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It was the Uruguayan newspaper La República that drew attention to an appointment that seem designed to irritate Argentine President Néstor Kirchner: that of navy Captain Juan Craigdallie (accused of having been a torturer in the period 1973-85) as naval attaché in Buenos Aires. Argentine diplomats had been working quietly to dissuade the Batlle government, and several Uruguayan senators had done likewise. Kirchner described this as `disrespect'. Matters were made worse when President Jorge Batlle's human rights adviser publicly accused Kirchner and his Brazilian peer Lula da Silva of `acting as agitators or guerrilla sympathisers, as they were in the past' (because while the Mercosur summit was taking place they had attended a function at the Montevideo city council organised by the FA mayor). The incident was last week declared `closed', but Argentina has said it still rejects the appointment.

The government of President Nicanor Duarte is hoping that the fact no terrorists have been found in the Triple Border area [WR-03-48] will not dissuade the US from helping make the area, where Paraguay meets Argentina and Brazil, easier to control. He wants US assistance and an `integrated' tripartite security organisation to `deactivate mafia-like organisations' which have recently branched out into the kidnapping business across these porous borders.

Only recently the trail of a kidnapping of an Argentine youth led to Ciudad del Este, on the Paraguayan side of the Triple Border. Cristián Schaerer, son of a provincial minister, was abducted last September; ransom was paid in Ciudad del Este, but he has not yet been released. In November, Argentine police arrested an Argentine national charged with participation in other kidnappings, who claimed to have seen the young Schaerer alive at the time the ransom was paid.

President Duarte, on a brief visit to Buenos Aires last week, said that investigations into the recent kidnapping and murder of a young Paraguayan pointed to a gang `acting on the other side of the border', in Argentina. 

ARGENTINA | Production up, unemployment down. Economic activity in Argentina in the third quarter was 2.8% higher than in the previous quarter, which left the accumulated figure for the first three quarters 7.7% higher than a year earlier. This is roughly in line with the government's expectations of 7.3% growth for the year as a whole.

Open unemployment at the end of the third quarter was 14.3%, a little more than one percentage point lower than in May, and 4.5 points lower than a year earlier. This measurement was made with a new methodology introduced by Indec in the third quarter. Had the old methodology been used, the decline over the 12 months to October would have been 3.5 points.

ARGENTINA | IMF review (and disbursement) delayed. The conclusion of the IMF's review of the US$12.5bn agreement with Argentina, which the government had expected to clear the way for the disbursement of US$330m before Christmas, has been delayed -- reportedly because the Fund wants faster movement towards an agreement with Argentina's bondholders on a restructuring deal. 

President Néstor Kirchner responded stating, `The international organisations are not going to twist my arm.' The IMF has suggested that there is no delay — just a review that has not been finalised.

BRAZIL | Bank continues with small rate reductions. The central bank last week reduced the benchmark interest rate by one percentage point, to 16.5%. This is its lowest point since April 2001, but business associations and unions have already complained that it is not sufficient to pull up Brazil's flagging growth rate. The bank's aim has been to lower inflation to 8.5%, give or take two points. By end-November it had reached 8.73%, which suggests that by year-end it will be in the upper half of the target band.

One good-news item on the growth front is that the grains harvest next year is expected to total 130.9m tonnes, or 7% more than this year's record result. The soya crop is estimated at 58.6mt, which will allow Brazil to overtake the US as the leader in the full soya cycle (beans, meal and oil).

The Central American heads of government, summiteering last week in Belize, turned down the proposal by Honduras and El Salvador that they should all adopt the same kind of drastic antigang legislation which these two countries have been applying in the second half of this year. Instead, they just issued an instruction to their chiefs of police to `renew efforts for the presentation of a regional strategy of action against the gangs, to be submitted as soon as possible to the [Central American] security commission for its adoption.'

The feature common to the Honduran and Salvadorean legislation is that it makes mere membership of a mara or street gang a punishable offence, regardless of whether a person is found to have committed a crime. Guatemala, for one, has been experimenting with local `truces' with the gangs, in which what the police offer is precisely the opposite: not arresting anyone on the strength of ostensible signs of mara membership.

Miffed, Salvadorean President Francisco Flores and Honduran Vice-President Vicente Williams signed a separate declaration with a bilateral commitment to cooperation against the gangs, including another item that the rest of the region was reluctant to adopt: arrest warrants enforceable across borders without the need to engage in the established extradition procedures.

According to the region's police chiefs, Honduras is the country with most mareros (36,000), followed by Guatemala (14,000) and El Salvador (10,500). Pitted against the estimated 69,000 gang members throughout the region are 108,000 police (Guatemala is assumed to have the largest force).

"What a delay is depends on what people's expectations were and when they had those expectations. So the reality is that they have not been concluded, but those people who thought that the negotiations for the review would have been concluded earlier, they may view that as a delay. But it is not a delay in the sense that we are not continuing to talk, because we are indeed continuing to talk."

Thomas Dawson, chief IMF spokesman, trying to explain what is happening with a performance review the Argentines consider delayed.


"I wish these issues would remain bilateral, because all Latin American countries have had their history of border problems, and dealing with them multilaterally has never proved convenient."

José Miguel Insulza, Chilean interior minister, on Bolivia's claim for an access to the sea.


"Evidently this is a bilateral problem, but it also has regional repercussions in South America, and for that reason it is a problem that interests all of us."

Celso Amorim, Brazil's foreign minister, trying to define his country's stance on the Chile-Bolivia dispute.

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

In this report we focus on the telecommunications sector in Brazil as a scrap develops over who will buy Embratel. We consider the forthcoming cabinet reshuffle in Brazil now that President Lula has driven his two key constitutional reforms, tax and pensions, through the legislature, and provide our customary round-up of economic developments over the course of the last month. Also, a special feature on Lula's muddled environment policy. In the Southern Cone, Argentina's President Néstor Kirchner faces down a massive rally by the piquetero movement, the IMF reprises the role of villain and tension mounts between Argentina and Uruguay. Elsewhere, the WTO issues a word of warning for Chile as it stacks up free-trade agreements and Paraguay's supreme court gets a long-awaited face-lift. An annual subscription to Latin American Regional Report: Brazil & Southern Cone (12 issues) is priced at US$225 (Discounted rates available to academics/NGOs). For details, please call LAN on +44 (0)20 7251 0012 or email: [email protected]

Latin American Weekly Report (Online) ISSN 1741-7422. Published weekly (50 issues a year) by Latin American Newsletters, 61 Old Street, London EC1V 9HW, UK. Telephone +44 (0)20 7251 0012, Fax +44 (0)20 7253 8193, Email: [email protected]. Website: www.latinnews.com EDITOR: Eduardo Crawley, [email protected]. Subscription rates will be sent on request. COPYRIGHT © 2003 in all countries. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, electrical, chemical, mechanical, optical, photocopying, recording or otherwise, without the prior written permission of the publishers. REFERENCES: Back references and cross-references in the current series will be made thus: WR-03-01 will indicate Latin American Weekly Report, Issue No.1, 2003.

As three more fatalities last week raised the death toll in Haiti since September to 25, and members of the government continue to step down, the political opposition has called for `mobilisation', already into its third week, to continue until President Jean-Bertrand Aristide steps down.

On 18 December, a clearly beleaguered Aristide called on the opposition to join him in accepting a pacification formula proffered by the Catholic hierarchy in November (but dismissed at the time as `tantamount to a coup'). The proposals involved reforming the police, suspending the opposition's boycott of all elections, and establishing an all-party committee to appoint replacements for the legislators whose mandates run out at the end of this year — a recognition even then that elections were improbable.

This time round it was the opposition's turn to reject the proposals, dismissing Aristide's invitation as `a panic reaction'. The opposition feels strengthened by the recent convergence of the different strands of anti-Aristide groups, from the old shock force of the Armée Cannibale (now Front de Résistance Anti Aristide), through the `resistance fronts' of other main cities, to the university students and the Groupe 184 which acts as an umbrella of business and political groups in the capital.

It also sees the Aristide government beginning to crumble. Over the past couple of weeks resignations have been handed in by education minister Marie-Carmel Austin, the director-general of the health ministry, Emile-Hérard Charles, tourism minister Martine Deverson, the ambassador to the Dominican Republic, Guy Alexandre, environment minister Webster Pierre, his director-general, Gabriel Nicolas, and Volvick Remy Joseph, vice-president of the electoral council.

Most significantly, the police appear to be adopting a stance more favourable to the opposition: demonstrators have even applauded their appearance, and Evans Paul, leader of the Convergence Démocratique coalition, has publicly expressed recognition for their assistance.

For all his refloating of the Church's proposals, Aristide has not called off his followers since he urged them to resist the attempts to unseat him `by all means possible' — an invitation some pro-Aristide leaders have interpreted as an order to distribute weapons and get tougher. The last two deaths were the result of shootings by Lavalas supporters on the margins of a huge demonstration in Port-au-Prince on 22 December, which otherwise took place peacefully — under police protection.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		13.12.02	12.12.03	19.12.03
Argentina	peso	3.50	2.96	2.99
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.47	7.81	7.84
Brazil	real	3.74	2.92	2.92
Chile	peso	699.00	596.50	597.00
Colombia	peso	2,793.36	2,815.37	2,801.96
Costa Rica	colón	377.38	417.06	418.26
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	20.89	37.11	35.13
Ecuador	dollar	1.00	1.00	1.00
El Salvador	colón	8.75	8.75	8.75
Grenada	EC dollar	2.70	2.70	2.70
Guatemala	quetzal	7.61	8.02	8.02
Honduras	lempira	17.08	17.83	17.94
Mexico	nuevo peso	10.26	11.27	11.32
Nicaragua	córdoba oro	14.62	15.54	15.70
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	7,100.00	5,915.00	5,990.00
Peru	nuevo sol	3.52	3.47	3.48
Uruguay	nuevo peso	20.89	29.13	29.75
Venezuela	bolí­var	_	1,598.00	1,600.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	September	October	November	Last 12m	Jan-Dec 2002
Argentina	Indec	0.00	0.60	0.20	3.60	41.00
Bolivia	INE	0.23	1.25	-0.51	3.26	2.45
Brazil	FGV	1.05	0.29	0.34	11.02	26.41
Chile	INE	0.20	-0.20	-0.30	1.00	2.80
Colombia	Dane	0.22	0.06	0.35	6.13	6.99
Costa Rica	DGEC	0.13	1.17	1.42	9.33	9.68
Ecuador	Inec	0.73	0.01	0.33	6.48	9.36
El Salvador	Min.Ec.	0.10	0.31	0.07	2.59	2.80
Guatemala	BCG	0.42	0.43	0.45	5.84	6.33
Honduras	BCH	0.40	0.40	0.70	7.20	8.10
Mexico	Bco.Mx.	0.60	0.37	0.83	3.98	5.70
Nicaragua	BCN	0.22	0.39	0.82	6.38	3.87
Paraguay	BCP	0.20	2.10	1.30	9.90	14.60
Peru	INE	0.56	0.05	0.17	1.88	1.52
Uruguay	DGEC	0.80	0.52	0.16	10.84	25.94
Venezuela	BCV	1.30	1.50	1.90	26.10	31.20
US	DOL	0.30	-0.10	-0.30	1.80	1.60
Previous: WR-03-49

The stockmarket in figures
Market	Index	12.12.03	19.12.03	Variation (%)
Buenos Aires	Merval	994.98	999.69	0.47
São Paulo	Bovespa	20973.94	21385.54	1.96
Santiago	IPSA	1464.85	1440.13	-1.69
Bogotá	IGBC	2237.87	2283.80	2.05
San José	BCT	11190.49	10902.17	-2.58
Quito & Guayaquil	Interinvest	67.39	67.51	0.18
Mexico	BMV	8337.97	8564.90	2.72
Lima	ISVBL	2251.32	2309.34	2.58
Caracas	BC	21866.58	21773.10	-0.43
Source: Daily market reports.

The tenth anniversary of the Zapatista uprising, despite the congratulatory celebrations in Chiapas, was not occasion for much optimism, either on the part of the `autonomous' Zapatista municipalities or on that of local observers sympathetic to the indigenous cause but not necessarily pro-Zapatista. The former see a growing threat from paramilitary gangs led by local political bosses; the latter, the prospect of escalating conflict between Zapatista and non-Zapatista indigenous communities.

A spokesman for the `good governance committee' of Oventic who goes by the nom-de-guerre of Isaac, says that the presence of the military in Chiapas is being used as `cover' by local paramilitary groups who attack or harass Zapatista communities. Since Pablo Salazar was elected governor, he says, `the military pressure has eased somewhat, but there still are paramilitary groups.' This noted, Isaac claims that the army often uses the excuse of counternarcotics operations to harass Zapatista communities; he cites a recent example of a military convoy of 30 vehicles descending upon Chachihuitán.

The real problem he sees, however, is that the paramilitary groups, which he also identifies as los prií­stas (the people of the PRI), `feel that they are supported by the army, and do what they wish in the community.' Since the Zapatista communities adopted their new `autonomous' structure last August [WR-03-31], says Isaac, they have had to repel attacks by these groups organised by local political bosses. This, he said, is forcing the autonomous municipalities to `take charge of their own security.'

Indian vs Indian
This is not the only kind of conflict threatening Chiapas, says the Catholic archbishop of San Cristóbal de las Casas, Felipe Arizmendi. Another is the increase in confrontations between indigenous communities. `What is painful,' he says, `is that now it is Indian against Indian, Zapatistas against non-Zapatistas, poor against poor.' Conflict with non-Zapatistas was one of the shortcomings the Zapatistas acknowledged when they adopted their new strategy last August.

The main dividing line is over acceptance of government aid: the Zapatistas will have no truck with it. One practical problem this creates is the breakdown of consensus over works that would benefit all. For example, says the bishop, `the divisions make it impossible to build or surface roads that are vital to ensuring a worthwhile standard of living.' Government aid, though, is not the only cleavage. There are also divisions over party-political affiliation, land disputes and religious persuasion — and often these divisions breed violence.

This situation, according to Arizmendi, has not been helped by the legal vacuum in which the Zapatistas have adopted their new `autonomous' structures: `The decision to adopt the autonomies without a constitutionally recognised legal framework has led to the existence of two legal frameworks that are difficult to harmonise.'

In these circumstances, he says, `it is worrying that there should be no prospects of a new dialogue with the government, because there is distrust and disillusionment.'

The government of President Vicente Fox has belatedly claimed ownership of a heightened airport security operation after the opposition Partido Revolucionario Institucional (PRI) said it would summon ministers to congress to explain why US agents were supervising security at Mexico city airport. It has also tried to score, preventively, some political points by claiming that implementation of its security scheme had been hampered by the legislators' refusal to fund it adequately.

The PFP, Mexico's preventive federal police, confirmed on 3 January that since the previous day US agents had been overseeing security checks at Mexico city airport — from which 70 flights leave daily to US destinations. They arrived after three Aeroméxico flights to Los Angeles had been denied permission to land on the strength of a security alert. Aeroméxico says it has been losing about US$750,000 per suspended flight.

Passengers heading for the US must now undergo three checks, two of them with X-ray scanners, and are then held in isolation while the US team checks their lists, at times referring to Washington. At least three passengers were taken back off their flight for further searches on the strength of such checks. Overall, this has added 30 to 50 minutes to the wait before embarking.

Reclaiming ownership
On 5 January the government said that in fact it had instituted `contingency level III' precautions as early as 24 December on the strength of an `exchange of intelligence' with the US. According to Alfonso de Marí­a y Campos, director-general for North America at the foreign ministry, the US agents at the capital's airport were only engaged in `exchanging information'.

Migrations undersecretary Armando Salinas Torre said that another security scheme, the SIOM or `integral migrations operations system', has been put into effect in Mexico's five busiest airports. Devised on the model of US-VISIT, the SIOM envisages recording the fingerprints and images of all arrivals, but this, as well as its extension to all 172 international airports, has been delayed due to lack of funds. Salinas complained that congress had only seen fit to appropriate M$120m (US$10.9m) for this programme in 2004. Controls on the identities of departing passengers have also been delayed.

Juan Ramos, undersecretary for public security, has announced that federal agents are now being routinely placed on commercial flights. This includes Mexico among the countries that have agreed to comply with the US demand for air marshals to be deployed aboard all US-bound flights.

Tit-for-tat checks in Brazil
Acting on a request from the federal chief prosecutor's office, a federal judge in Brasí­lia ordered that US nationals visiting the country be photographed and fingerprinted, `reciprocating' the treatment meted out to Brazilian visitors to the US. His order began to be carried out on 1 January.

Judge Julier Sebastião da Silva justified his ruling on the grounds that `international law includes the principle of reciprocity.' A high-ranking official at the tourism ministry said the judge was `mad' and predicted that the government would appeal his ruling. Instead the foreign ministry urged the US to exempt Brazilians from the controls, promising that it would reciprocate.

Is Mexico ready for an `outsider' candidate to the presidency? Ví­ctor González a 56-year-old pharmacist and campaigner for cheap medicines for all, believes it might be, and is putting himself forward for consideration as a candidate in the 2006 elections.

González has built up a countrywide network of 1,350 pharmacies owned by his company, Farmacias de Similares, which specialises in marketing generic drugs that replicate the branded ones after their patent protection expires. His slogan: `The same, only cheaper.' With a turnover of about US$300m a year he is able to fund an allied network of 1,200 consulting rooms run by doctors who charge only US$2 per visit. His targets are the 40% of Mexico's population that has no access to medical care or medicines.

On the business front, he has begun to go international. He has teamed up with Nobel prizewinner Rigoberta Menchú to launch a Farmacias de Similares chain in Guatemala, a first step towards building up a presence throughout Central America.

At home he has also set up a campaigning organisation, Grupo por un Paí­s Mejor, which brings together civic associations in drives to expand publicly funded healthcare, eliminate corruption from the administration (particularly in the health area), and push legislation to shorten patent protection of medicines. Though his brother was a founder of the Partido Verde Ecologista de México (PVEM), and a nephew is now its leader, González thinks it would be unseemly to seek their nomination. He has been toying with the idea of launching a new party of his own, which might be called the Partido Mexicano Anticorrupción (Mexican Anticorruption Party). A recent telephone poll showed 15,000 people across the country sympathetic to the idea of his candidacy.

The office of the special prosecutor in charge of investigating the notorious Ciudad Juárez femicides has embarked upon an attempt to put these cases into perspective. It is underlining facts that puncture many of the myths that have been circulating about these murders. Manuel Esparza, spokesman for the Fiscalí­a Mixta de Homicidios de Mujeres de Ciudad Juárez, starts with an updated tally of the killings: 328 since 1993 (surprisingly, he does not make the point that this highlights the rarely cited fact that Juárez by no means has the highest rate of femicides in Mexico).

Of this total, he says, 92 were `sexually motivated homicides' that were neither interrelated nor the work of any organised criminal group. Overall, investigators have pinpointed eight different categories of motives for the killings, with robbery and drug-trafficking prominent among them. Two thirds of the Juárez femicides have led to arrests and 90 prison sentences have been handed down. As to disappearances of women in the Juárez area, only 42 remain unsolved.

Over the whole of last year there were nine murders of females (three of them children, victims of domestic sexual abuse). In the six cases Esparza's office has been investigating, four arrests have been made (the other three cases are being investigated by the chief prosecutor's office, the PGR).

The Mexican government is gearing up for a big push to persuade the US to open up its roads to Mexican trucks, as it should have done under Nafta provisions back in 2000. Instead, under pressure from the US trucking lobby, it cited non-compliance with US road safety standards to keep Mexican trucks confined to a 32-kilometre strip along the border.

In November 2002, Washington allowed Mexican trucks free access beyond that limit, but only subject to compliance with strict safety rules. President Vicente Fox, describing this restriction as `unequal and discriminatory', ordered retaliatory limitations on the movements of US trucks in Mexico.

Prospects of overcoming this problem were dealt a blow in January last year, when a US appeals court ruled that the government had violated a federal environmental law by opening up the motorways without first conducting an environmental impact study. The Department of Transport only got around to starting a study of the short- and long-term impact of the free circulation of Mexican trucks in October. It is expected to take 12 to 18 months to complete.

Between 85% and 90% of Mexican-US trade is carried overland. The economic disadvantage the restrictions impose on Mexico are twofold. First, Mexican truckers lose out on an important part of the carriage. Second, the need to trans-ship adds to the cost, reducing Mexico's competitiveness.

REMITTANCES | Continuing rise this year. Western Union's director in Mexico, Eduardo Levy, predicts that remittances by Mexican expatriates will increase this year by 8% to 12%. In the first 10 months of last year they totalled US$11.1bn, and they were expected to surpass US$14bn by year-end.

Apart from the anticipated improvement in the US economy, Levy says that an important factor in the increase will be the lowering of remittance costs due to increased competition. While only seven years ago the remittance business was in the hands of only five or six firms, now there are about 140. There are some 15.5m Mexican expatriates in the US (4m or so illegally); 85% of the remittances are made by electronic means, and the average individual remittance is US$300.

MINING | Reversal of decline? Figures for mining output in October, showing an 8.7% year-on-year increase, suggest that the fortunes of the industry may be changing. The latest developments have left the 10-month accumulated output 2.2% below that of the same period last year. Among the minerals showing increases in October are gold, silver and copper, items in which Mexico enjoys a significant share of the world market — and also the items that had recorded the greatest falls since last year.

EMPLOYMENT | More job losses in manufacturing. Employment in manufacturing last October was down 4.1% on the same month of 2002. This took the 10-month year-on-year decline to 3.9%. A worrying detail is that the number of hours worked was down by 4.4%, a sign of shrinking productivity. All branches of manufacturing have recorded falls. The steepest were in metalworking (-7.3%), textiles & apparel (-6.6%) and wood products (-5.3%). As we have reported, the countrywide open unemployment rate increased again in November, to 3.8%, after two months of falls from the five-year peak of 3.96% reached in August.

Trade is not the only area where Lula da Silva's Brazil is rebelling against `asymmetrical' international arrangements. It is now embroiled in a contest of wills with the International Atomic Energy Agency (IAEA) over what is an `appropriate' verification régime for its new uranium enrichment facility, due to start producing next year and intended to make Brazil a net exporter of enriched uranium by 2014 (WR-03-42). The IAEA wants access for spot inspections, much as will be the case for Iran and Libya.

Brazil's science & technology minister, Roberto Amaral, has publicly described this as `idiotic' in the case of a country which has no intention of developing a nuclear weapons programme and whose new facility will not be producing weapons-grade material.

Reservations: fact & spin
Sceptics at the IAEA and elsewhere tend to `recall' two things. First, that last January Amaral suggested publicly that Brazil should acquire a nuclear weapons knowhow. This was actually the spin put on his statement by a BBC interviewer, who asked if Amaral's advocacy of seeking technological knowhow included what was needed to make an atomic bomb. He replied that it included `all knowledge'. The context in which Amaral was speaking was that of Brazil having signed the Non-Proliferation Treaty of 1967 and its development of nuclear power for peaceful purposes, but the ensuing spin earned him a rebuke from the IAEA and a spate of scare stories about `the next nuclear threat'.

The other is that the uranium enrichment programme is a joint endeavour of Nuclebrás and the Brazilian navy, which is still involved in the development of a nuclear-powered submarine. Indeed, last November Amaral announced that he intended to have the timetable for the nuclear submarine programme, so that the first one is completed by 2010 rather than eight years later. On this point it is the navy that, privately, describes the reservation as `idiotic', noting that there is a world of difference between a nuclear-powered submarine and an explosive nuclear device, and that there is no ban on the former.

Some add that Lula, while on the campaign trail, criticised the NPT as skewed in favour of those who already have nuclear weapons — an incontestable fact, since they have not complied with the NPT's requirement that they disarm (rather, they have continued to develop their nuclear weaponry).

Lula's stance is in line with the long-held reservations that deterred Brazil from signing the NPT until 1997, since which time it has opened its nuclear facilities to mutually arranged IAEA inspections. Before that, however, Brazil and Argentina — the only two South American countries with nuclear industries — had put in place a series of measures to ensure that their nuclear programmes would remain confined to peaceful use. In the 1980s they opened up each other's facilities to verification. In 1992 they set up a bilateral `accountancy & control' agency to check that the utilisation of nuclear materials in both countries is exclusively peaceful. This involves an innovative system of bilateral inspection: the Brazilians inspect Argentine installations and the Argentines inspect the Brazilian ones.

It has been known for the better part of last year that Chilean interior minister José Miguel Insulza wants to become the next secretary-general of the Organization of American States (OAS) in June. He announced his candidacy in December, and while explicitly eschewing a `vote-hunting' campaign, has already attracted two overt heavyweight supporters, Brazil and Argentina. This may not suffice, even as a launching pad.

To be elected, an aspirant must attract at least 18 of the 34 votes of OAS member-countries, a situation that makes the 14 votes of Caricom all-important. Of Insulza's rivals, former Costa Rican President Miguel Angel Rodrí­guez — the first to throw his hat in the ring — has hinted that he has most of the Caricom vote in the bag. Certainly, current Costa Rican President Abel Pacheco has been lobbying Caricom leaders, and Rodrí­guez claims to have been pledged 20 votes already. Among those that have made public their support for him are three South American countries: Venezuela, Bolivia and Uruguay. A fourth, Peru, expressed `sympathy for an eventual Insulza candidacy' as early as June, but has not followed this up (perhaps because of recent ructions over Bolivia's access to the sea and allied matters).

But just as Insulza cannot count on the support of all of South America, Rodrí­guez does not enjoy the backing of all of Central America — because one of his peers, outgoing Salvadorean President Francisco Flores, wants the job for himself. And what Flores has going for him is that he is considered Washington's choice for the job. In this contest, the US has so far been the only heavyweight that matters, chiefly due to its ability to push others in the direction it wants. The word in San Salvador is that the US will deliver the Caricom vote to Flores, which would shoo him in.

Central America's turn?
There is no rule about rotation of the top OAS job between subregions or countries. Since its creation in 1948 the organisation has had seven secretaries-general. All of them hailed from South America: two Colombians, plus one each from Argentina, Brazil, Chile, Ecuador and Uruguay. Costa Rica saw its postulation of Bernt Niehaus founder when the US threw its weight behind the first election of the current secretary-general, former Colombian President César Gaviria — and was again persuaded to withdraw its candidate from the race when Gaviria sought reelection and it was deemed good hemispheric form to deliver a unanimous vote.

A fourth candidate?
Over the past couple of weeks the word has been spreading that a fourth candidate might be about to join the contest: Valentí­n Paniagua, the Peruvian who headed the transitional government that ruled between the ouster of Alberto Fujimori and the election and installation of Alejandro Toledo. Currently, he `commutes' between the leadership of the Partido Acción Popular (PAP) and his job as head of the OAS electoral mission — from where the notion of his candidacy appears to have sprung.

The Chilean press has been speculating that a Paniagua candidacy would further erode Insulza's chances (and might even draw some South American votes away from Rodrí­guez). There is, however, a strong suspicion that the Paniagua candidacy may be a tactical ploy or a red herring: sources in Peru say that, encouraged by what the opinion polls have been showing, Paniagua fancies his chances as a presidential candidate in the 2006 elections.

President Nicanor Duarte's plans to purge and modernise Paraguay's national police force may prove a greater challenge than anticipated. A prosecutor has accused 20 members of the force, including several high-ranking commissioners, of trying to involve him in a plan to steal part of the booty from a bank robbery.

State prosecutor Pedro Celestino Alderete took directly to President Duarte the charge that the top police officers investigating the robbery of US$540,000 from the state-owned Banco Nacional de Fomento (BNF) had proposed to him a plan to `recover' only part of the booty, and share out the bulk between those engaged in the investigation. All the accused, including the chief of criminal investigation, Commissioner Rubén Mendoza, have been placed under arrest. The incident has raised questions about a string of robberies from the BNF, all unsolved.

The police hierarchy have been under a cloud since the involvement of high-ranking officers in a smuggling case led to a purge, and the resignation of the interior minister, last October. Police commandant Humberto Núñez reported receiving threats after inaugurating a new internal affairs department in late 2003.

BRAZIL | Policy mismatch emerges. There could be friction between the finance ministry and the central bank, now that they have set disparate inflation targets for this year. In 2003, the effort to bring down the inflation rate was one of the main factors holding back economic growth. This year, the government, which wants to start delivering on campaign promises and needs growth to do so, has set its inflation target at 6%. The central bank, which had set it at 3.9%, has raised it, but only to 4.5%.

It is expected that final figures for 2003 will show annual inflation at 9.1%, down from the 12.4% recorded in 2002 but above the initial target of 8.5%.

SOUTHERN CONE | Record trade surpluses. Both Argentina and Brazil report record trade surpluses in 2003. Brazil has posted for the year as a whole a surplus of US$24.8bn (89% greater than that of 2002), which resulted from record export earnings of US$73.1bn (up 21.1%) against imports of US$48.25bn (up only 2.2% as a result of the stagnation of the domestic economy). Argentina reports a surplus of US$14.66bn for the first 11 months of the year, resulting from record exports of US$26.96bn (up 14%) against imports of US$12.3bn (up 50%).

ARGENTINA | Jobless rate shrinks. The national statistics institute Indec reports that the open unemployment rate in the third quarter was 16.3% (1.7m people), down from 17.8% in the second quarter. This has been calculated with new methodology introduced in October; using the old method the rate declined from 15.6% to 14.3%. If the 1.8m beneficiaries of the heads-of-family subsidy scheme are also classed as unemployed, the rate would rise to 21.4%. Indec also reports that 1.7m people work fewer than 35 hours a week.

URUGUAY | Leaving recession behind. The economics school of the Universidad de la República predicts that Uruguay's economy will growth this year by 6% and that unemployment will fall two percentage points, to 15%. Agricultural production will provide much of the push, expanding by 9%. Uruguay's GDP is reckoned to have grown by 1% in 2003.

The diplomatic skills of two governments are being put to the test by a string of border clashes that since mid-December have claimed the lives of seven members of Venezuela's national guard, and which the Colombian media has been reporting as the result of Venezuelan crossborder incursions. Determining the facts has not been proving easy.

On 18 December three Venezuelan national guardsmen were killed while on patrol near the Colombian border in the vicinity of Novilleros, in the southwestern state of Táchira. On 20 December, four more Venezuelan national guardsmen were ambushed and killed as they patrolled the border with Colombia near Tres Bocas in the northwestern state of Zulia. Some 300 extra guardsmen were promptly deployed in the area but found nothing. The same day as the ambush, Colombian villagers from Tibú municipality (in the department of Norte de Santander, facing Zulia) claimed that Venezuelan troops had crossed the border on a helicopter and attacked the locals.

The official Venezuelan report on these incidents noted that they were the first killings of national guardsmen along the Colombian border in six years. It also noted that in both cases the weapons of the killed soldiers had been stolen.

Third incident
On 26 December the Colombian media carried reports from the border hamlet of Montelara, in the northern department of La Guajira, about an incursion by a 150-strong Venezuelan army and national guard force in pursuit of car thieves, which ended in a shootout in which two of the Venezuelan guardsmen were killed. The Colombian military high command, acknowledging reports of the incident, said it had no confirmation of the two deaths. In Venezuela, the regional national guard commander provided a different version: an armed confrontation took place, just inside Venezuela, after two cars refused to halt at a checkpoint manned by a 15-strong patrol. The cars, he said, had been stolen in Venezuela, presumably by Colombian paramilitaries, who fled into Colombia. He did not acknowledge any deaths among the guardsmen (indeed, to this day Caracas has not done so).

Montelara is a few minutes walk from the Venezuelan border, and lies on the road to Maicao, hub of the route for smuggling fuel from Venezuela — some of it for use as a `precursor chemical' in the processing of cocaine. This trade is dominated by Colombian paramilitary groups (though it also involves peasants and indigenous communities along the border).

Higher up the chain of command in Venezuela the immediate reaction was to reinforce that stretch of border with 700 extra guardsmen. Increased border patrolling yielded an unexpected result: the discovery of a six-hectare coca plantation and a cocaine-processing lab on the Zulia border.

Uribe downplays situation
Colombian President Alvaro Uribe appeared willing to grant the Venezuelans the benefit of the doubt. He cautioned against `brewing a storm in a teacup', and noted, `Some people crossed [the border] to commit a crime; they were pursued and it is possible that in that pursuit they may have crossed the dividing line. This is a very live border, in which one can pass from one side to the other without being aware of where the line is.' On the other side, he found an echo in General Melvin López, secretary of Venezuela's national defence council, who after restating that Venezuelan troops had always scrupulously respected Colombia's sovereignty, added that some border skirmishes take place `in common areas where the border line is not clearly marked.'

It was Uribe, too, who sought to defuse the situation by instructing his foreign minister to try to set up a joint commission to examine these and future incidents and produce `consensus reports'. Venezuela's foreign minister, Roy Chaderton, read this as meaning that Colombia had set up its own commission of inquiry and announced that Venezuela would do the same. None too conciliatory, he said that Uribe's call for prudence should be accompanied by a greater Colombian military presence on the border. He complained that since 1987 more than 100 members of the Venezuelan military had been killed in attacks launched from Colombia, and that more than 600 Venezuelans had been kidnapped and transported across the border.

Members of the foreign relations committee of the Colombian congress retorted that since 1955 there had been at least 83 instances in which Colombian citizens had been affected by actions of the Venezuelan national guard.

Fourth incident
The mood in Colombia was not improved by intense media coverage of another incident on 1 January. Once again, the people of a hamlet in Tibú, Norte de Santander, claimed that Venezuelan guardsmen had crossed the border, beaten people up, and sacked and destroyed houses. Colombian General Gabriel Galvis, commander of the fifth army brigade, flew to the area to investigate — but warned that it was not yet clear it the raiders had been Venezuelan military or members of the guerrilla or paramilitary groups active in the vicinity. A full report is still awaited.

Caricom has sent a top-level team of diplomats to Port-au-Prince to try to achieve what has eluded the OAS: a negotiated solution to the political crisis that has afflicted Haiti since 2000, and which has been escalating since last September. Protest demonstrations have continued since before Christmas with only two brief breathers, and attempts by police and government supporters to disperse them have claimed a reported 12 lives over that period.

Blueprint for `transition'
The prospects for success are not good. On 5 January, the opposition coalition Convergence Démocratique (CD) issued a call for a general strike starting on 7 January, to be followed by marches and demonstrations demanding Aristide's resignation. This came after the government pointedly ignored a blueprint for a `transition process' prepared by the opposition.

This plan assumes that Aristide will step down. It proposes adhering to the constitutional line of succession and installing a supreme court judge as provisional President, and a prime minister assisted by a `council of state'. The provisional government would remain in power for two years, during which time it would institute a series of changes to prepare the ground for new elections.

At the top of the list of reforms is the restoration of order, starting with an overhaul of the police's high command. A new director-general and inspector-general would be selected and vetted by the provisional President and a panel of nine judges. Next come the selection and installation of a new provisional electoral council. The plan also envisages the implementation of an emergency economic recovery programme.

Aristide, presiding over the 1 January bicentennial of Haiti's independence, acted as if he had no intention of bowing to opposition pressure. He promised to hold legislative elections this year, to launch a 10-year economic development programme, improve the provision of social services, reduce infant mortality, undernourishment and AIDS, and increase access to primary education.

The celebration, held against the backdrop of police efforts to disperse opposition demonstrators, was attended by only one head of state, South Africa's Thabo Mbeki, and one head of government, prime minister Perry Christie of the Bahamas. Mbeki was conspicuously enveloped by a 50-strong South African security contingent, complete with two helicopters (one of which was shot at). When his trip came in for strong criticism at home, his officials put out the story that he had been engaged in `quiet diplomacy' seeking to help solve the Haitian crisis.

Caricom's timetable
The Caricom mission was preceded by a letter to Aristide from the organisation's president, Jamaican prime minister PJ Patterson, expressing `great concern at the reports on the increase in political instability in Haiti.' Its first brief is to prepare a report on the situation for Patterson, to be presented within a week, and try to persuade government and opposition to attend a conciliation meeting, tentatively to be held in Jamaica towards the end of January.

Pressure on President Lucio Gutiérrez is about to increase. This week the various `social organisations' begin a wave of protest actions explicitly aimed at forcing Gutiérrez to step down. Two political parties, the Movimiento Popular Democrático (MPD) and the indigenist Pachakutik (PK) have announced that they will support the protests and their objective.

The umbrella indigenous organisation and PK have been engaged since mid-December in conversations with Izquierda Democrática (ID) and the Prian, the party of former presidential candidate Alvaro Noboa, about what has been described as the possibility of carrying out `structural changes within a democratic framework' — from which the option of forcing Gutiérrez out has not been excluded.

They have reportedly reached agreement on some items of a legislative agenda, starting with a joint effort to keep Guillermo Landázuri on as president of congress. The government had been seeking joint action with the conservative Partido Social Cristiano (PSC) and the populist Partido Roldosista Ecuatoriano (PRE) to replace Landázuri (who is second in the line of presidential succession). The PRE refused to go along with this.

Indeed, the PRE bloc leader, Mario Touma, has pointedly refused to rule out an alliance with the PK and other left-of-centre parties. Further discussions between the PK and the MPD have been planned, as well as a bid to enlist the Socialists.