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Two very different outcomes have emerged from Mexico's midterm legislative elections. In what matters to the 'market-shapers' focused on pending economic reforms, the results mean that the ruling Partido Acción Nacional (PAN) will not be able to achieve anything without heavy horsetrading with a strengthened Partido Revolucionario Institucional (PRI). As regards the country's longer-term political future, it has increased the chances that Andrés Manuel López Obrador, of the leftist Partido de la Revolución Democrática (PRD), might be the next President. 

Early counts suggest that the PAN has seen its representation in the lower chamber of congress fall to somewhere between 148 and 158 seats (out of 500), while that of the PRI has risen to 222-227 -leaving it 
placed to muster a working majority in conjunction with one of the smaller parties.

PRI leader Roberto Madrazo greeted the results with a reiteration of his pre-election call for a broad consensus (WR-03-23), attaching to it an invitation to create 'a broader and more participatory democracy' -a clear message to President Vicente Fox that the time has come to sit down and negotiate.

The most remarkable result, though, is the growth of the PRD's representation, from 55 seats to somewhere between 93 and 100.

This is likely to do wonders for the presidential prospects of López Obrador, the highly successful mayor of Mexico city who is already shown in opinion surveys as the favourite 
presidenciable for the elections due in 2006. The PRD won an overwhelming majority of the congressional seats for Mexico city.

The PRI, which attracted about 34% of all the votes cast, showed that it remains strong -indeed has strengthened its position- across the country. This will be seen by PRI strategists as their greatest advantage, since neither of its rivals have a similar countrywide reach.

Particular encouragement was derived from having wrested control of the state of Nuevo León from the PAN (more than offsetting the loss to the PAN of the small central state of San Luis Potosí­). The PRI was ahead in four of the six states where gubernatorial elections were held on Sunday.

REPRISAL FOR NOT ENSURING ITS CITIZENS' IMPUNITY 

With great fanfare, on 1 July the US government announced that it was freezing military aid to all countries that had signed the treaty creating the International Criminal Court (ICC) but failed to sign and ratify so-called 'no surrender' or 'Article 98' agreements ensuring the impunity of US nationals the ICC might want to try for war crimes, crimes against humanity and genocide. 

The list of countries affected included 14 from the western hemisphere: seven from South America, six from the Caribbean and one from Central America (see table). These stand to lose about US$35m in military aid this financial year (which has only three months to run) and, if their circumstances do not change, about US$135m in 2004. 

These are minimum amounts, as they do not include the unbudgeted donations of second-hand military equipment, and as next year's allocations are not yet fully decided. 

Off the hook. Two Latin America countries, Bolivia and Panama, were granted waivers, presumably because they are expected to sign impunity agreements soon -though it must be noted that the US President has the power to grant waivers on national interest grounds. 

Another Latin American country, Argentina, was exempted from the cut-off on account of being a 'major non-Nato ally' of the US. This is the first substantial benefit Argentina has obtained from this status, which President Carlos Menem had sought so strenuously to obtain. 

Ironically, Argentina also figured prominently on the obverse of this story. One of its most prominent lawyers, Luis Moreno Ocampo -famous for prosecuting his country's former military rulers on charges of torture and murder in the 1980s- was sworn in at The Hague on 30 June as the ICC's first prosecutor. It will be an important part of Moreno Ocampo's job to define the ICC's prosecution policy and decide which cases to pursue. 

Colombia. The country hardest hit has been Colombia, where the US is heavily involved in President Alvaro Uribe's offensive against the Farc and ELN guerrillas -though the bulk of US assistance is designated as for counternarcotics purposes, and is therefore not subject to the cuts. 

The Colombian government had hoped to be spared entirely, on account of having signed, back in 1962, a bilateral agreement granting immunity to US military personnel stationed in the country. However, to Uribe's chagrin, Washington said this did not fit the bill, as it did not cover non-military personnel. The objection is not just because of the large number of technically non-military US nationals involved in operations in Colombia, but on the more general grounds that the US wants to protect even nationals passing through from being arrested on an ICC warrant. 

Uribe, who revealed that his government had been discussing the matter with Washington since last September, complained publicly that 'dialogue between friendly countries cannot be a dialogue under pressures', but has also said that he expected to negotiate a solution 'with patience and good faith'. 

Worth noting: Uruguay has a similar agreement granting immunity to US military personnel stationed in the country, and, like Colombia, was told that this would not suffice. Uruguayan foreign minister Didier Opertti quipped that Washington seemed to be suffering from the 'Pinochet syndrome', meaning the fear that some official might be arrested on an ICC warrant while travelling abroad. 

Ecuador. The Ecuadorean government's first reaction was to announce that it would review all military arrangements with the US. Swiftly, though, it clarified that this did not apply to the use of the Manta airbase. 

In a parallel with the bulk of US aid for Colombia, this is also labelled a counternarcotics venture, not a military one, despite the very visible involvement of US military personnel. 

Others. The Brazilian government criticised the proposed US impunity agreements as contrary 'to the letter and the spirit' of the ICC, a body whose creation Brazil had supported and with which it is now tied under a multilateral commitment. The 'Article 98' agreements were also described as contrary to the equality of nations before the law. 

Uruguay and Peru also said that signing such agreements would contradict their acceptance of ICC jurisdiction; Peru added as a rider that it hoped to continue cooperating with the US in the military sphere. 

Costa Rica's foreign minister, Roberto Tobar, described the aid cut-off as 'unjust', adding, 'It is clear that we will not sign any agreement [with the US] and that we will remain in the ICC.' 

An indignant Caricom defiantly invited those of its members that had not yet ratified the ICC treaty to do so as soon as possible, while leaving the door open for anyone to sign the US impunity agreements (a dispensation the Bahamas are considered likely to take up).

REFORM SPEED-UP PLEDGED, PLUS WARNING OF 'SEVERITY' 

The escalation of the campaign by the MST, the movement of landless peasants (WR-03-25), moved President Lula da Silva to bring forward a meeting with the movement's leaders that had been scheduled for 7 July. 

In the days immediately before they gathered at the Planalto palace last Wednesday, MST militants in the northeastern state of Pernambuco hijacked four trucks carrying food and distributed the cargo among peasants who had been awaiting government assistance. Another group of 150 families had struck closer to home, moving into the fazenda 'Chapadinha', only 40 kilometres outside Brasí­lia. 

As Lula was greeting the MST leaders, wearing an MST baseball cap for effect, gunmen armed by the fazendeiro, businessman Mario Zinato, were facing off the invading peasants, and there were fears that a violet clash might ensue at any moment. The background to the meeting was a government tally of 114 land seizures across 20 of Brazil's 27 states. 

'No truce.' The MST leaders submitted to Lula a 16-point wish list, headed by two demands: that this year the government should settle 120,000 families in land of their own, and that by the end of Lula's term, in 2006, the total should have reached a million. A good gauge of the import of these demands is that over the past eight years the government managed to settle only slightly more than 100,000 under the agrarian reform legislation. Seen from another angle, the MST claims to represent 5m landless peasants. 

Lula promised to speed things up as much as possible; at present, government plans envisage settling only about 60,000 families this year. 

Lula also promised that the government would conduct, as swiftly as possible, detailed surveys to identify idle lands which could be expropriated and distributed under the agrarian reform provisions. 

According to Aldo Rebelo, the ruling PT's leader in the lower chamber of congress, who was present at the meeting, Lula did not discuss the ending of the land seizures that the courts have declared illegal. 

'There was no talk of a truce,' Rebelo said. 'The government did not ask for a truce, nor did the MST offer one. There was a reaffirmation of mutual confidence [that the agrarian reform will go ahead].' 

Ministerial warning. A more specific response to the situation came the following day from justice minister Márcio Thomaz Bastos. He warned publicly that 'any act that breaches the law will be sanctioned with the utmost severity, whether the perpetrators are fazendeiros or the Movimento dos Sem Terra [MST].' 

Bastos said that he was 'very worried' by the tension that had built up in land disputes, and that the federal police's intelligence service had been instructed to alert the government should it become apparent that it was necessary to use force to keep things controlled. 

Something else appears to have been said at 'Chapadinha', which was vacated on 4 July by the MST 'invaders'. According to MST lawyer Elmano de Freitas, the land reform agency had promised to give them, legally, some of the land, which was owned by the government. 

Unreleased tension. Still on the brink is the MST camp at the Pontal do Parapanema, in the state of São Paulo, where more than 10,000 peasants have congregated and fazendeiros have been mustering gunmen to evict them. 

The mood among the landowners has become more belligerent since Lula received the MST delegation at the Planalto. Antônio de Salvo, president of the CNA, the umbrella farmers' confederation, says that this has sent the signal that the President endorses the MST. He is demanding equal treatment for the CNA, plus a public commitment that the government will act against illegal land seizures.

'The more [foreign troops] there are, the fewer of US troops we have to have.' That was US Secretary of Defense Donald Rumsfeld talking last week about Iraq. Plans are under way to increase the number of non-US troops to about 20,000. 

The US asked 70 countries to send troops, but only 24 have accepted (in some cases with small token units). Of the 24, four are from Central America and the Caribbean (see table below); they have agreed to send a total of 1,260 soldiers to serve in a 9,000 contingent under Polish command. Their contribution is of the same order of magnitude as those of Poland (2,300) and the Ukraine (1,800). 

The participating Latin American countries were, with Colombia, the only ones in the region to sign up for the 'coalition of the willing' mustered by the US for its war against Iraq. 

During the war itself they did not send troops, but a large number of Central Americans were there serving in the US military. The Nicaraguans alone are estimated to have numbered about 400. 

The first US casualty of the war, Marine Corporal José Gutiérrez, was a Guatemalan. 

It is expected that the US will cover at least part of the cost of the deployment of Central American and Caribbean troops in Iraq, particularly after Daniel Fisk, the Deputy Assistant Secretary of State for Western Hemisphere Affairs, publicly proclaimed on 20 June, in an address to the Center for Strategic and International Studies, that 'the Central American states would benefit from even lower levels of [military] spending.' Two of the Central American countries involved, Nicaragua and Honduras, are among the very poorest in the hemisphere.

The government of Brazil intends to do away with dollar-pegged public service rates. 'We cannot have dollarised rates in a country like Brazil,' presidential chief of staff José Dirceu proclaimed last week. 

He said the government will 'review the regulatory régimes and the contracts, in such a manner that we will continue to attract investment while enjoying rates compatible [with the country's economic situation].' 

At present, the rates for public services such as telecommunications, electricity and rail travel, as well as fuel prices, are pegged to a wholesale prices index that is greatly influenced by the exchange rate -hence the talk of 'dollarised' rates. 

According to Dirceu, 'the government is interested in [attracting] investment in infrastructure, because the privatisations model has failed.' 

Some courts appear to share the view that the current rate adjustment régime is unfair. Last week fixed telephony rates were raised by an average 28.75% -which was actually less than the variation of the benchmark IGP-DI index over the past year. 

This notwithstanding, the federal tribunal of Belo Horizonte granted an injunction suspending the application of the new rates. The federal tribunal of Ceará went further: it ordered the rate increase to be based on the variation of the IPCA index, much less influenced by the exchange rate. This effectively halved the increase imposed by the utilities. 

Communications minister Miro Teixeira has endorsed the proposal to establish a congressional commission of inquiry (CPI in the Portuguese acronym) to look into the contracts signed with the private telephone companies five years ago. 

Finance minister Antônio Palocci has been trying to tone down the statements of his colleague, reassuring operators that the Lula administration will honour the contracts signed with the telephone companies -while seeking to negotiate better ones and ensure their 'proper fulfilment'.

* Brazil's economy will apparently not produce the 'spectacle of growth' that President Lula da Silva promised last week would begin in July.

Clarice Messer, research director at Fiesp, the federation of São Paulo industrialists, said, 'We can't see from where and when that spectacle will appear; we hope that things will get better towards the end of the year.'

Messer reported that, in May, industrial production in São Paulo was 0.5% higher than a year earlier, while sales were down 1.5% -so the increase in output is only going to engross stocks.

The outlook, she said, was for year-on-year comparisons to be lower in both June and July.

Anfavea, the auto industry's association, reports that car production in June, at 141,545 units, was 14.4% lower than in May and 1.9% lower than in June 2002. June sales, at 100,102, were the worst since February last year; 6.1% lower than in May and 7% lower than a year earlier.

The central bank appears to share the pessimistic view. On 30 June it lowered its growth forecast for this year from 2.2% to somewhere between 1.5% and 1.8%.

Finance minister Antônio Palocci, though, tends to side with his boss: he says he is confident that GDP will grow by about 2%.

* Brazilian bankers are protesting publicly that they are not to blame for the high interest rates currently prevailing. Gabriel Jorge Ferreira, president of Febraban, the banking federation, said last week, 'There is no doubt that interest rates in Brazil are harming productive activity and inhibiting investment, but the banks are not the big villains of the economy.'

The main blame, he says, lies with a deficit-burdened, chronically indebted state, whose demand for resources squeezes out the private sector.

The benchmark interest rate set by the semi-autonomous central bank is currently 26%, but rates for companies go as high as 67%, and consumer credit can be charged up to 180%.

AFTER BRIEF TALKS, GOVERNMENT RESORTS TO FORCE 

When Bolivia's own movement of landless peasants (Movimiento Sin Tierra, MST) last week launched a string of land seizures in various parts of the country, the government made a brief attempt to negotiate, then ordered in the troops to evict the squatters. More than anything else, this was out of fear that the MST campaign might link up with other peasant movements and trigger far greater disruption. 

MST leader Angel Durán announced last week's seizures as the first step in a long-term campaign to be conducted under the slogan, 'Agrarian Reform from Below, with Land for All.' Their targets, he said, would be land left idle by the owners. 

According to Durán, this was a response to the government's non-fulfilment of promises; the MST, he said, had no political agenda. 

The seizures took place in widely distant places: Terebinto, in the lowlands some 500 kilometres east of La Paz; the high plateau near Lake Titicaca, 75 kilometres south of the capital; the hill-rimmed Yungas, 120 kilometres north of La Paz; and the Chaco in the far south, next to the border with Argentina. 

Two sensitive spots. Perhaps the most politically sensitive was the closest to the capital: the 1,800-hectare Collana dairy farm in the Altiplano, which happened to be owned by the sister-in-law of President Gonzalo Sánchez de Lozada's wife, and is mostly in use. It was there that the government initiated negotiations with the MST, only to walk out after the squatters refused to accept the precondition of leaving the place before moving on to substantial discussions. Some 120 troops were deployed there, and there have been reports of skirmishes with the squatters. 

In the Chaco, the MST moved into a huge cattle ranch, La Palma, owned by the mother of Jesús Cardozo, president of the regional cattle-breeders' association, AGC. Claiming that the invading peasants were armed with rifles and shotguns, Cardozo got the AGC to muster its own armed counter-force and issued ultimatums to the government and the MST, to the effect that, if the squatters were still there by the beginning of this week, the cattle ranchers would move against them. 

Force & climbdown. Interior minister Yerko Kukoc, a believer in strong repression, sent in the troops and police on 4 July to evict the MST members from the finca they had occupied in Terebinto. Tear gas and bullets were fired, but no injuries were reported. As this was happening, President Sánchez de Lozada was conducting a high-profile visit to Santa Cruz, to hand out the title deeds to lands formally ceded to several indigenous communities represented by the Confederación Indí­gena de Bolivia. 

Kukoc vowed that similar actions would be carried out to evict squatters in other parts of the country. By the following day, MST leader Durán was announcing that the MST was 'willing to take a step back' -if the government agreed to the immediate initiation of talks about the MST's demands, which he said 'are very concrete: land, territory, development, technology and justice.'

The man the Bolivian government most fears, MAS congressman Evo Morales, recently confirmed as leader of the peasant confederations that represent the coca growers, has just made a power bid for the broader peasant organisation, the Confederación Sindical Unica de Trabajadores Campesinos de Bolivia (CSUTCB). 

At a hurriedly convened congress of the CSUTCB, 2,000 delegates voted to replace their leader, Felipe Quispe, with Román Loayza, a senator for the MAS and a close ally of Morales. Loayza, like Morales, is Quechua; Quispe is Aymara -indeed is often accused of seeking Aymara dominance of Bolivia's indigenous movement.

OPPOSITION 'NO LONGER SEEKS MONOLITHIC UNITY' 

The impasse over the selection of the crucial 'fifth man' for Venezuela's new electoral council may end up being settled by a deal between the pro-government legislators and their arch-enemies of Acción Democrática (AD), the only one of the 'traditional' parties to have retained a respectable following. 

Their main motivation is to prevent the issue from being handed over to the supreme court, which is mandated if congress fails to make up its mind. The court has already formally requested the names of the 86 candidates nominated for the Consejo Nacional Electoral (CNE), a clear sign that its patience has almost run out. 

The word is out that the supreme court's constitutional panel will issue on 15 July an ultimatum to the assembly, giving it 10 days to come up with the appointments of the CNE's five titular members and 10 alternates. 

Deadlock explained. Actually, government and opposition have agreed to share out equally the 10 alternate posts and four of the titular ones. They have been stuck for weeks on the appointment of the tie-breaking fifth titular member. 

This is chiefly because the opposition have so far remained committed to acting as a single bloc, which allows the smaller parties to hold the rest hostage. The pro-government bloc needs opposition agreement, because it only has 51% of the seats in the national assembly, and these appointments require approval by a two-thirds' majority. 

It does not, however, need all of the opposition vote. If, for example, it were to reach agreement with AD, which has 20% of the seats, the problem would be solved. 

Ditching unity. Last week AD congressman Edgar Zambrano (vice-president of the commission that selected the 86 nominees), said that the larger opposition groups had concluded that they could no longer aspire to 'monolithic unity'. 

This may have been intended to scare the dissenters within the opposition. If so, it does not yet seem to have worked. On the other hand, the vice-president of the assembly, Ricardo Gutiérrez, has served notice that at the regular session on 8 July a motion will be tabled to convene a special session with the purpose of appointing the new CNE before the weekend. 

The deal might contain an element of agreeing to disagree over the 'fifth man': it now appears perfectly feasible to leave only that appointment up to the supreme court. The constitutional text empowers the court to 'remedy the omissions' of the assembly; it does not oblige it to take over the appointment of the entire CNE if only one name is missing.

* Dual-rate dollar mulled for Venezuela.  After a series of contradictory statements, central bank director Domingo Maza announced on 3 July that the government is looking at the possibility of allowing a parallel exchange market to coexist with an official, fixed-rate one, when it phases out the controversial exchange controls that have been recently placed under the wing of the finance ministry. 

The parallel market, it seems, would not be entirely free: according to Maza it would function under central bank supervision, for specific transactions. The exchange rate on this market, though, would be set by market forces. 

Maza did warn, however, that no final decision had been reached. 

In the meantime, it is expected that the exchange-control agency, Cadivi, will be distributing as much as US$45m a day by August, which should provide a measure of relief to dollar-starved industrialists who have been running short of inputs and spare parts. 

The central bank reports that since exchange controls were introduced on 6 February, Venezuela's international reserves have increased by US$3.96bn, and now stand at US$18bn -of which just over US$1bn is held by the Fiem stabilisation fund. 

* Inflation in Venezuela this year will reach 35-36%, the highest rate in six years, according to finance minister Tobí­as Nóbrega. Last year's 31.2% was the highest in five years. 

In the first half of this year, accumulated inflation was 15.4%, compared with 12.8% in the same period of 2002. 

Though Nóbrega says that the crisis has bottomed out, he clearly expects the inflationary momentum to continue. He says, though, that private forecasts of a rate somewhere between 45% and 70% are grossly exaggerated. 

Nóbrega expects the Venezuelan economy to contract this year by 10.7%, considerably lower than the 17% ventured by the IMF in its last forecast, which was considerably influenced by the effects of the shutdown of the oil industry.

* Venezuela could face insolvency if it continues to contract debt at the current rate. The warning comes from central bank director Domingo Maza. 

In testimony to the national assembly, Maza noted that the domestic debt now stood at Bs15tn (US$9.5bn), which he said was now equivalent to 20% of GDP. He said that provided the debt was being used for sensible investment, there should be no problem. In fact, the central bank has been issuing paper to mop up excess money that is trapped in the economy by exchange controls. 

Maza said that in the medium term he could not be sure where the money to pay off the domestic debt would come from -and that this was why he was worried about the country's potential insolvency.

The land issue has brought together three members of the Chávez family: President Hugo Chávez was born in Barinas, the central plains state whose governor is the President's father. The President's brother Adán is the head of Venezuela's land institute, currently engaged in distributing to landless peasants titles to idle, state-owned land. The institute has already distributed 20,000 titles to some 730,000 hectares -but peasants have been going ahead and occupying land without waiting for the institute.  

The cattle breeders' association of Barinas reports that there have been more than 90 'invasions' of land in recent months, and accuses the government of encouraging them. Their leader, Manuel Cipriano, who compares the situation in Barinas to that in Zimbabwe, has been threatening publicly direct action to evict the 'invaders' and warning that 'there could be clashes'.  

Some of those 'invaders' actually have provisional occupancy certificates issued by the land institute -which the ranchers consider illegal.

NO-ONE SEEMS CERTAIN ABOUT NEWLY ACTIVE GUERRILLAS 

The Peruvian government does not seem to know what to say about the recent spate of activity by the guerrillas of Sendero Luminoso (SL). Within days, interior minister Alberto Sanabria has shifted from saying that he and President Alejandro Toledo were 'very worried' by events and 'do not underestimate' them, to reciting again the old official line that 'there is no resurgence ['rebrote'] of Sendero Luminoso. 

Partly this was because he felt obliged to contradict the assertion of opposition leader Alan Garcí­a that there was indeed a rebrote, which was 'reappearing again as the gravest threat to our democracy.' 

Pressed to explain himself, Sanabria said that what was being witnessed was 'a new strategy of the seditious groups to make their presence in the country known.' 

The events. On 4 July the army reported its first success in its search for the senderistas who staged the brief kidnapping of 71 pipeline workers a month earlier (WR-03-22). In a clash between the Tincabeni and Sonabeni rivers in the province of Satipo, in the central department of Juní­n, it said it had killed Ví­ctor Quispe (aka 'camarada Martí­n'), identified as one of the abductors and as a 'political leader' of SL. 

In the same general area, an SL unit had earlier abducted the leader of the rondas campesinas (peasant self-defence groups that played an important role in the counterinsurgency campaign during the Fujimori era). The rondas in the area are now asking to be issued new weapons and munitions. 

A week earlier, an army patrol was ambushed by senderistas northeast of Ayacucho; a soldier was killed. Another was injured by a landmine. 

On 30 June a platoon of senderistas descended upon the village of Antasco, Apurí­mac, apparently intent on raiding the local police station. Finding that its occupants had fled, the guerrillas gathered the population in the town square and lectured them on how SL was now 'peaceful'. 

On 2 July, the regional president of La Libertad, Homero Burgos, was one among the occupants of about 20 cars and buses travelling the road from Tingo Marí­a to Huánuco that were halted and robbed by a small unit of SL fighters armed with AK-47s. 

The government has extended for another 30 days the state of emergency in Ayacucho, Juní­n and Apurí­mac, and the province of La Convención in Cusco, to facilitate military operations. It has refused, 'for security reasons', to confirm reports that it has sent a 300-strong unit of élite commandos to spearhead a sweep through those areas. 

The antiterrorist directorate of the police, Dircote, reckons that there are about 330 senderistas moving around the targeted areas. The recent incidents suggest that they operate in small, highly mobile units of 10 to 15. 

Adding to confusion. Beyond the semantics, confusion over what is happening is being increased by the pronouncements of people reputed to be experts on the subject of Sendero. Only recently, Colonel Benedicto Juárez of Dircote claimed that SL leader Abimael Guzmán and those senderistas who follow him have been directing political action from the prisons where they are serving sentences for terrorism. 

Now, a former judge who presided over the special antiterrorist tribunal, Marcos Ibazeta, has defied conventional wisdom with the assertion that Guzmán is behind the recent increase in senderista activity in the field, 'testing the water' with actions which do not, as in the past, target the population but the military. 

The most widely held view is that those senderistas who persist in armed action are a remnant who refused to go along with Guzmán's peace agreement of 1992, whereas those who continue to follow their jailed leader are concentrating on peaceful political work.

FOUR OF SEVEN MEMBERS ARE RECENT FRG APPOINTEES 

Even before the supreme court ruled, on 5 July, against retired General Efraí­n Rí­os Montt's registration as the presidential candidate of the ruling Frente Republicano Guatemalteco (FRG -see WR-03-20), it had become clear why the 77-year-old former dictator was insisting again on a bid that had already been blocked twice by the electoral authorities and the courts. 

The key was provided by Rí­os Montt himself, when he boasted to journalists, 'In the constitutional court we stand 4:3.' His lawyers had already indicated that if they failed with the supreme court on the same old constitutional objection, they would appeal to the constitutional court. 

Of that court's seven current members, four have been appointed by the FRG government. 

Automatic majority? Rí­os Montt takes it for granted that they will rule in his favour. There is a precedent: in the supreme court the single vote in favour of allowing Rí­os Montt's candidacy was that of Roderico Pineda, an admitted FRG sympathiser who was appointed in 2000. All top court appointments have to be ratified by congress, a body of which Rí­os Montt is president. 

The argument on which Rí­os Montt's candidacy was refused, now as in 1990 and 1995, is that a clause in the constitution bars from running for the presidency or vice-presidency anyone who has taken part in a coup or uprising that has breached the constitutional order. 

Justifying his dissenting vote, Pineda argued that this provision in the 1985 could not be applied retroactively to Rí­os Montt, who headed a military government in 1982-83. This is the argument that the government, from President Alfonso Portillo down, has been voicing for some time. 

Once the appeal is filed, the constitutional court must come up with a provisional ruling within three days, giving Rí­os Montt the chance to register in good time for the 9 November elections. 

From soldiers to politicians. As Rí­os Montt's presence in congress so clearly demonstrates, there is no bar against former members of military governments running for lesser elective posts. Apart from Rí­os Montt, there are 18 retired military officers registered as candidates. This has riled human rights organisations, as several of these have played prominent roles in rights violations in the not-so-distant past. 

The roster of military candidates includes: 

General Otto Pérez Molina, former head of the Estado Mayor Presidencial (EMP, the body from which repression, overt and covert, was directed). 

General Marco Tulio Espinoza, another former head of the EMP. 

General Héctor Gramajo, defence minister under (elected) President Vinicio Cerezo (1986-90). 

General Julio Balconi, defence minister during the (elected) presidency of Alvaro Arzú (1996-2000). 

Lieutenant-Colonel Otto Noack, who resigned from the army in 2000 after having been punished for stating to the press that the army should admit its responsibility for human rights violations during Guatemala's long internal war. 

Still powerful. According to José Rubén Zamora, chairman of the editorial board of the newspaper El Periódico, the military are still the real power in the land. Guatemala's elected presidents since 1986, he says, 'have been puppets, democratic façades for these people.' 

Zamora was one of several members of the press who have been targeted in a rough intimidation campaign attributed to 'clandestine security groups' -people who, according to human rights procurator Sergio Morales, display the same modus operandi as the old 'death squads' linked to the official security apparatus.

Colombia's planning director, Santiago Montenegro, announced last week that public-sector job cuts between now and 2006 will have to be higher than originally planned in order to satisfy the demands of the IMF. 

President Alvaro Uribe had originally intended to cut 40,000 public sector jobs, but Montenegro said on 2 July, 'It's reasonable to expect that the original target [...] will be surpassed'. 

The government intends to reduce sharply its public expenditure in order to bring its budget deficit in line with the level demanded by the IMF, and this year alone it has implemented a series of far-reaching reforms. Most recently, the state-owned telecom company was liquidated, Colombia's largest pension and health service provider was restructured, and the publicly controlled energy company, Ecopetrol, underwent radical changes. 

According to Montenegro, however, 'The process of state reform is not over. It will continue and this is the direction we are headed in the long term.' 

The government's reform programme, which has so far prompted few protests, is expected to increase in intensity if and when a referendum on Uribe's austerity measures gains approval from the constitutional court.

* Ecuador OKs by IMF; readies spending cuts.  Economy minister Mauricio Pozo returned from Washington, where he sorted out an understanding with the IMF (WR-03-25), to announce that the government will cut administrative spending by US$25m this year and next. 

He emphasised that the change did not mean that the budget would be cut (it stands at US$6.7bn for 2003), but that spending would be switched around. He said that the change would produce the money needed to meet the recent pay award for the teachers, which had been costed at US$30m. 

The key issue for the economy is the effect that the new heavy crude oil pipeline (OCP) will have on oil exports. The OCP is due to come onstream in September, at which point the state oil company expects to switch heavy oil, which has been clogging up the existing pipeline, the SOTE, to the OCP. This should free enough capacity on the SOTE to allow a sharp increase in production, perhaps even its doubling. 

The government's targets for this year are growth of 3%, rising to between 5.5% and 6% in 2004, Pozo said. He expects the country to have produced 152m barrels of oil this year (416,000bpd). 

* Colombia's GDP should grow this year by about 2.5% according to BBVA-Banco Ganadero. The bank had previously forecast a rate of 2%, but upgraded it after figures for the first quarter showed growth of 3.82%. The bank also noted that unemployment has been shrinking: the May rate of 13% was 2.3 points lower than a year earlier. 

Another encouraging sign was the number of building starts in the labour-intensive construction industry; in the first quarter they were 12.4% higher than in the same period of 2002. Indeed, overall construction activity is estimated to have increased by 15.8% year-on-year in the first quarter. 

* Bolivia's GDP in the first quarter of the year was up 1.37% on the same period of 2002 -but only if measured in local currency; in dollars it contracted by almost 7%, according to figures just released.

CHESSLIKE PLOY BY 'STACKED' SUPREME COURT 

The game plan to spring former President Arnoldo Alemán from house arrest and place him beyond the reach of the courts has come to light, courtesy of a disgruntled member of the supreme court, who has been talking under a cloak of anonymity. 

The plan is to avoid anything as crude as direct intervention by the supreme court now that it has been 'stacked' with new justices as a result of a share-out between the pro-Alemán Liberals and the Sandinistas (WR-03-23). Instead a complex chesslike manoeuvre is envisaged. 

The corruption case against Alemán is led by judge Juana Méndez, who is seconded by judge Dominga Ampié. The first gambit is the replacement by the supreme court of Ampié. The candidate for her job is Benjamí­n Arriaza (son of the deputy mayor of Masaya, Gloria Larios, who faces corruption charges herself). 

The second move, also by the supreme court, is to promote Juana Méndez to the Managua appeals court, which would leave Arriaza in charge of the case. 

Arriaza is then expected to review a crucial decision by Méndez, rejecting an October 2002 ruling by the Central American court (CCJ) to the effect that Alemán enjoyed immunity from prosecution as a member of the Central American parliament, Parlacen. 

This would automatically free Alemán under the guise of virtuous compliance with the CCJ's ruling. 

Constitutional experts in Managua say that the Liberal-Sandinista share-out of the supreme court breaks about every rule in the book. It ignored a law stipulating that the nominations of supreme court justices should come from a special commission of magistrates. It also ignored the rule that appointments should be voted on individually, not en bloc. Finally, it included in the same package the replacements of justices whose mandates had expired with those of other justices whose terms have not yet run out. 

The big problem, of course, is that seeking a ruling of unconstitutionality would be fruitless, since it would be heard by the very court whose legitimacy was being questioned. 

A radical way out of this dilemma has been suggested by constitutional lawyer Gabriel Alvarez. Since the legislators clearly violated the constitution, he says, President Enrique Bolaños is constitutionally empowered to 'use the army to restore constitutional order.' This would entail dissolving the current national assembly and calling new legislative elections.

POLL FAVOURITE IS FORMALLY NOMINATED BY THE PLD 

The rival who President Hipólito Mejí­a fears most, former President Leonel Fernández, has been formally proclaimed presidential candidate by the Partido de la Liberación Dominicana (PLD). In internal elections held on 27 July, he beat his closest rival, former running-mate Jaime David Fernández Mirabal, by 87.2% to 12.3%. 

In an uncharacteristic outburst, Mejí­a said days ago that Fernández represented a 'danger' to the ruling Partido Revolucionario Dominicano (PRD) -and could win the presidential elections scheduled for May next year. Mejí­a, who aspires to be re-elected, has not yet been formally nominated by his party. 

The only other contender in the field is Eduardo Estrella, of the conservative Partido Reformista Social Cristiano (PRSC). His narrow victory in internal elections held on 30 March were unsuccessfully contested by his rival, former Vice-President Jacinto Peynado, who claimed that Mejí­a had connived to get Estrella nominated in order to boost his own chances.

Finance minister Guillermo Nielsen announced last week that certain people within the IMF were attempting to sabotage Argentina's relationship with the lender after Buenos Aires was forced to deny media claims that the Fund wants restructuring to cover new debt. 

Nielsen's remarks came after the Buenos Aires business newspaper El Cronista quoted an internal IMF document recommending that Argentina should include non-defaulted local debt, the so-called Boden bonds, when it came to discuss any debt restructuring package. Boden bonds worth US$14.19m have been issued in exchange for bank deposits since the bond was introduced last year. 

The economy ministry was quick to dismiss the report, issuing a statement saying, 'The Republic of Argentina reaffirms that the restructuring of public debt whose payments have been suspended, will only include debt issued before 31 December 2001.' Nielsen, however, was convinced that the report was more than mere media speculation, and he told the Buenos Aires stock exchange that 'a sector within the bureaucratic structure of the IMF is working through the press to sabotage the [lender's] relationship with Argentina.' He added that 'under normal circumstances the leak would have destroyed the capital markets.' 

Although Nielsen did not mention anyone by name, the economy ministry accused what it calls the 'hardline wing' of the IMF of engineering the leak. Officials revealed yesterday that the group, which is thought to be led by the IMF's deputy director and US representative Anne Krueger, is keen to see Argentina punished further for defaulting on its debt. 

As a result, the lender's hardline wing is thought to be against the three-year aid plan outlined by the IMF's managing director Horst Köhler when he was in Argentina late last month. Krueger & co are apparently concerned that if Buenos Aires were to reach a deal now, while the economy was on the up, it would appear to the world that Argentina had got one over on the IMF.

* Argentina's export earnings in May reached US$2.75bn, 16% up on a year earlier and the highest level since the peso was devalued 17 months previously. Imports were up 26%, to US$1.08bn, leaving Argentina with a trade surplus of US$1.67bn.

For the first five months of the year the figures showed an economy in recovery, with exports up 13% year-on-year, at US$11.65bn and imports growing 32%, to US$4.69bn. Overall, for the January-May period the trade surplus stood at US$6.96bn against US$6.72bn in 2002.

The important thing to note about the May export data is that Argentina is no longer relying simply on strong global prices to keep the figures looking robust. In the first quarter of this year exports were up just 0.7% by volume but 11.2% by price; behind the growth in May was a 9% rise in prices and a 6% increase in volume.

Primary agricultural products such as soya and maize continue to make up the bulk of Argentina's shipments abroad, where Brazil, Chile, the US, and China are still its biggest markets.

As for imports, Indec director Jorge Scalise points out that the growth in May was against one of the lowest points in Argentina's economy last year. On a month-on-month basis imports were down slightly on April's US$1.11bn, which represented an 81% year-on-year surge.

The May growth was based on strong imports of intermediary goods, although imports of capital goods were also picking up.

Although the weak peso should allow exports to increase and bolster Argentina's external position this year, economists will not be convinced that the recovery in the real economy is sustainable until there is a surge in imports.

* Argentina's economy minister, Roberto Lavagna, has announced that if necessary the government will 'deepen' the controls of short-term capital inflows recently announced. If required, he said, he would move from the current 'flexible' régime to 'a stricter mechanism, like Chile's.'