exile in the Dominican Republic, Zelaya expressed his full support for the alternative truth commission. He also claimed unequivocally that “What we suspected at the beginning has now been confirmed: the United States was behind the coup." This is not what he said while holed up in the Brazilian embassy in Tegucigalpa for months on end hoping for the US to help reinstate him, and, given his failure to supply any evidence to confirm his suspicions his words seem more redolent of his disillusionment and frustration. A spokeswoman for the US State Department denied that the US either had advance warning of the coup or was involved in it.

Brazil's presidential campaign turned violent last week, with militants of the ruling Partido dos Trabalhadores (PT) clashing with activists of the main opposition Partido da Social Democracia Brasileira (PSDB) on the streets of Rio de Janeiro. President Lula da Silva failed to condemn the violence and instead chose to adopt a confrontational discourse against the opposition to promote the interests of his party.

PT militants assaulted PSDB activists accompanying the PSDB presidential candidate, José Serra, as he campaigned on the streets of Rio. Serra himself had objects thrown at him, some of which hit him in the head. This led the candidate to cancel the campaign in order to get medical treatment, claiming he was hit by a heavy object.

Images of the event show PT militants initiating the brawl and clearly show that Serra was hit at least twice. One of the images, filmed by the national television broadcaster SBT, showed Serra was hit by what looked like a paper ball. But another image, filmed by an amateur cameraman and distributed by the internet site iG, showed he was hit a second time by what looked like a wooden stick. After being hit by that object, Serra put his hand on his head and then decided to stop the walk to seek treatment.

The clash dominated Brazil's media. Lula, instead of condemning violence of any kind, especially during an electoral campaign, chose to attack the opposition by casting doubt over the seriousness of Serra's injury. “It was shameful what Serra's campaign team is trying to do, [the episode] was a lie, a farce," he told journalists. The PT's candidate, Dilma Rousseff, took Lula's line and declared in one of her daily television advertisement slots that “this is a traditional method by conservative right-wing politics, to create facts and accuse the other side of violence."

An expert in image analysis from the Universidade de Campinas, Ricardo Molina, however, confirmed that the second image was real and that the second object to hit Serra was much heavier than the first one. For Serra, the episode was evidence that “the PT does not know how to behave democratically." He then went on to say that “it is worrying that the most important authority of the republic condones, in such form, acts of violence."

The PT, as a party, ultimately has to assume responsibility for its militants physically attacking the party's opponents, especially when one of its main leaders and Rousseff's campaign adviser, José Dirceu, says publicly, at political rallies, that “the opposition must be beaten, in the ballot box and on the streets." It is also difficult to excuse Lula of responsibility when he chooses to continue to promote the interests of his own party in such serious circumstances.

This episode serves to show that the many social achievements of the Lula administration will not be its only political legacy. Lula has unashamedly used his office to promote the interests of the PT, not least by actively campaigning for Rousseff during official ceremonies and allowing the use of the state apparatus against the opposition. Lula has also preferred to de-legitimise his opponents as democratic forces, choosing instead to characterise them not as groups with inefficient or even wrong answers for Brazil's problems, but rather as agents of political and social backwardness. At the same time, and in a clear contradiction, Lula has allied himself with politicians he formerly criticised for corruption.

• Clown controversy
  Some 1.3m dissatisfied voters in the state of São Paulo elected the clown Tiririca to the lower chamber of Brazil's congress on 3 October. Tiririca's victory, not least as the candidate with the highest vote in the state, came as a surprise for a candidate who campaigned under the motto “I do not know what happens in congress. Vote for me and if I get there I will tell you." His rivals, however, have questioned whether Tiririca knows how to read and write, which seems to be the only pre-condition to become a member of congress in Brazil. The electoral court is looking into the claims.

The most striking debate in the 2011 presidential election campaign appears to be over the 2006 presidential election campaign. The candidate for the left-wing coalition Gana Perú, Ollanta Humala, is accusing the frontrunner in the contest, former president Alejandro Toledo (2001-2006), of using his position to seek assistance from the US embassy in Lima to stage a defamation campaign to prevent him from coming to power in 2006. Humala, who narrowly lost out to Alan Garcí­a in 2006, is basing his claims on a Wikileaks diplomatic cable from the US embassy to try and transform his lacklustre campaign ahead of the 10 April contest. The story has got him back in the headlines but whether it erodes some of Toledo's support and boosts his own is a moot point.

The Wikileaks diplomatic cable, dated 29 November 2005, was published by the Spanish daily El Paí­s on 19 February. Its contents make it clear that Toledo's interior minister, Fernando Rospigliosi, had “expressed concern over prospects that ultranationalist Ollanta Humala is establishing himself as a political force to be reckoned with _ (and) suggested that the Embassy consider supporting an anti-Humala communications program."

The US ambassador at the time, James C. Struble, concludes that while “we share many of Rospigliosi's concerns regarding Ollanta Humala's rise in the polls and the possibility that the latter will establish a strong pro-Evo (Morales) pro-(Hugo) Chavez political base following the 2006 elections _ we have no/no intention of involving the Embassy in anti-Humala information or commentary campaigns: that is a task for the competing political parties."

Humala said it was “shameful turning to a foreign power to interfere in an electoral process," which is exactly what Humala's opponents accused him of doing with Venezuela's President Hugo Chávez . “To ask for help from the embassy is not anti-democratic; anti-democratic is for Venezuela and Cuba to intervene, and for everybody to know this is happening and to do nothing," Rospigliosi said. “He had to be stopped from coming to power."

Toledo's running mate Carlos Bruce has sought to distance him from the whole embarrassing incident, claiming that the former president knew nothing about Rospigliosi's request; Humala maintains this is an insult to the intelligence of Peruvian voters. He claims Toledo himself must have been behind the attempt to gain US support for his character assassination, although the current ambassador Rose Likins has strenuously denied that this was the case.

The whole episode has helped lift Humala's campaign; whether it gives him a significant push in the polls to put him back into contention, with a concomitant fall in Toledo's support, is another matter, but it is worth noting that his current backing of 12% almost certainly understates his support. As the US diplomatic cable points out in 2005, and it remains relevant today, “much of his support flies under the radar of the major media and urban-based polling."

The difficulty for Humala, however, is that he is no longer seen as “the great hope" of Peru's poorer population in the provinces, and there are other candidates muscling in on the support base he once had. Keiko Fujimori, the daughter of imprisoned former president Alberto Fujimori (1990-2000), is the prime example. Keiko lies in second place behind Toledo in three of the four surveys conducted by polling companies this month, which would be enough to carry her through to a run-off. She was invited to the US embassy in Lima by Likins to be notified of other Wikileaks cables from the embassy which are likely to be released in the coming days now that the national daily El Comercio has obtained more than 1,000 Wikileaks cables related to Peru (see sidebar).

Keiko, who said she “regretted that way that confidential information from an embassy is interfering in an electoral process", was shown three cables by Likins related to her, including opinions Keiko said she did not share: that her father had accepted his conviction in order not to undermine her candidacy and in the hope that she would win and pardon him; and that her support was based on his popularity, as her Fuerza 2011 party lacked a solid structure.

Likins said last week that she would meet all the candidates who might be mentioned in the cables: she has already met Humala and Toledo.

The main finding of the opinion surveys is that Toledo has not extended his lead. The Datum poll, which was conducted most recently (between 11 and 13 February), has Toledo down two percentage points on its previous offering. Keiko has not really kicked on but has gained second place by default: Luis Castañeda, the former mayor of Lima, has been unable to arrest his slide in the polls.

Surveys ahead of presidential elections on 10 April (%)

	Ipsos-Apoyo	CPI	Universidad Católica	Datum
Alejandro Toledo	28	30.0	28.6	28
Keiko Fujimori	22	18.0	20.3	19
Luis Castañeda	18	20.0	17.5	19
Ollanta Humala	12	10.0	12.0	11
Pedro Pablo Kuczynki	6	4.0	3.6	5

                   Wikileaks

The editor of the national daily El Comercio, Rossana Echeandí­a, published a first-hand account on Sunday of the circumstances under which her paper obtained more than 1,000 diplomatic cables related to Peru from Wikileaks in London on 16 February after receiving a phone call on 22 January. Mirko Lauer, a columnist writing for the rival daily La República, questioned the decision by Wikileaks: “in trusting its booty to just one Peruvian paper, the people at Wikileaks are running the risk of bias in the selection or presentation of the material," he argued.    

The reason for Mexico's interest in coordinating antigang policies with its Central American neighbours [SSR-03-04] is becoming quite clear: gang members are fleeing crackdowns in the isthmus and establishing themselves on Mexican soil. Federal chief prosecutor Rafael Macedo has publicly acknowledged that the biggest gang, Mara Salvatrucha, is `creating a serious problem'.

So far, the problem is mainly confined to border areas, particularly the southern border with Guatemala, where authorities reckon that about 3,000 gang members, or mareros, operate on both sides of the dividing line. Ciudad Hidalgo (Suchiate), just across from Ayutla in Guatemala, has been described by city authorities as `overrun' by the maras. They have not stayed there, though: many have moved inland to Tapachula, where a worrying new development has been noted: the recruitment of young Mexicans (one estimate puts the number of local acolytes above 700).

The mareros have acquired notoriety in this area for preying on Central American migrants making their way north; attractive targets because they are carrying a relatively large amount of money to finance their long journey. In large groups they `steam' through the train from Hidalgo, robbing as they pass and occasionally throwing overboard those who try to resist. They are already a visible component of the local prison population: a few weeks ago a riot in an establishment for juveniles was triggered by a turf war between members of rival maras.

Members of maras figured prominently among the 26 people arrested this year by Chiapas police and charged with 30 murders. They are not, however, the only ones responsible for having raised the level of violence in the area [SSR-03-03]; also in that group were sicarios (contract killers working for organised crime) and people traffickers. Of the 66 murders recorded by the Chiapas police this year, most are reckoned to be the result of clashes between rival criminal gangs. That criminal activity moves a lot of money in the area is illustrated by the fact that two of the sicarios arrested in Chiapas for seven of this year's killings were charging up to M$200,000 (US$18,000) per hit.

Moving northward
That the mareros are also following the migrants' trail to the US (for many of them, deportees from the US, a return journey) has been proven by the testimony of several of those detained near the southern border, and by recent arrests of Central American gang members in the northern border city of Nuevo Laredo.

On 9 December in Tuzantán, Chiapas, about 55 kilometres further inland than Tapachula, more than 20 members of the Mara Salvatrucha, wielding guns and machetes, struck a train carrying Central American migrants, killing three and injuring four. Police reaction was swift: 10 alleged raiders were arrested soon after the incident. A week earlier one person was killed and four were injured in an attack on the same train. The Salvatrucha gang is considered responsible for 20 killings of migrants between November and December.

One big fear of the Mexican authorities is that the combination of tougher anti-mara policies in Central America (see page 18) and tighter control on the US border will result in more mareros opting for setting up shop in Mexico — a prospect made more frightening by the precedent of the recruitment of Mexican youths in Chiapas.

A late attempt by Venezuela to mend fences with the US after having rescinded its agreement with the DEA did not suffice to avert the country's 'certification' as uncooperative with US antidrugs efforts. However, Washington chose to waive the sanctions meant to accompany 'decertification', so as to be able to continue financing 'pro-democracy' initiatives in Venezuela.

After Venezuela broke off the longstanding cooperation agreement between its national guard and the DEA, a decision taken in July but only announced on 7 August (SSR-05-08), Washington denied Venezuelan accusations of espionage and shady deals with 'controlled deliveries' by the DEA. The State Department said they were just a smokescreen to cover up Venezuela's scant cooperation with the US on the drugs front which, it added, was about to lead to its 'decertification' in the annual State Department report which blacklists those countries deemed uncooperative, making them liable to sanctions (the loss of all aid except that devoted to antidrugs purposes).

Washington followed up by cancelling the visa granted to General Frank Morgado, head of the national guard's antidrugs command. The US ambassador to Venezuela, William Brownfield, made it clear that this was because Morgado was suspected of involvement in the drugs trade. Within days the Venezuelan government announced that Morgado would be replaced as head of the antidrugs command. 

General Melvin López, inspector-general of the armed forces and one of those who had been most vocal about the charges against the DEA, said that at times it was good to 'clear the air' by removing the man in charge of an agency at the heart of a domestic and international controversy, making it clear that this was an attempt to cool the issue. Privately, officials began to spread the word that Morgado was found to have hyped the allegations against the DEA, in order to deflect complaints about his own performance that had been coming from the DEA and other foreign antidrugs agencies.

At that point, the Venezuelan government began to float the idea of drafting a new agreement with the US, a move that drew a guarded welcome from the State Department. Interior minister Jesse Chacón said that the proposed new agreement would be similar to those in place with Britain, the Netherlands, France and Russia. DEA agents, he said, would be barred from carrying arms and making arrests, and 'controlled deliveries' would be disallowed; on the operational side, everything would be exclusively in the hands of Venezuelan agents. The draft agreement was handed over to ambassador Brownfield on 12 September.

Chacón said the draft agreement had been built around a new proposed antidrugs strategy, based on targeting storage depots rather than trying to intercept shipments. This dovetails with the suggestion made by White House antidrugs czar John Walters that the reason increased eradication of drug crops has not affected the inflow of drugs is that the traffickers had large volumes of drugs in storage. Coinciding with this, Conacuid, Venezuela's antidrugs agency, announced that in the first eight months of this year it had intercepted a record 59 tonnes of drugs - a transparent message to the 'certifiers' in Washington that Venezuela was acting decisively against the drugs trade.

'Decertification'
The gesture failed to make an impression on Washington. On 15 September President George Bush Jr sent to the US Congress a list of 20 states considered major drug-transit or major illicit drug-producing countries, singling out Venezuela (and Myanmar) for their 'failure to make progress in meeting their international counternarcotics obligations'.

Among the 'majors' were 13 Latin American and Caribbean countries: the Bahamas, Bolivia, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Haiti, Jamaica, Mexico, Panama, Paraguay and Peru.

There are no hard objective criteria to determine whether a country is to be considered a 'major'. When presenting this year's list, Nancy Powell, Acting Assistant Secretary of State for International Narcotics and Law Enforcement Affairs, said, 'In order for a country to be classified as a major drug transit country, no specific numerical threshold is required; instead, a country must be a significant direct source of illegal narcotic or psychotropic drugs or other controlled substances significantly affecting the United States or be a country through which transport of such drugs or substances [takes place].'

The reasons for 'decertifying' Venezuela were stated as follows: 'Venezuela is a major transit country for drug shipments to the United States and Europe, with 150 metric tons of cocaine and increasing quantities of heroin moving though its territory annually. Despite increased drug seizures in the past four years, the Venezuelan government has not addressed the increasing use of its territory for transit purposes and has failed to eradicate coca and opium poppy fields near its border with Colombia.'

Venezuela, however, was granted a waiver of sanctions. President Bush wrote to Congress, 'Vital national interests require that US assistance to Venezuela be continued so that selected programs can be supported. These are programs that aid Venezuela's democratic institutions, establish selected community-development projects, and strengthen Venezuela's political party system.' These programs, in fact, are designed to strengthen the opposition to Venezuelan President Hugo Chávez .

There has been some speculation that the replacement of Roger Noriega by Tom Shannon as the number-one western hemisphere official at the State Department might bring a 'softening' of the US attitude towards Venezuela. This has been based mainly on some conciliatory remarks made by Shannon during his ratification hearings but these do not differ greatly from the pro-forma statements made by his predecessor and State Department spokesmen about hoping for an improvement in relations: the onus is placed firmly on Chávez .

Checking 'US evidence'
An indication that Venezuela is planning a new move - direction unknown came on 28 September when Chacón announced that the government would check a purported US satellite image taken in July and said to show coca plantations in Venezuelan territory. US officials would not comment on the authenticity of the image.

Chacón said the image did not conclusively show coca crops but that the government would check six suspect areas 'and,' he added, 'if there are crops there, next week there won't be.' The tone suggests that Venezuela is either pursuing a conciliatory line or seeking to prove that it has been unfairly 'decertified'. In hostile mode, an image such as this would have been cited as confirmation that the US is spying on Venezuela with evil intent.

ARGENTINA | Arms smuggling scandal. In late May and Argentine court initiated a formal investigation into a suspect operation to export 6.7 tonnes of automatic rifles, ostensibly as scrap metal, to a US-based firm, JLD Enterprises, set up by an Argentine national. The shipment had been intercepted in February by customs officials alerted by the low value declared (US$2,600). Upon inspecting the cargo, many rifles were found to have had their serial numbers filed off, while others had numbers which did not match those on the manifest. The rifles were found to still be serviceable.

The operation had been authorised a year ago by a government commission formed by representatives of the defence, foreign affairs and economy ministries. The source was the Dirección General de Fabricaciones Militares (DGFM), the state-owned arms manufacturer, which in 2006 was transferred from the defence ministry to that of planning. 

Defence minister Nilda Garré rushed to dissociate the military from the planned sale and the administrator of the DGFM, Arturo Puricelli, said that the affair bore no resemblance to the clandestine sales of weapons to Croatia and Ecuador in the 1990s, which led to upcoming trial of fourteen people, including a former head of the DGFM. The current investigation is focusing initially on two divisions of the DGFM.

PARAGUAY | Amnesty sought for Oviedo. The Unión Nacional de Ciudadanos Éticos (Unace) has submitted a bill to the senate granting amnesty to its leader, former general Lino Oviedo, who is currently serving a 10-year prison sentence for leading an attempted coup against President Juan Carlos Wasmosy in April 2006. Unace is the third-largest party in congress and it holds the presidency of the legislature as a member of the Concertación opposition alliance.

The proposed amnesty is confined to the attempted coup, not to the events for which Oviedo still faces trial: the March 1999 assassination of Vice-President Luis Marí­a Argaña (he is accused of having masterminded it) and the deaths of seven youths in the disturbances which followed that murder. Oviedo was imprisoned on the coup conviction in 2004, when he returned to Paraguay after having spent almost five years in exile in Argentina and Brazil.

Approval of the amnesty will require a two-thirds majority in both chambers of congress. Unace's lawyer, Ví­ctor Sánchez Villagra, says there has been no negotiation over the proposed amnesty with President Nicanor Duarte or the ruling Colorado party. He also professed to ignore whether Oviedo has changed his stance of rejecting any amnesty.

BRAZIL | Threat to bar Chávez form Mercosur. The opposition Partido da Social Democracia Brasileira (PSDB) and Partido Demócrata (DEM) announced on 5 June that they would block ratification of Venezuela's access to Mercosur if President Hugo Chávez does not formally retract his statements about the Brazilian senate's call for him to reconsider the decision not to renew the licence of the television station RCTV (taken off the air on 27 May). Chávez said the Brazilian senate had been 'parroting what they were told in Washington'.

President Lula da Silva, who had sought to avoid entering the debate over RCTV, felt compelled to say that he 'repudiated' Chávez 's outburst. Though the opposition alone would be unable to block ratification, the RCTV affair has caused a rift within Brazil ruling coalition. Former president José Sarney, a leading figure in the Partido do Movimento Democrático Brasileiro (PMDB), Lula's main ally with four ministers in his cabinet, and Walfrido Mares Guia, of the Partido Trabalhista Brasileiro (PTB), minister for institutional relations, have been outspoken critics of Chávez 's move.

With the scandal still raging about alleged links between high-ranking Ecuadorean officials and the Farc guerrillas [SSR-09-02], the Correa administration has found itself fending off more claims, from Colombian sources, that the Farc is still finding shelter in Ecuadorean territory. One source says that two top Farc leaders have found refuge there, another that the Farc still has at least seven camps inside Ecuador. Ecuador's security minister says this is impossible, but admits that the army keeps running into Colombian irregulars in the border provinces.

On 2 March the Bogotá-based Radio Cadena Nacional (RCN), citing 'state intelligence' sources, reported that two members of the Farc's general staff, Guillermo Torres ('Julián Conrado') and Sixto Antonio Cabaña ('Domingo Piojo') had taken refuge in Ecuador [and that another nine were in Venezuela]. The Ecuadorean government demanded from Colombia any evidence proving this, including details of their location, and formally asked the Organisation of American States (OAS) to support this request.

Miguel Carvajal, Ecuador's internal and external security minister, said that this was 'impossible, because the presence of the Ecuadorean army is very strong'. He went on to underline that the Ecuadorean armed forces had located and dismantled about 170 guerrilla 'installations' in 2008, up from 47 in 2007. In the border provinces of Esmeraldas, Carchi and Sucumbí­os, he said, the military must deal with the presence of both the Farc and the Ejército de Liberación Nacional (ELN, Colombia's second-largest guerrilla group), as well as two paramilitary organisations, Los Rastrojos and Águilas Negras.

The minister argued that while Ecuador had been stepping up its border-control operations, Colombia had not carried out its announced deployment of a new brigade on its side of the border. Alluding to recent Colombian claims that 27,000 troops had been deployed, he said this was equivocal, since only 3,000 were actually in the border area. 'Why are there no Clombian operations on the border?' he said: 'Because their operations consist in going in for a couple of days, striking and pulling out, because there is a strong presence of irregulars there.'

On 13 March the army reported that a unit patrolling in the Yanamaru area of Sucumbí­os province, about 1.5 kilometres from the Colombian border, had engaged an armed group, killing a female fighter. The military were unable to ascertain whether the group belonged to the Farc or one of the paramilitary organisations known to be operating in the area. On 25 March, according to Carvajal, the army had clashed twice with Farc guerrillas, without casualties on either side; the guerrillas had fled back into Colombia.  Carvajal said that clashes have been taking place almost every other month, and that there have been encounters with 'irregulars' in which the latter have avoided engaging the soldiers.

In between both events, on 21 March, Colombia's Caracol Radio broadcast an interview with a former Farc fighter, Carlos Andrés Cuéllar, who claimed  that the guerrillas still had at least seven camps inside Ecuador, with about 200 men, and that he had witnessed a visit by an Ecuadorean general who had warned of an impending military operation in the area. Cuéllar also said that the Farc had received from Venezuela mortars with a range of five kilometres, which their new leader, Guillermo León Sanz ('Alfonso Cano'), intended to use against Colombian army units in the border area.

HAITI | Arms distribution alert. On 12 October, the civilian head of UN Stabilization Mission in Haiti, (Minustah), Edmond Mulet, issued a call for information regarding the distribution of weapons by groups close to the government in the runup to the presidential and legislative elections scheduled for 28 November. Several candidates had recently stated publicly that weapons were being handed out to followers of the Préval government with the purpose of intimidating voters.

Minustah has urged anyone who has any information about this to report it to the national police, Minustah's police contingent (Unpol), electoral observer missions from the Organization of American States (OAS) and Caribbean Community (Caricom), so that the provenance and destination of these weapons can be ascertained. Mulet is rather sceptical about the claims. 'Every time elections are called, they reappear.'

On 14 October, as Minustah's mandate was expiring, the UN Security Council extended it for another year. It decided to keep the mission's current authorised strength of up to 8,940 military personnel and 4,391 police.

DOMINICAN REPUBLIC | Police implicated in protest fatalities. A series of protest actions spearheaded by the protest group, Frente Amplio de Lucha Popular (Falpo) in demand of public works and social benefits in Navarrete, in the northern province of Santiago, has claimed two lives and left 17 people injured in October. The fatalities were a young student and leader of Falpo, killed on 12 October, and a police corporal killed on 20 October. Six of the injured in the most recent incidents were workers of a tomato processing plant who were set upon by the police as they were going to work. According to Falpo, police officers ordered the workers to lie on the ground and then opened fire on them

At the opposite side of the country, in the populous city of San Cristóbal, some 26 kilometres southwest of Santo Domingo, a dispute between two rival public transport unions over control of bus routes, claimed two lives on 20 October. Witnesses cited by the local media say they were shot by police. The procurator-general's office has ordered an investigation into these allegations.

NICARAGUA | Honduran gunmen in major incidents. The participation of Honduran gunmen with drug-trafficking connections in a series of incidents in October has set off alarms in Nicaragua. On 1 October  the Nicaraguan naval force subdued and arrested six heavily armed Hondurans in Caño Roca, near Rí­o Maí­z in the southern Caribbean district of Bluefields as they prepared to handle a transhipment of cocaine. They were initially confined in the prison at Bluefields, but on 23 October the authorities discovered a plan to spring them from there and moved them to a maximum security prison in Managua.

On 9 October three Nicaraguans were shot dead near Cárdenas, in the southern border department of Rivas. Police believe the three had been involved in the kidnapping of five Hondurans who had been transporting drugs for the Mexican Gulf cartel, and that their murder was a reprisal by the Hondurans. Police say that at least one of the Nicaraguans was a known criminal reputed to have extorted a substantial ransom for freeing the Hondurans.

Date: 30 May. To be elected in the first round a candidate must obtain 50% of the votes cast. If no candidate obtains sufficient votes to win outright a second-round run-off will be held between the two top candidates on 18 June.

Type: Presidential, legislative
Main contenders: Known: Gustavo Petro Urrego, Polo Democrático Alternativo; Rafael Pardo Rueda, Partido Liberal; Sergio Fajardo, independent; Noemí­ Saní­n, (as independent or possible candidate for the Partido Conservador).

Possible: President Alvaro Uribe (if a referendum is held and votes in favour or his second re-election), Juan Manuel Santos (in the event that Uribe does not run), both from the Partido de la Unidad Nacional.

After securing a constitutional amendment which allowed him to stand for a second consecutive term in the 2006 presidential elections, the popular incumbent president, Alvaro Uribe, is now awaiting a constitutional court ruling which would permit him to be re-elected for a third consecutive term, unprecedented in Colombia's history. The legal wrangle over re-election has effectively frozen the election campaign, as opposition and ruling party candidates remain in the dark as to who they will be up against. The outcome of the 30 May elections now hinges on the verdict of the constitutional court.

Re-election bid
For Uribe to stand in the May elections a constitutional amendment allowing for a third consecutive re-election needs to be approved via referendum. The constitutional court is currently reviewing whether or not such a referendum would be constitutional. The court is expected to rule in February. If the court does authorise a referendum it will require participation by a quarter of the electorate in order to be considered valid. A majority of affirmative votes would then allow Uribe to stand.

A recent poll by Datexco published in the national daily El Tiempo indicated that 47% of the population would be against a referendum on altering the constitution to allow Uribe to stand. This is compared to 41.28% who said they would be in favour (down from 58% in late-August). However, those opposed to the idea also indicated that they do not intend to go out and vote if a referendum is called, whereas 85.4% of those in favour said they would vote for Uribe. In sum, if the court gives the green light to the referendum, the constitutional amendment is likely to go ahead.

Supporters of the re-election bid point to Uribe's sustained popularity among the electorate, having consistently achieved opinion poll ratings of above 60%. For many Colombians, Uribe has become synonymous with security and public order as a result of his government's campaign against the Fuerzas Armadas Revolucionarias de Colombia (Farc) and - in the short term at least - its taming of paramilitary violence. Their line is that the constitutional amendment is legitimate because the majority of Colombians back Uribe, thus placing participatory democracy over liberal democracy, with its focus on constitutional checks and balances and legal scripture.
Opposition to the reelection bid has been widespread among academics, NGOs, the media, and, unsurprisingly, the political opposition. They are concerned about the birth of continuismo in Colombia, the one country in the region that has traditionally eschewed it by enacting strict term limits. It is feared that the proposed amendment would negatively impact Colombia's democratic institutions, threatening to erode established checks and balances and further consolidate power in the executive. They point to neighbouring Venezuela, and what they see as the harmful effects of President Hugo Chávez 's increasingly autocratic rule after a decade in power as an example of what should be avoided. The drop in support for the amendment suggests that the public is paying heed to their concerns, however, as the 30 May elections draw nearer, the decision of the constitutional court remains an open question.

Ruling Party Candidates
Uribe has so far refused to confirm whether or not he intends to stand if the court rules in favour of re-election, although he has strongly hinted at the possibility. Recent polls indicate that 46.21% of the electorate would vote for him in a snap election, giving him a commanding lead above all other presidential hopefuls, but not quite the 50% needed to avoid a run-off. Uribe would still be the favorite to win, as he is many points ahead of his nearest rivals, whose support is inconsequential in comparison.

If Uribe does not stand, his former defence minister, Juan Manuel Santos, will run in his place. Having previously been favourite to win the election should the referendum fail, polls now place Santos in fourth place, with 7.89% of the vote. This drop in support is presumably because he has been forced to stall his campaign until the re-election referendum is decided. Interestingly, polls show that when Uribe is excluded the number of undecided voters jumps from 11% to 24.2%. If Uribe does not stand and puts his support behind Santos' candidacy this would no doubt swing a decisive number of the undecided voters towards Santos. This poll also suggests that voters feel Colombia lacks a clear leader without Uribe.

The Opposition
The two main opposition parties are the Polo Democrático Alternativo (PDA) and the Partido Liberal (PL). Both held primaries in 2009 to select their presidential candidates. The leftwing PDA selected Gustavo Petro Urrego, who originates from the moderate wing of the party. Analysts note that he is having difficulty uniting the party behind his candidacy. The Datexco poll puts his support at a puny 3.51%.

The centre-left PL picked the centrist Rafael Pardo Rueda, who is close to Cesar Gaviria, former president (1990-1994) and ex-secretary general of the Organization of American States. Polls indicate that if a poll were held today Pardo would secure 7.89% of the vote, whereas if the court rules against the referendum this would rise to 8.66%, putting him in third place.

In first place, if Uribe does not stand, is the independent candidate Sergio Fajardo, with 13.31% in the polls (compared with 8.08% if the incumbent runs). Fajardo is the popular former mayor (2003-2007) of Medellin, credited with bringing the murder rate down in the city (though it is now reportedly on the rise again). Despite his stint as mayor, Fajardo's political credentials are somewhat thin and he lacks the support structure of a party apparatus.

Another opposition candidate with a significant amount of support is Noemí­ Saní­n, former two time presidential candidate. She is a possible nominee for the government allied Partido Conservador, which will hold primaries to select its candidate on 14 March. Polls place her support at around 5.4% if Uribe stands and 9.5% if he doesn't.

The country's top official in the battle against organised crime, José Luis Santiago Vasconcelos, argued that none of the drug gangs in the country posed a threat to the Mexican state. Santiago Vasconcelos is the head of the organised crime unit at the Procuradurí­a General de la República and he was speaking at the 73rd annual meeting of Interpol, which this year was held in Cancún, Mexico. 

Santiago Vasconcelos's statement belies what many locals believe. He was responding to an interview, given by a former Colombian president, Ernesto Samper, to a Mexico City newspaper, El Universal. Samper said that Mexico was now living in a state of narco-terror similar to that which afflicted Colombia. 

Samper's argument is based on the fact that over the past 10 years, since the advent of Nafta turned Mexico into the main drug conduit to the US, Mexico's drug traffickers have become increasingly rich and violent. There have been regular rumours, and stories in the New York Times, linking senior politicians to drug gangs. The most notorious New York Times story claimed that the current president of the Partido Revolucionario Institucional in the lower chamber of congress, and a former government of Sonora, Manlio Fabio Beltrones, had been close to drug traffickers. The newspaper had to retract its story when it failed to produce any firm evidence to substantiate its allegation. 

The widespread view in Mexico has been that the drug gangs either paid off or killed off those investigating them; policemen, judges and journalists could choose between plomo o plata (lead or silver). It is this background which makes the sweeping statement by José Luis Santiago Vasconcelos so newsworthy. He utterly rejected the notion that Mexico was becoming Colombianised. He said that the Mexican government had never been as weak as the Colombian government and never had submitted or bowed to organised crime groups in the way that governments in Colombia had.

Santiago Vasconcelos said that Samper's comments were out of date and out of context and that although they may have been true of Colombia in the 1980s, when the Colombian economy had a rough time and the country was divided, Mexico had never suffered anything as troubling. Santiago Vasconcelos's statements are inaccurate: Colombia's economy, amazingly, grew by a steady 3% a year for over 40 years from 1950. It did not suffer any of the economic and financial crises that buffeted Mexico from the early 1980s. Colombia was the only major economy in Latin America that did not have to reschedule its foreign debts.

Santiago Vasconcelos argues that the upsurge in drug-related violence in Mexico is the result of the weakening of the gangs. He claimed that there were now no dominant gangs with unchallenged control of areas of the country, so smaller gangs competed violently for their share of the business. Santiago Vasconcelos came dangerously close to lamenting the decline of the big powerful gangs, which, in his view, did not permit violent squabbling.

Again, this view seems at odd with the facts. The still unresolved murder of the cardinal archbishop Juan Jesús Posadas Ocampo, who was apparently caught up in a shoot-out between two gangs at Guadalajara airport in May 1993, showed that even when the big gangs were more powerful the level of violence was high. Santiago Vasconcelos said that he was confident that there was no criminal group, organisation or alliance which posed a threat to the Mexican state.

On 17 November, the government of President Vicente Fox published a 800-page report on the Dirty War, which took place in the 1960s, 1970s and early 1980s when the government fought leftwing guerrillas. The report, by a special human rights investigator, is entitled Informe Histórico a la Sociedad Mexicana 2006 and is published on the internet. Human rights activists said that the report was "disappointing" and "fraudulent". They point out that there was no fanfare for the report suggesting that even its authors realise that it is inadequate. The report appeared on investigators' internet site on 17 November. 

Less partisan commentators note that for the first time the Mexican government has unequivocally admitted that past governments (run by the Partido Revolucionario Institucional) carried out a covert campaign of murder and torture against dissidents and guerrillas under successive governments stretching from the later 1960s to the early 1980s. The report directly accuses three presidents of involvement in the Dirty War. 

Human rights activists argue that the report only skates over the surface of what happened in the Dirty War. They say that the report is significantly inferior to similar reports commissioned by the governments of Argentina and Uruguay. Rosario Ibarra, a leftwing senator and noted human rights activist (who coincidentally took a prominent role at the "inauguration of the legitimate president" Andrés Manuel López Obrador on 20 November) dismissed the Fox's government's effort as "worthless; a complete fraud because the investigator has done nothing to get at the truth." One of her sons was "disappeared" during the Dirty War.

Ibarra said that she did not have "any respect" for Ignacio Carrillo, the special investigator appointed by President Vicente Fox. Carrillo headed the Fiscalí­a Especial para Movimientos Sociales y Polí­ticos del Pasado (Femospp). Ibarra claimed that Carrillo's whole approach was to try to divert the investigation and cover things up rather than to unearth new evidence which could be used to prosecute people who had committed human rights abuses. Carrillo's team has spent five years working on the report, most trawling through government and army archives. The report documents 1,650 cases of torture that took place either in prisons or what the investigators call "concentration camps." The report also documents massacres; "disappearances" and other crimes committed against leftwingers. 

The Femospp found that "the authoritarian regime" as the Fox government terms PRI governments "at its highest levels" broke the law and committed crimes against humanity. According to the report, "the highest levels" of government authorised the use of the army, rather than the police, to deal with internal law enforcement and to investigate and combat crimes. The report said that the most serious episodes occurred during the governments of Presidents Gustavo Dí­az Ordaz (1964-70), Luis Echeverrí­a (1970-76) and José López Portillo (1976-82). The two big events were the massacres of students, at Tlatelolco in 1968 and then, on Corpus Christi, in 1971.

The report accused Echeverrí­a and López Portillo, (who is now dead) of being the two presidents who used the army and secret police in its counter-insurgency strategy, in Guerrero and Mexico City. Carrillo had tried to prosecute Echeverrí­a and various senior police and army officers, but the courts threw out all the allegations on the grounds that the crimes were covered by a statute of limitations.

In South America, "disappearances" are not covered by a statute of limitations. Either the disappeared were murdered which means that their murderers can be prosecuted because there is no statute of limitations for murder; or else they are still alive so the crime is continuing. The Mexican courts took a different, more conservative view. A representative from the "Comité de Ví­ctimas del 68", Marín del Campo, said that the committee rejected the government report because it did not "get to the bottom of the issues and did not punish those directly responsible for the Dirty War."

On the other hand, independent historians of modern Mexico say that Fox and Carrillo have broken new ground. "The Mexican government has never officially accepted responsibility for these crimes," Kate Doyle, the director of the Mexico project of the National Security Archive, a private research group at George Washington University, told The New York Times. 

The report has lengthy chapters on the 1968 and 1971 massacres and the campaigns in Guerrero against Lucio Cabañas Barrientos, a guerrilla leader, and his supporters who operated in the mountains for years. The report confirms that the military tortured villagers who were suspected of succouring Cabañas and his men. Some villages were destroyed in a deliberate effort at a scorched earth policy to weaken Cabañas. The report names the military officers responsible for various atrocities, both in Guerrero and in the massacres in Mexico City.

Some successes

One area where the Femspp did make some progress was in identifying bodies of the disappeared. On 14 November, the Femspp identified the bodies of two guerrillas who had been killed by the army in 1974. The two were Lino Rosas Pérez and Esteban Mesino Martí­nez. Both were rural teachers. 

The Femspp confirmed that both men had been killed violently, though it did not specify how. One appears to have been shot in the head. The bodies of both men were exhumed from their graves in Tecpan de Galeana.

Both men were, apparently members of Lucio Cabañas Barrientos's Partido de los Pobres. They were probably killed on 2 December 1974, when Cabañas was killed in a shoot out with the army in El Otatal. Villagers then buried them, not knowing who they were in the public cemetery. The bodies were exhumed in 2005.

The Comisión Nacional de Derechos Humanos (CNDH), has confirmed, after 11 years of research, that 532 people were "disappeared" in the Dirty War. It is still studying evidence in another 200 cases.

Michael Hayden, the outgoing director of the US Central Intelligence Agency (CIA), said on 16 January that Mexico was now, along with Iran, one of the major foreign policy problems for the incoming US president, Barack Obama. Hayden's comments underline how worried senior US policymakers are about the situation in Mexico. On 27 January, Admiral Michael Mullen, the chairman of the US joint chiefs of staff, said that he was “extremely worried" about the border with Mexico and the internal war against drug gangs in Mexico.

In a press conference, Mullen said: “"I am extremely concerned about (the US-Mexico) border and the drugs war, although it's not the only measure, but, if you look at the number of murders, kidnappings, and murders that have occurred over the last couple of years, and the rapid increase in that, that has all of our attention." Mullen went on to say: “I know General [Gene] Renuart (of the US Northern Command), who engages as our combatant commander with Mexico, shares that concern, and we want to do as much to assist and support our neighbour, in the that regard, as we possibly can."

According to Reforma, a Mexican newspaper which pitched the question about Mexico to Mullen, Mullen said that at least two of the 10 US chiefs-of-staff shared the view that the situation in Mexico was a major concern. What is significant is that no politician in the Obama administration has yet commented in public on Mexico. So far all the worries have been expressed by outgoing officials from the Bush administration.

These former policymakers have become increasingly outspoken about what is going on in Mexico ever since the publication of the National Drug Intelligence Center (NDIC)'s annual report, on 15 December 2008. The NDIC, which is part of the US Department of Justice, claimed that Mexican Drug Trafficking Organisations (DTOs) were the main criminal threat to the US.

In early January, the Bush administration's outgoing National Security Adviser, Stephen Hadley, became the first senior serving official to say that the US was extremely worried about the drug gangs' challenge to the Mexican government.

Hayden himself said that the gangs made Mexico as much as a challenge for Obama's foreign policy as Iran. He said that in his view Mexico was more of a problem than Iraq. Hayden handed over the CIA to Obama's appointee, Leon Panetta, on 20 January.

On 13 January, the Mexico City daily, El Universal, reported that the US Department of Defense rated Mexico and Pakistan as the two countries most likely to need a sudden deployment of US troops. This conclusion was buried in the Joint Operating Environment (JOE) report, drawn up by the US Joint Forces Command.

Mike McConnell, the National Intelligence Director (who accompanied Hayden when they made their valedictory remarks on 16 January), added that the US had not (yet) drawn up any plans to deploy ground forces in Mexico. He said that the US strategy was to boost support for Mexican forces.

Mexico's interior minister, Fernando Gómez-Mont, argued on 14 January that the US was panicking: Gómez-Mont admitted that Mexico had problems but said it was dealing with them and that there was no danger of it becoming a security risk to the US.

Mexican bankers are predicting that lending could rise at double digit levels in 2011, especially if the central bank remains a) relaxed about inflation and b) more concerned that any further strengthening of the peso against the US dollar may be dangerous for Mexican exporters.

In the year to January, consumer lending grew by a modest 5% year-on-year, but this represents a substantial pick up over the past three months. Indeed consumer lending only started growing year-on-year from November 2010.

Mexico has 41 universal banks, which have total assets of M$5.4 trillion (US$446bn). Total loans are just under M$2.14 trillion. The banks are well based, with reserves against non-performing loans equivalent to 193% (of non-performing loans). The biggest segment of bank lending is corporate loans, which stood at M$995bn at the end of January. Consumer lending stood at M$402bn and mortgage lending at M$359bn.

The country's two biggest banks, which are both foreign owned, BBVA-Bancomer (owned by Spain's Banco Bilbao Vizcaya Argentaria) and Banamex, owned by Citigroup, expect consumer lending to grow by between 12% and 14% in 2011.

Outstanding Mexican consumer loans have risen month-on-month since May 2010, when they reached an almost four-year low, according to the Comisión Nacional Bancaria y de Valores (CNBV). The loans totalled M$402bn (US$33bn) in January 2011, up from M$356.3bn in the same month in 2010. It is worth noting that in Brazil, consumer loans are 10 times higher, even though Brazil's GDP is only about 50% bigger. In Brazil, consumer loans were R$553.8bn (US$333bn), according to central bank data.

If Mexican banks are to fund such growth in consumer lending they are going to need more capital. Guillermo Ortiz, a former central bank governor and finance minister who now chairs Mexico's biggest locally owned bank, Grupo Financiero Banorte, said as much on 22 March during a presentation to investors in New York.

Banorte may need more capital than its rivals because its loan book looks riskier. According to CNBV figures, Banorte's non-performing loans in January amounted to 3.44% of its total loan portfolio. The average for the banking system was 1.99%, the same as in January 2010. Banorte's non-performers, however, had jumped from 2.34%.

• Banorte & Ixe merge
  On 8 March the government, the finance ministry and the Banco de México authorised the merger between Banorte and Grupo Ixe. The merged group will be the country's third biggest financial consortium behind BBVA-Bancomer and Banamex-Citigroup. The two companies announced their proposed merger on 17 November 2010.   Banorte had 8.3m customers for its bank and runs pensions for a further 8m people. It has a network of 1,100 branches. It also owns a Texas bank, Inter National Bank and has an operation in New York, Banorte Securities International. Ixe is more of investment banking business, offering commercial banking and private banking as well as car loans, mortgages, stock broking and investment management.

According to CNBV figures, banks have increased their lending to consumers and the construction industry. Construction loans now account for 24% of the banks' total loans, well above any other corporate sector. Inbursa, the financial arm of Carlos Slim, the world's richest man, has placed the biggest property bets in January, though overall Banamex is the still biggest property lender (albeit it  reduced its lending between January 2010 and January 2011). The quality of the Banamex loan book appears to be the highest in the banking system: less than 0.5% of its loans are non-performing. HSBC has done most to improve its loan portfolio over the past 12 months: its non-performers dropped from 2.43% to 1.6% between January 2010 and January 2011.

Perhaps mindful of the jump in Banorte's non-performers, Ortiz is one of the more bullish bankers on the direction of Mexican interest rates. He argues that the Banco de México will not increase interest rates any time soon, though he concedes that perhaps it may raise rates by 0.5 a percentage point in the first quarter of 2012. The futures markets, however, are forecasting that rates will be 0.75 of percentage point higher than their current 4.5% level  (so at 5.25%) by the end of the year.

Our view is that Ortiz is probably right and the futures markets are wrong. Mexico, along with Colombia, is the only major Latin American country that has not raised interest rates in the past 12 months. Mexico's consumer price inflation rate is the third lowest in the region after Chile and Peru.

The Banco de México's five-member board has kept the benchmark lending rate at 4.5% for a record 17 meetings, after cutting it from 8.25% on 15 August 2008.

So far there is no sign of inflation picking up, but this is probably due to the strength of the peso against the dollar. The consumer price index was up 3.1% percent in the 12 months through to mid-March 2011 from 3.6% in February. Even so, local economists are bearish about inflation. The consensus is that inflation will hit 3.9% by end 2011. We think inflation is unlikely to jump, unless there is some unexpected political development, such as a defeat for the ruling Partido Revolucionario Institucional (PRI) in the election in the Estado de México in July this year.

Bank deposits
Total deposits held by Mexican banks rose 8.5% year-on-year to M$2.42 trillion (US$200bn) at the end of 2010, according to the CNBV. Total loans in January were M$2.14bn, up 0.5% year-on-year. That's about 14% of GDP, less than a third of bank lending in Brazil.

BBVA-Bancomer had most loans with M$573.9bn, followed by Banamex with M$322.7bn. Mexican banks have been boosting their lending power by selling bonds in the local market. These bonds offer higher yields than government debt. Bankers expect Bancomer, Banamex, Inbursa and Santander to return to the local market because they've only sold a small amount of the bonds they have been authorised to issue. Santander, Mexico's third-largest bank by outstanding loans, is the most recent to issue. It sold M$3.7bn of two-year bonds, which paid 15 basis points more than the two-year interest rate future (i.e. 5.4%). Last November, Banamex sold M$7bn of four-year bonds, which yielded 28 basis points above the interest rate future.

• Nuclear: Mexico's only power station, at Laguna Verde, uses the same technology as the Fukushima powers stations which have caused such problems in Japan after the recent earthquake.  Opinion polls in Mexico suggest that public enthusiasm for nuclear power is diminishing. Nine out every 10 Mexicans, according to a poll by Marí­a de las Heras, believe that there is a substantial chance of a major accident at Laguna Verde. One reason for this may be that, unlike most governments in the world, Mexico has not announced any fresh checks or monitoring of its power stations. All the government has done is order senior nuclear officials to visit the power station and make any public statements about its safety from outside the plant. Mexico's long term energy strategy has envisioned an increase in nuclear power. The country has been planning 10 more nuclear power stations including two more generators at Laguna Verde.