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Strong pressure from business groups has led President Carlos Mesa to backtrack on several key features of his economic policy package, launched in early February and designed to prune a fiscal deficit which last year reached 8.6% of GDP. The main casualty was a temporary tax on net assets of more than US$50,000. The strongest resistance to the package came from the business associations of Santa Cruz, who are emerging as determined enemies of what they perceive as `regressive' regional dominance by La Paz and the western highlands.

Opposition to the economic package appeared to have lost steam when a mid-February strike by transport unions (allegedly orchestrated by the owners of transport firms) failed to make much of an impact. However, the cruceño business associations picked up the banner and started lobbying against what they described as `recessive' tax measures — meaning the taxes on assets and on financial transactions.

The government tried to mollify them by replacing the first of these with a tax on real estate and vehicles worth more than US$50,000. This caused a new uproar, and last week the government opted instead for a surcharge on the existing tax on real estate, from which all those worth less than US$50,000 are exempted.

This is the first big victory for the cruceños, who since last year's wave of protests have been highlighting the contrast between their business-oriented region and what they see as a regressive, populist Altiplano and its coca-based perimeter. To an extent their stance is shared by the southerners of gas-rich Tarija — a combination that has led commentators to speculate about the emergence of a `crescent' of regional opposition to what has long been the traditional seat of power in Bolivia.

There have been sporadic bouts of Santa Cruz separatism, and certainly the dominant rhetoric there portrays the eastern lowlands as radically different, almost `another country'. Most cruceño leaders, though, do not seriously contemplate secession. Their assertiveness is expected to translate into strong support for regional decentralisation, to counterbalance 'highland dominance', when a constituent assembly is convened next year to draft a new constitution.

[The only overtly secessionist proposal is that of Aymara leader Felipe Quispe, who periodically trots out his proposal for the creation of an indigenous nation which he would call Collasuyo, harking back to the days of the Incas. Quispe sees his own people, the Aymara, as entitled to preeminence over the majority Quechua.]

President Lucio Gutiérrez has lost two of his cabinet ministers — both invoking `personal reasons' for their resignations. First to go last week was José Repetto, minister of urban development and housing (whose departure had been anticipated by the Quito rumour mills weeks ago). No explanations for his departure have yet emerged.

Next was environment minister César Narváez, recently turned upon by local and foreign environmentalists because he had agreed to consider demands by the fishermen of the Galápagos, which included changes to regulations the Greens consider vital to the preservation of the islands as a nature reserve.

The government of President Alvaro Uribe has admitted that the `demobilisation' talks with the paramilitaries of the Autodefensas Unidas de Colombia (AUC) have arrived at a `critical' juncture. According to peace commissioner Luis Carlos Restrepo, `without a strong pull on the rudder the process might not be viable.' The paramilitary leaders, however, have made it clear that they do not agree with his vision of the way ahead.

Restrepo proposed that the paramilitary organisations should be concentrated in several specific locations to expedite the conclusion of the negotiations. The response from the AUC leadership was instant. Political director Carlos Castaño said, `A successful concentration will take place once the government assumes real responsibility, with concrete actions, for security in the various zones, and fulfils its social and economic role. In other words, when the government replaces us de facto just as we have replaced it de facto.'

AUC military chief Salvatore Mancuso gave the issue a slightly different slant. `Cessation of hostilities,' he said, `is not the same as concentration. To the contrary [the latter] could exacerbate the attacks on the population by the guerrillas and consequently prompt the emergence of new forms of defence among those affected. Concentration of the autodefensas would be an invitation to the guerrillas to increase hostilities.' The government has recently acknowledged what others have been pointing out for some time: there has been no real cessation of hostilities by the paramilitaries.

Castaño and Mancuso later called for an `urgent meeting' with President Uribe `to save the process.' The AUC followed this up with a communiqué by its `general staff' saying that negotiations would continue — and demanding that the government should guarantee the safe passage of AUC negotiators and the non-extradition of its leaders. It called for `national and international agreements [with] a commitment not to authorise the extradition of AUC members observing whatever is agreed.'

The US has filed requests for the extradition of both Castaño and Mancuso, to be tried for drug-trafficking offences. Recent evidence showing the extent of paramilitary involvement in the drugs trade suggests that more extradition requests may follow.

Though a meeting with Uribe would mean going over the head of peace commissioner Restrepo, eroding his authority, it is an option favoured by Julio César Vidal, the bishop of Monterí­a who has been acting as `facilitator' of the negotiations with the paramilitary organisations. He says that the talks seem to have come to a standstill, `as if everything had been frozen,' and that if a face-to-face encounter can overcome that, it should take place.

Progress so far
Progress towards `demobilisation' has been very slow. An agreement was reached in July last year that all of the AUC's estimated 13,000 fighters (most probably an inflated figure) would be demobilised by the end of 2005. So far only one big member organisation of the AUC, the 850-strong Bloque Cacique Nutibara, has demobilised — by many accounts, only partially. This was followed by the demobilisation of the small (150-strong) Cauca bloc.

Last week the Frente Capital of the Bloque Centauros, a 400-strong group that operates in central Colombia and the eastern plains, announced that it was `ready' to demobilise. The only thing delaying them, they said, was `logistics.'

At a time when the Colombian government is saying that it has been unfairly treated by the annual report of the UN High Commissioner for Human Rights, a decision by the chief prosecutors' office to close an investigation into an army general's links with paramilitary groups has revived the doubts many harbour about the Uribe administration's treatment of the paramilitary `demobilisation' process.

Chief prosecutor Luis Camilo Osorio announced last week that he was dropping the case against former General Rito Alejo del Rí­o, who had been indicted for `formation of armed groups outside the law, embezzlement and dereliction of duty'. These charges date back to 1996-97, when del Rí­o was commander of the 17th army brigade, stationed in the Urabá region — birthplace of what was to become the Autodefensas Unidas de Colombia (AUC).

Evidence collected by the public prosecution service pointed to the general having ordered his troops to take part in joint patrols with paramilitary fighters, covered up paramilitary massacres by presenting them as clashes between the army and guerrillas, and generally supported the autodefensas operating in his jurisdiction. This preliminary evidence was deemed damning enough for President Andrés Pastrana to drum del Rí­o out of the service in 1998. The US government interpreted it as linking del Rí­o with international terrorism, drug trafficking and gunrunning, and withdrew his visa in mid-1999.

Chief prosecutor Osorio justified closing the case mainly on the grounds that two key testimonies were either flawed (the witness was not present where the events on which he testified took place) or did not materialise (an official travelled to the US to depose a witness, but he never showed up). Luis Vivanco, executive director of the Americas Division of Human Rights Watch (HRW, an NGO that has been keeping close tabs on Osorio), says, `there is ample evidence that corroborates the testimonies, but this evidence has been discounted by Osorio.'

Osorio's record
Vivanco is scathing about Osorio's record. `The first thing that [he] did upon assuming office in 2001 was to fire the prosecutors who had gathered enough evidence to arrest del Rí­o for these serious crimes. That purge of prosecutors was only the beginning of a marked trend in the attorney-general's office of hampering or derailing cases that implicate top military and paramilitary leaders.

`Within 72 hours of taking office, Osorio had demanded the resignations of two high-ranking, veteran officials who had handled some of the institution's most important and complex human rights cases, including this one. A third official felt compelled to resign in response to [Osorio's] actions. Subsequently, the prosecutor who had ordered General del Rí­o's July 2001 arrest was forced to flee Colombia because of threats on her life.'

Moreover, says Vivanco, under Osorio's leadership, the chief prosecutor's office has been rocked by corruption scandals, including reports of infiltration by paramilitaries, guerrillas and drug traffickers. Over the past six weeks, three top officials — the national director, the deputy national director, and the head of the witness protection programme — have been forced to resign or have been transferred because serious questions were raised about their integrity.

UNHCR's reservations
The UNHCR report that has so irked the Uribe administration actually highlights the fact that security has improved in Colombia under Uribe, and when it goes on to say that the human rights situation remains `critical', it lays much of the blame on the guerrillas and paramilitary organisations. What the UN criticises is that a number of government procedures were `incompatible with [its] international commitments' and that, to quote the UNHCR's representative in Bogotá, Michael Frühling, there has been `no progress at all' in the implementation of recommendations made by the agency a year ago.

In his presentation of the report, Frühling also underlined that there has been `an increase in the number of allegations about links between public servants and paramilitaries.' As regards the `demobilisation' of the paramilitary groups, the agency warns that there are still `questions about the juridical treatment' proposed by the government for those who down arms, such as legislation to grant them `alternatives to custodial sentences'. Frühling noted, as well, that `regrettably the cessation of hostilities [announced in December 2002] was not honoured' by the paramilitaries.

The UNHCR reiterated its criticism of the `antiterrorist statute' which grants the military powers previously reserved to the judicial police, and it pointedly commended the work of defenders of human rights, who had been publicly rebuked by Uribe last year for what he perceived as bias.

The Colombian police has revived the renowned Bloque de Búsqueda, the special search unit which in the 1990s tracked down the leaders of the Medellí­n and Cali cartels and disrupted their operations.

In its new version it will have 120 counternarcotics and intelligence officers, headquartered in Pereira, capital of Risaralda, in the heart of Colombia's `coffee axis'. Its brief will be to concentrate on the departments of Caldas, Quindí­o, Risaralda and Norte del Valle, seeking to capture the leaders of the various drug `cartels' operating there. Just as in the 1990s the Bloque's main achievement was finding and killing Medellí­n cartel leader Pablo Escobar, for the new Bloque the big success would be capturing Diego Montoya, boss of the Norte del Valle gang.

This drive is being launched just as the army celebrates the disruption of a trafficking network linked to the Farc guerrillas by Operación Diplomacia — so codenamed because it involved joint action with Panama. Two of the 14 people captured are said to have been direct subordinates of Nayibe Rojas, reputed manager of the Farc's drug earnings, herself captured recently in the south of the country.

Gravitas was not much in evidence in the slanging match that erupted last week between Colombia's two highest judicial bodies, the supreme and constitutional courts — the former proclaiming that the latter had become a `despotic [...] threat to democracy', the latter riposting that the supreme court had always `rebelled against our existence'.

The spat began when the constitutional court issued, in February, a statement to the effect that any lower-court judge could review injunctions granted by the supreme court, because their sheer volume was holding up thousands of trials. The supreme court responded last week with a unanimous declaration of its 23 justices, saying that `any power that assumes the faculty of overstepping its boundaries is out of control, close to tyranny, despotism and excesses.' Constitutional court president Clara Inés Vargas said the supreme court justices `are playing with fire at a political moment when the reform of the judiciary is being debated.'

The constitutional court, introduced by the constitution of 1991, has broken the monopoly over the last word previously held on all matters judicial by the supreme court — but is supposed to confine itself to ruling on the constitutionality of laws and their application.

COLOMBIA | About-face on debt reduction. President Alvaro Uribe last week announced that the executive was abandoning the scheme to draw down US$500m from Colombia's international reserves to pre-pay part of the external debt — a measure to which the central bank had agreed under considerable government pressure. Colombia's external debt (public and private) is currently equivalent to 51.6% of GDP. The country's international reserves stand at US$10.6bn. Uribe said that going ahead with the operation would send the signal that the government was not worried about the appreciation of the peso over the past few weeks and may even encourage further appreciation.

COLOMBIA | Drive to reduce unemployment. The government's council for economic and social policy (Conpes) last week announced a package of measures designed to bring down the open unemployment rate, which has shot up since the end of last year. It said that exchange policy would be adjusted to contain the appreciation of the peso, that interest rates would be lowered, and that there would be tax refunds for exporters. Also, the housing subsidy would be extended, and public works at municipal and national level would be expedited.

Of this package, the exchange policy and interest-rate components depend on the acquiescence of the central bank, which is one of the most autonomous in Latin America. Only in late February did the bank reduce its `intervention' interest rate (by a quarter of a percentage point, to a range of 7-10.75%) after holding it steady for 10 months running, despite entreaties by Uribe to ease it.

ECUADOR | No acceptable bids for power firms. The Fondo de Solidaridad de Ecuador has had to scrap plans to contract out the management of 13 state-owned power utilities. Only one company — Soluziona Consultorí­a y Tecnologí­a, of Spain — qualified as a bidder, and at the last minute it decided to pull out when its demand for `sovereign guarantees' was rejected. The Fondo is the government agency charged with upgrading the state-owned power and telecommunications concerns.

The Farc guerrillas are operating along the full extent of the border between Colombia and Peru. Confirmation of this, which had usually been played down in Peru, came last week from Colombian defence minister Jorge Uribe, after a meeting in Lima with his Peruvian counterpart, Roberto Chiabra — in which they started implementing security cooperation initiatives agreed a month earlier with other Amazonian partners.

Uribe said, `We do not have evidence that big movements are taking place, but the fact is that [the Farc] operate in the whole of the riverine network that we share on the border.' He added that small groups of guerrillas enter Peru by crossing the 1,600-kilometre Putumayo river, which in part is the border.

The Uribe-Chiabra meeting is a follow-up of the broader gathering of Amazonian countries a month ago. In Lima they announced the implementation of one of that previous meeting's decisions: the extension to Brazil of the regulations agreed between Colombia and Peru to combat illicit activity on shared rivers.

The two ministers also agreed on common rules for the military forces of both countries stationed in border areas, as a further safeguard against unwanted friction. In the same vein, they intend to increase the exchange of officers.

One offshoot of the Lima meeting will be worth watching: a seminar to be held next June in Bogotá to exchange views and experiences regarding public policies to combat both terrorism and drug trafficking. As is well known, in both areas conditions differ considerably between the two countries, as do their public policy approaches.

Colombia has agreed to increase its military and police presence along the border with Ecuador, as the latter had been demanding, particularly since last year's flap about the alleged smuggling of Ecuadorean military-issue weapons to the Farc guerrillas and recent crossborder movements of Colombian fighters. The details of the agreement were thrashed out last week by both countries' military commanders; they will be announced publicly during a forthcoming visit to Colombia by Ecuadorean President Lucio Gutiérrez.

General Octavio Romero, chief of Ecuador's joint command, says the main objective is that Colombia should `increase the presence of military and police in the area, so as to close down all illegal crossing-points that allow easy access to [Ecuadorean] territory.' Romero warns that expectations are modest: `No country can achieve total security. We are talking about lowering the levels of conflict.'

The strengthening of the Ecuadorean-Colombian border was one of the issues discussed with General James Hill, chief of the US Southern Command, during his passage through Ecuador days ago. One of the results of his visit was a `working paper' with recommendations for the retraining of the Ecuadorean military to deal with `new' security threats: guerrillas, drug traffickers, gunrunners, criminal gangs, kidnapping rings and the like.

The US has been pressing smaller Latin American countries to scrap `conventional' armies and go instead for leaner, more agile armed services capable of dealing with the `new' threats. This entails giving the military roles that have hitherto been considered more appropriate to the police.

At least publicly, the US appears to be coming to terms with Bolivia's shift from a `zero coca' policy to one of `virtual zero'. That was what emerged from last week's visit to Bolivia by Robert Charles, Assistant Secretary of State for International Narcotics Affairs and Law Enforcement. In a marked change from the browbeating approach Bolivians have become used to, Charles said that surplus coca production and drug trafficking are `Bolivian problems that call for Bolivian solutions.'

He argued against calling off the coca eradication in the Chapare region entirely, on the grounds that the coca growers replant as soon as their bushes are uprooted; even a pause, he said, would only lead to `greater production of illegal coca in a zone where all growing is already illegal under Bolivian legislation.' This sounded very much like the `virtual zero' approach announced by the previous Bolivian administration: eradicating at the same pace as new planting.

Charles also said that it would be up to the Bolivian government to decide what to do in the Yungas region, where the legal coca is grown but where illegal production last year expanded by 26%. Previously the US government had publicly pressed Bolivia to extend the forcible eradication programme to the Yungas. An initial attempt to do just that ran into strong resistance, and was abandoned. The response to eradication in the Chapare region has not been confined to the expansion of cultivation in the Yungas but has also included the opening of new areas on the rim of the eastern lowlands.

Bolivia's congress has reverted to form, making life difficult for the Mesa administration, first with the treatment of the fiscal measures already amended under pressure from the Santa Cruz lobby (WR-04-10), then with preparations for a vote of censure against mines & hydrocarbons minister Alvaro Rí­os. The latter was only avoided when Rí­os decided, last week, to resign — prompting the first major change in President Carlos Mesa's cabinet.

A successor is already in place: Antonio Araní­bar Quiroga, former president of the Movimiento Bolivia Libre (MBL), who served as foreign minister from 1993 to 1997. Araní­bar had retired from political activity, but said that he had found Mesa's invitation `irresistible for a public servant'. He takes on a difficult job: devising a policy which should serve as the framework for a new hydrocarbons law and for the referendum on the future of Bolivia's natural gas sector.

Araní­bar ostensibly joins the cabinet in a personal capacity, like the rest of Mesa's ministers. It has hardly escaped notice, though, that with his appointment there are now three ministers from the MBL (the others being Alberto Ferrufino, interior, and Luis Fernández Fagalde, labour). The MBL, which fancies itself as `progressive', is a fairly new party with fleeting participation in government: it emerged in 1985 from a split in the Movimiento de la Izquierda Revolucionaria (MIR).

COLOMBIA | Borrowing at home rather than abroad. The government has decided to cut US$500m from its planned borrowing on the international bond market, and increase its domestic borrowing by the same amount. This means that its bond placements abroad this year will only amount to US$700m instead of the originally announced US$1.2bn. The decision is in line with the government's announcement last week that it would be taking action to counter the appreciation of the peso (WR-04-10), and its earlier decision to cancel plans to reduce the external debt by dipping into the country's international reserves. The executive has been urging the central bank to take action also on this front, and on interest rates.

VENEZUELA | Investment trickles in faster. Siex, Venezuela's superintendency of foreign investment, tried to put some spin last week on the latest figures for foreign direct investment (FDI) by underlining that in February it was 213.7% higher than a year earlier. The absolute figures actually show the parlous state of the economy as a magnet for FDI: the inflow in February this year was a mere US$102m; last year, a barely noticeable US$32m. Of course, in February 2003 the country was just beginning to pull out of the devastating two-month strike-lockout staged by the opposition in a bid to unseat President Hugo Chávez .

BOLIVIA | Economic growth to accelerate. Bolivia's economy will grow this year by about 3.6%, a full percentage point more than last year, according to the central bank. The bank bases its calculations largely on the estimated increase in Bolivia's exports of natural gas to Argentina and Brazil, and on the assumption that exports to Brazil, its main market, will grow by 3.3% this year. Worth noting: last year Bolivia's economic growth rate fell just short of population growth; if the bank's forecast if fulfilled, this year it will be about 0.8 points ahead — which starkly illustrates just how much Bolivia must achieve if it is to pull the bulk of its population out of poverty.

One thing is not yet clear about the corruption scandals enveloping the government of Mexico city (WR-04-10): did it go as far up as the mayor, Andrés Manuel López Obrador, still the poll's favourite for next President? What does seem certain is that the ruling Partido Acción Nacional (PAN) was, if not complicit in, at least aware of the incriminating videos that brought these cases to the attention of the public.

The first hint that improper dealings in the federal district (DF) might not have been confined to assembly leader René Bejarano and finance secretary Gustavo Ponce was the claim conveyed by the latter last week, from his place of hiding, that López Obrador had ordered him to make illegal transfers of public funds to finance certain projects. The mayor has flatly denied this.

López Obrador has continued his counteroffensive, based on blaming the government for manipulating the release of the videos. He revealed that he had been informed by the Mexico city delegate of the federal chief prosecutor's office (PGR) of a meeting between officials of the PGR and the intelligence agency Cisen (Centro de Investigación y Seguridad Nacional). A report picked up by most media claimed that others in attendance were lawyers representing businessman Carlos Ahumada - the man at the centre of the bribery-extortion scandal - and PAN senator Diego Fernández de Cevallos, and that what was discussed was the `ratification' of Ahumada's charges of extortion against city officials.

Leonel Godoy, president of the Partido de la Revolución Democrática (PRD; López Obrador's party), has publicly suggested that the meeting might have had the purpose of `revising' Ahumada's accusation. In any case, he says, the meeting is itself a crime, a confabulation between federal agencies; one of them with a state role - Cisen - and the other in charge of receiving Carlos Ahumada's accusation.' López Obrador has identified PAN leaders Fernández de Cevallos and Federico Doring as leading figures in the `plot' against him - `and also, very probably [former President] Carlos Salinas de Gortari.'

Foreknowledge admitted
Fernández de Cevallos replied that he `did not take part in the presentation of [Ahumada's] accusation nor in its ratification' - which was not quite a denial of having attended the meeting. The senator did admit, though, that he had known of the incriminating videos before they were aired (he refuses to explain how this awareness came about). He has also said that there are more videos still to appear, and that leaders of the PRD and the Partido Revolucionario Institucional (PRI) were aware of their content. This would confirm a claim made earlier by López Obrador. Once again, Fernández de Cevallos did not elaborate on how he knew this.

The DEA too?
López Obrador has actually enlarged his list of plotters to include the DEA. He blames this US agency for having arranged the filming of Ponce as he gambled in a Las Vegas casino. He has asked for explanations of how the camera got into the gaming room and how Ponce's hotel bills were leaked.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		14.03.03	05.03.04	12.03.04
Argentina	peso	3.15	2.95	2.93
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.61	7.91	7.92
Brazil	real	3.43	2.87	2.90
Chile	peso	736.00	595.00	605.00
Colombia	peso	2,959.76	2,676.92	2,683.46
Costa Rica	colón	387.14	425.82	426.72
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	22.79	49.27	48.84
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	7.90	8.10	8.09
Honduras	lempira	17.30	18.11	18.14
Mexico	nuevo peso	11.00	11.03	11.06
Nicaragua	córdoba oro	14.98	15.88	15.89
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,880.00	5,980.00	5,965.00
Peru	nuevo sol	3.47	3.48	3.48
Uruguay	nuevo peso	29.50	30.00	30.05
Venezuela	bolí­var	1,600.00	1,920.00	1,920.00
Sources: EFE; Bank of America.

Inflation in the region
Country	Source	December	January	February	Last 12m	Jan-Dec 2003
Argentina	Indec	0.20	0.40	0.10	2.30	3.70
Bolivia	INE	0.90	0.62	0.19	4.59	3.94
Brazil	FGV	0.52	0.76	0.61	6.69	12.53
Chile	INE	-0.30	-0.20	0.00	0.00	1.10
Colombia	Dane	0.61	0.89	1.20	6.28	6.49
Costa Rica	DGEC	1.25	1.70	1.29	11.55	9.87
Ecuador	Inec	-0.04	0.41	0.69	3.84	6.07
El Salvador	Min.Ec.	0.20	1.11	0.44	2.63	2.50
Guatemala	BCG	0.58	1.53	0.74	6.26	5.85
Honduras	BCH	0.30	0.90	_	6.90	8.10
Mexico	Bco.Mx.	0.43	0.62	0.60	4.53	5.70
Nicaragua	BCN	0.76	1.59	_	7.16	6.48
Paraguay	BCP	0.90	0.30	0.10	3.80	9.30
Peru	INE	0.56	2.19	1.09	3.43	10.19
Uruguay	DGEC	0.65	2.19	0.02	9.07	10.19
Venezuela	BCV	1.80	2.50	1.60	21.90	27.10
US	DOL	0.58	0.50	_	1.90	1.60
Previous: WR-04-10

The stockmarket in figures
Market	Index	05.03.04	12.03.04	Variation (%)
Buenos Aires	Merval	1157.56	1258.71	8.74
São Paulo	Bovespa	22872.94	21775.77	-4.80
Santiago	IPSA	1540.53	1484.66	-3.63
Bogotá	IGBC	3062.73	3117.21	1.78
San José	BCT	10288.21	10384.17	0.93
Quito & Guayaquil	Interinvest	68.35	68.34	-0.01
Mexico	BMV	10195.03	9837.33	-3.51
Lima	ISVBL	2770.10	2829.66	2.15
Caracas	BC	28217.94	27677.70	-1.91
Source: Daily market reports.

The presence of genetically modified maize from the US has been confirmed in Mexico by a panel of experts convened by Nafta's Commission for Environmental Cooperation, which has warned that it may spread and taint native varieties. Mexico introduced a ban on planting GM maize back in 1998, but three years later a pest-resistant variety was detected in the state of Oaxaca.

The assumption is that it got there by the use as seed of US maize imported as animal feed. Just under a third of the 5m tonnes of maize imported annually from the US is genetically modified, but it is not labelled as such. Chantal Line Carpentier, coordinator of the panel of experts, says that Mexican farmers do not see any advantage in the current strains of GM maize grown in the US, but might be interested in varieties designed to meet their requirements.

One of the panel's concerns is that the spread of GM maize may contaminate Mexico's 60 varieties of native maize, which would foil future development of improved strains from GM-free varieties. At present there is insufficient funding to control the spread in the field or preserve the native varieties in gene banks.

The panel is expected to deliver its final report and recommendations to the governments of Nafta member countries in mid-year.

TRADE | FTA with Japan `in the bag'. In the middle of last week in Tokyo, Japanese authorities announced that an agreement had been reached on the highly sensitive industrial chapter of the free-trade negotiations they had been pursuing with Mexico for the past year-and-a-half. The officials did not release details, but the newspaper Yomiuri reported that Mexico had agreed to eliminate tariffs on Japanese steel within 10 years, and on Japanese cars within seven.

The two sides have not yet announced agreement on agricultural products, which is the core component for Mexico. The news agency Kyodo, however, cites unnamed official sources as saying that differences had been ironed out on the five products that had been blocking agreement in this chapter (oranges, orange juice, beef, chicken and pork) - with Japan making greater tariff concessions. Kyodo also said that full agreement at ministerial level was expected by the end of March.

Mexicans are not yet celebrating. The memory is still too fresh of President Vicente Fox having to return from Japan last October without the FTA agreement everyone had expected him to sign during his visit. Japan is a newcomer to the bilateral FTA business. So far it has signed only one, with Singapore. The Mexican deal would be the first occasion on which Japan opened its doors to foreign agricultural products. Japan is currently negotiating FTAs with South Korea, Malaysia, Thailand and the Philippines.

COMPETITIVENESS | Warning from up North. The US ambassador to Mexico, Tony Garza, last week warned, in an address to the local American Chamber of Commerce, that if Mexico was unable to raise its competitiveness at the same pace as other countries that are opening their markets, foreign investment would go elsewhere. Among the `competitiveness challenges' he sees Mexico facing are the need for fiscal, energy and labour reforms - the package that `the markets' have been pushing but congress has been resisting - plus a transparent judiciary and respect for the rule of law.

Haiti got a new prime minister and almost immediately dropped the pretence that Aristide's succession would be `constitutional'. No new elections are likely to be held for at least two years. Aristide, meanwhile, is coming back to the Caribbean in yet another signal that he is not content with just fading away.

The `commission of wise men' announced on 10 March, after long deliberation, that it had settled on the Miami-based Gérard Latortue as Haiti's new prime minister. Great significance was attached to the fact that he returned to Haiti in the company of another man who had been considered by the commission for his job: retired General Hérard Abraham, former commander-in-chief of the now-disbanded Haitian army. But then Latortue had said that he would also like to have on his team a third man considered for the job: Smarck Michel, who had served as prime minister under Aristide and then moved into opposition. Latortue had said he wanted General Abraham to help in `recovering security', and Michel to help `in planning'.

The prime minister-designate also said that he expected to remain in his post for about two years -- because it would take that long to organise elections that would `give equal chance to all political parties and candidates.' This did not come as too much of a surprise: before Latortue's arrival, a member of the commission of wise men, Paul-Emile Simon, had admitted that it was unlikely that elections could be held within the constitutionally-mandated 50 days, and ventured a two-year wait.

The new man in charge
Latortue, 69, born in Gonaí¯ves, has spent most of his life outside Haiti, and just under a third of it as an official of the UN Industrial Development Organisation (Unido). He had studied law in Haiti, then pursued postgraduate studies in economics and politics in France, returning to teach economics in Port-au-Prince. He then went to the US to study marketing at Harvard, before joining Unido. After 22 years there, he went into business as a consultant. This was interrupted by a call to serve as foreign minister during the short presidency of another Haitian recalled from exile, Leslie Manigat (February-April 1988).

That was Latortue's only hands-on experience of managing Haitian affairs. His long absence — which was a plus for the commission seeking a `neutral' transitional prime minister — does not mean that Latortue lost touch with his country. As recently as 2003 he published research into the impact of international cooperation on his country.

He has said that he intends to keep his government `as neutral as possible [...] a government of technocrats [...] from no political party [and] with independent minds.' His first priority, he says, is to reestablish public security and relieve of their weapons the armed groups on both sides of the political divide. He says he wants to see vanish from Haiti's vocabulary such infamous terms as Macoute, Duvalieriste and chimí¨re — the tags of authoritarian repression.

Latortue sees an unspecified `role' for the foreign troops in achieving that first objective. It only starts taking concrete shape further on, when the current `stabilisation' force is replaced by a UN force. `Our police,' he says, `lack training and I count on the foreign forces to depoliticise them and make them more professional.'

After that comes the revamping of Haiti's judiciary, to install a system `that treats all Haitians equally.' His view of the experience of the past 20 years in this area is `no investigations ever completed, not even to identify suspects' — which is a mite exaggerated.

On the `stabilisation' front
The `stabilisation' force only began to prepare for serious deployment beyond the confines of Port-au-Prince towards the end of last week. This was after the US announced a change in the rules of engagement for its contingent, to include `preventing Haitians from killing each other' and to start disarming those still in possession of weapons. As put by US Marine Colonel Charles Gurganus, `The disarmament will be both active and reactive, but I'm not going to say any more about that.' The first joint US-French raid in search of weapons drew a blank.

An advance party of US Marines reached Les Cayes, the third-largest city in Haiti, south of the capital, on 11 March. They held meetings with the local police detachment and with former Haitian army captain Guy André Antoinier Clerval, who assured them that everything was under control. Up north in Gonaí¯ves, the rebel front, locally commanded by Buteur Métayer (formerly of the Armée Cannibale) and former paramilitary gang leader Jean Tatoun, is the only visible authority — moving around ostensibly unarmed. `We have no problems with the Marines,' says Tatoun, `since they have no presence here.'

The man seen as overall leader of the rebel front, Guy Philippe, has again announced willingness to disarm and cooperate with the new national authorities. The arrival of General Abraham has stoked hopes among the former soldiers commanded by Philippe that their proposal of reestablishing the army stands a chance.

On the rebel side the only discordant note comes from Hinche, where the local chief, former sergeant Joseph Jean Baptiste, has proclaimed that they will not surrender their arms and will not collaborate with the foreign military.

On the other side of the political divide, pro-Aristide demonstrators, after marching through the shantytowns of Solino and Bel Air, moved on into central Port-au-Prince, where the police dispersed them with tear gas and batons. The demonstrators then rioted, and firefights followed, in which an uncertain number of people were injured.

The US forces have killed four Haitians in several incidents last week, all described as defensive. Most of the victims are assumed to have been Aristide supporters.

The exiled Jean-Bertrand Aristide has found believers in his version of his departure from office. Apart from Caricom [WR-04-09], the African Union has described it as `unconstitutional' and Venezuelan President Hugo Chávez has said words to that same effect. South Africa despatched to Bangui its deputy foreign minister, Aziz Pahad, to ascertain personally what had happened.

On 11 March, Jamaican prime minister PJ Patterson, fresh from a slanging match with US ambassador Sue Cobb over Caricom's stance on Haiti, announced that Aristide would be arriving in Jamaica this week for a two-month stay. He said that Aristide had not requested asylum in Jamaica and that Jamaica was not arranging asylum for him elsewhere. A claim by Latortue that Chile had agreed to grant him asylum was promptly denied by the Chilean government — one of the participants in the `stabilisation' force.

The ruling coalition in Chile appears to be on the brink of challenging one of the sacred cows left behind by the Pinochet dictatorship: a law which guarantees that the armed forces will receive a share in the export revenues of the state copper corporation, Codelco. They want defence funding to come, like that of all other government agencies, from a budget openly debated in congress.

What appears to have rekindled this initiative, launched several times but which never stayed aloft for long, is the fact that the copper price is at a peak, above US$1.30 per pound, and Codelco's balance sheet this year looks like being the best for at least five years. The congressional leaders of the Concertación alliance would like to see all of Codelco's earnings go into the same kitty.

At present, the Ley Reservada del Cobre sets aside 10% of Codelco's gross export earnings for the armed forces (it actually protects them against slumps in the world price by stipulating that the contribution must never be less than US$223m. What this means is that the armed services get about a quarter of their funding from this source; the rest coming from the general pool of tax revenues via the budget.

It is this availability of cash that has allowed the Chilean military to embark upon the current process of modernising its hardware -- the string of acquisitions that have recently raised fears of an arms race in the region. Actually, Brazil has been keeping abreast of the Chileans on this front. The Peruvians have been warning that they may have to do likewise, given the `strategic imbalance' created by Chile's acquisitions.

As we have been reporting, much of the fuss about this has recently died down — but it could flare up again at any time.

The promoters
Among those most emphatic about changing the revenue guarantee law is former finance minister Alejandro Foxley, a Christian Democrat who currently heads the senate's finance committee. He says, `That is an absolutely anomalous mechanism that should be corrected as soon as possible. [The change] would give greater transparency to the financing of the armed forces, greater budget flexibility, and an improved position for Codelco.' Foxley is confident that the necessary votes can be mustered if the initiative is accompanied by a commitment from congress and the government `to include within the budget the required amounts.' This stance is shared by Socialist senator Carlos Ominami. Foxley would like to see the change effected in time for next year's budget.

In the lower chamber, congressman Jaime Mulet (from the DC) takes this a bit further and suggests offering some kind of guarantee to the armed forces regarding the discussion of their budget, `because what is at stake is the normalisation of procedures for defence funding and greater transparency in Codelco's accounts.'

A colleague of his, Pablo Lorenzini, dismisses concern that the military might get stroppy about this initiative. He argues that relations between civilians and the military have matured enough to tackle the issue in a civilised manner. As he sees it, there is a consensus on the matter between Concertación legislators, and the atmosphere is right to discuss the matter with the military. The only thing he worries about is the government's commitment, which he says is `unclear'.

What is not clear either is whether the assessment of the `maturity' achieved in military-civilian relations is more than wishful thinking.

The Bachelet factor
One member of the government who may not want to risk irritating the military at this point is defence minister Michelle Bachelet, a Socialist who fancies her chances at becoming the country's first serious female contender for the presidency. She has been trying hard to keep the service chiefs happy, expediting their upgrading programmes and giving them a higher international profile.

Though Chile stood up against the US in the UN Security Council when the war against Iraq was being debated, it has recently backed a scheme whereby former Chilean commandos are sent to Iraq to perform security tasks. Bachelet has also been involved in the decision to send Chilean troops to Haiti, not — as others in the hemisphere — when the planned UN force goes in, but right away, as part of the US-led `stabilisation' force.

The Chilean military are only recent converts to the idea of taking part in peacekeeping operations. Their brass tended to consider them a distraction from maintaining a high level of readiness to engage in interstate conflict with their neighbours. This has only started changing since the introduction of `confidence-building' measures with Argentina during the Menem presidency.

[The second contingent of Chilean troops flew out to Haiti on 8 March, raising its total contribution to 305. This makes it right now the third-largest unit, after the 1,600 from the US and the 510 from France — but only until the Canadians fly in reinforcements, raising their strength to about 450.]

The top four officials of the national assembly, all pro-Alemán Liberals, finally decided last week that they would no longer try to push legislation to secure the release of former President Arnoldo Alemán, or grant an amnesty to him and the officials of his administration who face corruption charges. They solemnly promised this at a meeting with President Enrique Bolaños in the wee hours of 10 March — in what appears to be a renewal of Liberal `unification'.

Two factors combined to achieve this result. One was that the Liberals were outmanoeuvred in congress by the joint action of the Azul y Blanco (pro-Bolaños) Liberals, the Sandinistas and other swing voters. Not only that, but this new entente appeared intent on removing the pro-Alemán Liberals from all positions of power in the assembly.

There was also a fair amount of prodding by US ambassador Barbara Moore, who has long been openly pressing the case for Liberal `unification' in order to ensure that the Sandinistas do not gain the upper hand. One message passed on to the assembly was that its crisis could compromise disbursement of the aid committed through the IDB-financed Millennium fund.

The commitment made by the Liberal assembly leaders to Bolaños was that they would not `promote any legislative initiative to achieve Alemán's release, through amnesty, pardon or interpretation of the antinarcotics law.' Alemán's only remaining hope now is that an appeals court might overturn his conviction on some or all of the charges. The appeals process is expected to take some time.

Just as the Partido Revolucionario Democrático (PRD) is poised to recapture the presidency, congress has approved in first reading a law creating a special prosecutor's office to look into the crimes committed by the military who wielded the real power in Panama between 1968 and 1989. The PRD was the creature of that military-backed régime; it was founded by the late General Omar Torrijos, father of poll-leading PRD candidate Martí­n Torrijos.

The new office will have its work cut out from day one. It will receive the findings of the `truth commission' created in 2001 to investigate these matters. The commission documented 110 cases of `disappearances' and murders during the period of military rule, and located the remains of 40 of the victims. It has formally asked the judiciary to reopen more than 20 cases of `disappearance' which had been shelved because the statutory limitations had run out.

This has been done in other countries, like Chile, Argentina and more recently Mexico, on the grounds that `disappearances', as abductions, are `continuing' crimes until such time as the victims are produced, or their fate is ascertained.

Interesting to note is that Martí­n Torrijos has been conducting the end-run of his campaign with a focus on the widespread `perception of impunity' and conviction that the judiciary has become `politicised'. He says his government will apply a policy of `zero tolerance' towards any malfeasance by government officials' and has vowed that there will be `no coverups.'

The general elections are scheduled for 2 May.