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Former military dictator Efraí­n Rí­os Montt, more recently president of congress and leader of the Frente Republicano Guatemalteco (FRG), has been charged with a series of criminal offences related to the disturbances of July last year, which claimed one life. He has been placed under house arrest.

The suit against Rí­os Montt was brought by Héctor Ramí­rez, son of the journalist of the same name who died during the events of Black Thursday and Mourning Friday (24-25 July 2003) — violent demonstrations staged by FRG supporters who had been trucked into the capital to bully the judiciary into overturning the bar on Rí­os Montt's presidential candidacy. The plaintiffs are also suing the police and military authorities for having allowed the demonstrations to proceed unhindered.

The former dictator held a press conference to announce that he would abide by whatever the court rules. The charges against him include homicide, coercion and threatening behaviour. He took advantage of the occasion to hold forth on the flight of former President Alfonso Portillo and the frustrated flight of former comptroller-general Oscar Dubón — both facing corruption charges. His explanation for their actions: `They were betrayed by their nerves.'

CENTRAL AMERICA | Regional trade rebounds. After a slight dip in 2002, last year trade between the five core Central American republics rebounded, increasing by 4.5% to just over US$3bn. Guatemala has the biggest slice of the business, 30.5%. Costa Rica and El Salvador follow, almost at par with 25.9% and 25.6%, respectively. Trailing far behind are Honduras (10.4%) and Nicaragua (7.6%).

PANAMA | Growth seen accelerating. Panama's economy will grow this year by about 4.5%, and the medium-term prospect is a rate of 5-7%, according to economy minister Norberto Delgado. He reported last week that the latest figures show Panama's economy growing last year by 4.1%, a result which owed much to the performance of exports, which, after shrinking by 3.4% in 2002, expanded by 8.6%. Best-performing sectors were construction (+28.6%), ports (+20.5%), the Canal (+8.8%). Even the primary activities recorded an unusual expansion of 7%. The big loser was financial intermediation, which after barely growing in 2002 saw activity decrease by 8.1% in 2003.

JAMAICA | Boost from aluminium. Alcoa has announced a US$690m expansion of the JAMALco refinery, which over three years is expected to more than double its production to 2.6m tonnes — and, says the firm, place JAMALco among the world's refineries with the lowest production costs. This scheme comes just after Alcoa completed, last year, a US$115 expansion of the same refinery. The government of Jamaica recently introduced tax incentives for investment in the bauxite sector.

CUBA | Reining in the dollar economy. From April, Cuban state enterprises will no longer be able to accept payment in US dollars for anything but their core business activities. The economy ministry ordered this last week invoking the need to `achieve better use and control of foreign currencies.' Cuba allowed the domestic use of the US dollar in 1993, in tandem with the peso and the convertible peso. Last year it started testing the free use of euros at some tourist resorts.

Colombians are standing taller nowadays — literally. A study conducted by central bank researchers has determined that the average height of Colombians has increased since the beginning of the 20th century by 7.52 centimetres, to 1.71 metres at present. This, says the study, is the same as the stature of the average inhabitant of the US in the year 1900.

Actually, close perusal of the findings shows that Colombians suffered a slight loss of average height in the 1970s, which the researchers attribute to `the acceleration of inflation and the increase in the relative price of foodstuffs.'

The study is to be presented at the first World Congress of Cliometry, to be held in Venice next July. Cliometry, or cliometrics, is the discipline of `quantitative history'.

"Don't let the senators do the government's dirty work. Let the government [...] say that it does not want the investigation."

PSDB senate leader Arthur Virgí­lio, on government manoeuvres to block a congressional inquiry into the murder of PT mayor Celso Daniel.


"Now, some leaders in the region have expressed concern that what happened to Aristide could happen to any one of them. Knowing what I know about the responsible elected leaders of the Hemisphere, I find it difficult to even conceive of such an eventuality."

Roger Noriega, US Assistant Secretary of State for Western Hemisphere Affairs.


"Aristide said he was a father, but he was a father who did not take care of his children. I will be a provider. And when I start making jobs for them, putting in schools, hospitals, public health, they will see."

Gérard Latortue, new prime minister of Haiti.

LatinFinance and Euromoney Seminars present: 3rd Annual Securitization in Latin America Summit Moving up the Value Chain 18th - 19th May, 2004 JW Marriott Hotel, Miami, USA For further information, please contact: Jason Coles, Euromoney Seminars Tel: +44 (0)20 7779 8681, Email: [email protected] Or visit: www.euromoneyseminars.com/SILAS04a

LATIN AMERICAN SPECIAL REPORT Who is competing for power in Latin America

Five countries are scheduled to elect new governments this year: El Salvador, Panama, the Dominican Republic and Uruguay. The latter is expected by many analysts to mark the leftist Frente Amplio's first real opportunity to outvote both of Uruguay's traditional parties together, and make it to the presidency. In El Salvador and Panama leftwing parties (FMLN and PRD) are hoping to do likewise, but their chances are not as clearcut; indeed, for the FMLN they seem to have been decreasing. In the Dominican Republic, after a most unusual nomination process, the fear of fraud hangs over the elections themselves. This latest Special Report from Latin American Newsletters goes beyond the scheduled elections to examine the situation in three special cases: Venezuela (where President Hugo Chávez 's tenure of office is at stake), Haiti (where the departure of President Jean-Bertrand Aristide creates new uncertainties) and Bolivia (where newly rewritten electoral rules will be tested in a referendum and municipal elections). Latin American Special Reports are published bi-monthly in electronic format. The annual subscription fee is US$485/ £345 or reports may also be purchased individually, priced at US$130/ £90 each. For further information, including details of our reduced academic rates, please call +44 (0)20 7251 0012 or email [email protected].

Latin American Weekly Report (Online) ISSN 1741-7422. Published weekly (50 issues a year) by Intelligence Research Ltd, 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 © 2004 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-04-01 will indicate Latin American Weekly Report, Issue No.1, 2004.

The governments of Chile and Peru have been trying hard to play down a revelation that makes a recent embarrassing border incident much worse. The incident in question was the shooting by Chilean marines stationed at a border post of a Peruvian who crossed into Chile and refused to halt when challenged.

At the time - which coincided with a particularly low point in relations between both countries - Lima protested at what it described as the use of `excessive force'. Last week homicide investigators came up with a grimmer detail: the victim had been shot dead as he lay on the ground, already immobilised by a previous gunshot injury. Indeed, two of the three shots fired at the Peruvian were made when he was down.

The findings have been passed on to the navy's prosecution service; the government in Santiago has promised to come down hard on the border guard. Already the case has prompted a renewal of calls for the marines to be withdrawn from border duty, which they perform at that particular crossing because its proximity to the sea puts it technically within the navy's jurisdiction.

Fallout from the case of the Spiniak paedophile-ring scandal has claimed its first two political casualties — but not among those who had been implicated by a colleague (WR-04-10). The leaders of the two main opposition parties, Pablo Longueira of the Unión Demócrata Independiente (UDI) and Sebastián Piñera of Renovación Nacional (RN), resigned their posts within hours of each other.

Both had taken high-profile stances in the exchanges of accusations related to the case, and as a result relations between the two parties, members of the Alianza por Chile, had become very acrimonious. Santiago mayor Joaquí­n Laví­n, of UDI — the man who almost matched Ricardo Lagos's votes in the last presidential election and hopes to do better the next time round — urged the two leaders to step down so as to enable a process of fence-mending.

In Laví­n's view, the rift was not only threatening his chances in the next presidential contest, but also those of the Alianza in the municipal elections due later this year. Talks between UDI and RN on the composition of the lists of candidates had come to a halt.

As this was happening it came to be known that the judge investigating the Spiniak case, Sergio Muñoz, had been quietly interviewing a number of politicians, in and out of congress. It has been noted that they have all been questioned as witnesses, and so far none has been added to the list of people indicted by Muñoz.

The judge is apparently trying to determine the origin of the rumours that led congresswoman Pí­a Guzmán, of RN, to claim that a number of congressmen were involved in the `Spiniak ring'. Among those questioned were two senators cited by Guzmán, Jovino Novoa and Carlos Bombal.

The scandal over the ruling PT's shady campaign funding refuses to go away, for all the government's efforts to block a formal congressional inquiry. Lula's Vice-President has come out clearly in favour of a parliamentary commission of inquiry (CPI). From another quarter, the opposition PSDB has been refocusing public attention on the PT slush-fund allegations arising from the murder of Celso Daniel [WR-04-05].

Vice-President José Alencar, of the Partido Liberal (PL), proclaimed last week, `If it were up to me, I'd favour a CPI.' In a counterbalancing move, the government trotted out comptroller-general Waldir Pires (whose post has cabinet rank) to state his opinion that the Diniz case does not warrant the establishment of a CPI.

Pires did not only echo the official line that establishing a CPI would greatly hinder all government business. In what sounded odd coming from the official who is supposed to guarantee the probity of government dealings, he suggested that it was hypocritical to make such a fuss over this affair `in a country accustomed to rouba mas faz and to oligarchies that have done all sorts of things'. `Rouba mas faz' (`he steals but he gets things done') was the cynical but effective campaign slogan of the legendary, corrupt São Paulo governor Adhemar do Barros.

The Celso Daniel inquiry
The opposition Partido da Social Democracia Brasileira (PSDB) has been having a hard time trying to raise support for a CPI to look into the 2002 murder of Santo André mayor Celso Daniel, Lula's campaign manager and at the time the leading candidate to occupy the finance ministry in a Lula government. Since that case was reopened by the judiciary last year, the crime has been connected with the workings of a PT slush fund, with alleged trails leading to the party's president at the time, José Dirceu — also a target in the Diniz case.

Over the past two days pressure and enticements from the government have persuaded two senators to withdraw their endorsements from the petition for a CPI: Palaléo Paes of the Partido do Movimento Democrático Brasileiro (PMDB, currently allied with the PT) and Paulo Octávio of the Partido da Frente Liberal (PFL). An incensed Arthur Virgilio, PSDB senate leader, has challenged the government to `come clean' and admit that it wants to halt the investigation.

The São Paulo legislature, though, is conducting an inquiry. Last week it heard investigating magistrate João Carlos da Rocha Mattos testify that the federal police had destroyed tapes recorded during the investigation into Daniel's murder. The tapes, he said, had been handed to Daniel's ex-wife Norma Regina for safekeeping; the federal police `visited' her home and took them away.

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		21.03.03	12.03.04	19.03.04
Argentina	peso	3.06	2.93	2.91
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	7.61	7.92	7.92
Brazil	real	3.40	2.90	2.90
Chile	peso	733.00	605.00	611.00
Colombia	peso	2,954.84	2,683.46	2,669.39
Costa Rica	colón	387.98	426.72	427.37
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	24.82	48.84	44.26
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	7.91	8.09	8.11
Honduras	lempira	17.31	18.14	18.16
Mexico	nuevo peso	_	11.06	11.08
Nicaragua	córdoba oro	15.01	15.89	15.89
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,950.00	5,965.00	5,990.00
Peru	nuevo sol	3.48	3.48	3.47
Uruguay	nuevo peso	29.50	30.05	30.15
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	1.10	6.70	8.10
Mexico	Bco.Mx.	0.43	0.62	0.60	4.53	5.70
Nicaragua	BCN	0.76	1.59	1.24	6.92	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	0.50	1.70	1.60
Previous: WR-04-11

The stockmarket in figures
Market	Index	12.03.04	19.03.04	Variation (%)
Buenos Aires	Merval	1258.71	1275.20	1.31
São Paulo	Bovespa	21775.77	22260.64	2.23
Santiago	IPSA	1484.66	1453.67	-2.09
Bogotá	IGBC	3117.21	3169.77	1.69
San José	BCT	10384.17	10077.95	-2.95
Quito & Guayaquil	Interinvest	68.34	68.34	0.00
Mexico	BMV	9837.33	10039.68	2.06
Lima	ISVBL	2829.66	2926.41	3.42
Caracas	BC	27677.70	27553.21	-0.45
Source: Daily market reports.

President Nicanor Duarte's drive to `pulverise' the supreme court was not meant to end with the impeachment of six justices [WR-03-49]. The ostensible purpose was that this should have been the starting-point for the reform of the judiciary so that it would become, so to speak, unimpeachable. Last week's process of selection of the new justices was, instead, a disappointing throwback to the old practice of party-political quotas.

What happened was that the parties represented in congress negotiated a shareout of supreme court seats with President Duarte. The ruling Colorado party got two; the main opposition party, the Partido Liberal Radical Auténtico (PLRA), another two; and a fifth seat went to Patria Querida (though initially it had been intended for the Unión Nacional de Ciudadanos Eticos, Unace, the Colorado splinter that follows cashiered and exiled General Lino Oviedo — which has as many seats in congress as Patria Querida). Only one seat was left to fill `by consensus'.

Vice-President Luis Castiglione provided an apt summary of the proceedings: `We reached a high degree of consensus; not total agreement, but consensus.' The actual list of nominees is expected this week (there are still internal differences within the PLRA).

One outcome is already clear: the ruling Colorados will have a majority, since the three justices untouched by Duarte's `pulverisation' — Antonio Fretes, Ví­ctor Núñez and Wildo Rienzi — are Colorados. Civic associations (with Transparency International prominent among them) have criticised the selection process as `lacking seriousness' and showing scant regard for the idea that public hearings should play a central role. This is the second development to have cast a pall over the reputation Duarte had been earning as a president genuinely committed to cleaning up Paraguay's political scene. A week earlier he attracted criticism by brining back into his cabinet a minister, Roberto González, earlier forced to resign because of his part in a corruption scandal (WR-04-10).

An indigenous community renowned for shunning contact with the outside world has taken the unusual step of sending representatives out of the bush to plead for an end to clearance efforts by private firms that are destroying their habitat. This is happening in defiance of court injunctions meant to halt encroachments until long-delayed land entitlement issues are resolved.

The Totobiegosode are a small nomadic branch of the Ayoreo people, an ethnic group of about 5,000 who inhabit the Chaco scrubland that straddles the borders between Paraguay, Bolivia and Argentina. Most of the Ayoreo have left the bush, many as a result of the evangelising fervour of the US-based New Tribes Mission, which used `missionised' Ayoreo to `hunt' their nomadic cousins and extricate them from the forest. They have also been under great pressure from firms that clear the forest to establish pastures for cattle — in most cases illegally, since they are encroaching on the 550,000 hectares of Chaco bush reserved by the constitution for the Ayoreo.

This has been enabled by the government's failure to transfer the land formally to the Indians. Collusion between squatter-ranchers and authorities is commonplace — aided by such practices as omitting any indication of indigenous occupation or settlement in official maps.

ARGENTINA | IMF gets nod towards `flexibility'. In yet another exercise in brinkmanship, Argentine president Néstor Kirchner blinked first, abandoning his earlier stance that he would not dip into reserves to meet an IMF payment deadline if the Fund did not first approve the quarterly performance test on the current standby arrangement. What the Fund got was a formal assurance that Argentina will `work with the assistance of investment banks to establish a timetable and process that will ensure meaningful negotiations with all representative creditor groups.' 

Hitherto, Argentina only countenanced `discussions', not negotiations, and it refused to recognise the Global Committee of Argentina Bondholders (GCAB), which represents investors holding about US$37bn of defaulted Argentine bonds.

On 9 March Argentina paid the US$3.1bn due; the following day the IMF announced agreement on the Argentine letter of intent, clearing the way for a disbursement that covers Argentina's outlay. The bondholders' association has accepted an invitation from economy minister Roberto Lavagna to go to Buenos Aires towards the end of March, to get started on `meaningful' talks.

ARGENTINA | Narrow jobless rate down. Just-released figures show that Argentina's official rate of open unemployment at end-2003 was 14.5%, two points lower than at the end of the previous quarter and almost 10 points lower than at the trough of the recent crisis, in the second quarter of 2002. Not classified as unemployed are the 1.8m beneficiaries of the `heads of household' subsidy scheme; if they were included, the jobless rate would be 19.7%.

BRAZIL | Industrial output inching upwards. Industrial production in Brazil in January was 0.8% greater than in December, which took the 12-month increase up to 1.7%. In calendar 2003, industrial output increased by a mere 0.3%. The official statistical institute, Ibge, has tried to find some comfort in that January was the fifth consecutive month of industrial growth, however minimal.

Brazil's Lula da Silva and Argentina's Néstor Kirchner formally launched a joint campaign last week to `sensitise' the IMF and other multilateral lenders to the need for economic growth to be granted priority in the packages of conditions they attach to their lending. Current practice, they say, `reveals contradictions between sustainable development and its financing.'

They are already putting forward one practical proposal: that the IMF amend its accounting standards so as to exclude investments in infrastructure from its computations of public spending -- and hence of the fiscal deficits or surpluses it demands.

This is particularly apposite, as only days ago, IMF deputy managing director Anne Krueger publicly suggested that Argentina should be held to a primary surplus higher than the current 3% of GDP. The Kirchner government said it intended to keep the present target.

It is this, and the linkage with Argentina's external debt situation, that led to many headlines about Brazil and Argentina having agreed to negotiate their debts jointly. The agreement they have reached is on an earlier step: a shared approach.

Beyond Lula & Kirchner
Two things are worth underlining. The first is that last week's Brazilian-Argentine accord builds on what was already under way: Lula had already embarked last month on this campaign to `sensitise' the IMF and other lenders. The other is that, less visible to the public, a move is afoot among UN agencies to persuade the Bretton Woods institutions to abandon their exclusively `macroeconomic' standards of eligibility for loans, introducing development-linked benchmarks as well. This reflects the approach aired by José Antonio Ocampo, the Colombian former executive secretary of Eclac, who has become undersecretary-general of the UN.

Ocampo has been arguing that social policy should be part of economic policy, not an afterthought. International officials keen to avoid being tarred as excessively `unorthodox' say that what is being suggested is analogous to the brief of the US Federal Reserve: to guarantee growth as well as monetary stability — as distinct from the current practice among multilateral lenders of relegating growth to a lower priority rung.

South American Community?
Lula and Kirchner also agreed to campaign for market access for their products and the elimination of subsidies by the developed countries. They set themselves the task of building around their shared approach a South American Community of Nations, which would bring together Mercosur (plus associates) and the Andean Community. Invitations will start going out immediately for a series of meetings between the economic teams of the South American countries. The first has been tentatively scheduled for May, in São Paulo.

By the way, the first political reactions in South America have started surfacing. In Uruguay, Tabaré Vázquez, presidential candidate of the leftist Encuentro Progresista-Frente Amplio, has embraced the idea of a joint approach to debt-related issues with Brazil and Argentina. President Jorge Batlle, on the other hand, rejected it, saying that as far as Uruguay was concerned, `there is nothing to fix'.

Officials at Chile's foreign ministry are fuming at what they feel was an underhand move by Peru to turn around, in public, what had been intended as a showpiece confidence-building encounter of top diplomats. Apparently breaching a prior agreement, Peruvian deputy prime minister Luis Solari, underlined that one issue still pending between the two countries was that of `the maritime boundary'.

Solari actually said, at a joint press conference after the 16 March meeting of the `political consultation mechanism', that during the proceedings he had raised that matter. His Chilean counterpart Cristián Barros, put on the spot, reiterated Santiago's official stance that `this is not a bilateral matter [because] demarcation was fixed by international treaties.' His team later added, off the record, that when Solari had tried to table the issue, Barros had refused to discuss it.

[The maritime boundary between Chile and Peru was set by the 1954 Maritime Border Zone treaty, which binds both countries and Ecuador as well. Peru wants to move the boundary further south.]

Solari also irked Barros by refloating the arms acquisition row [WR-04-08]. He said that countries had the right to buy the armament they wanted — `but if those arms do not reflect their needs, they will have to answer to their peoples.' Barros reiterated Chile's official line about the reasons for the purchases.

Ratcheting the tension
Peru immediately raised the temperature. Prime minister Carlos Ferrero stated on 16 March that Peru was working with Chile to settle the outstanding maritime dispute. He appeared to rule out seeking international arbitration, as Solari had suggested, because that would require both parties to acquiesce — `and we don't have that.'

Then President Alejandro Toledo went further, summoning the press to repeat an announcement he had made a month earlier -- namely that Peru would be buying two frigates from Italy this year, and another two by 2006 at the latest. This prompted Peruvian diplomats to repeat their claim that they were not engaging in an arms race; that it was simply a matter of the government `attending adequately to the requirements of its national defence.'

Chilean defence minister Michelle Bachelet said that the announcement had not surprised her at all, `since we had had this news a year ago.'

Outward ripples
All this has been having an effect on the Peruvian public. A survey conducted by the Universidad de Lima in the capital and neighbouring Callao showed 77.8% of respondents convinced that Chile is engaged in an `arms race'. Moreover, 88.6% believe that Chile is better armed than Peru, and 60% think that the Peruvian government should spend more on arms purchases. Interestingly, though, only 24.3% described Peru-Chile relations as bad; 60% saw them as `middling' and 11.4% as good.

Bolivia's foreign minister, Juan Ignacio Siles, echoed the mood by saying that he shared the vision there is in Peru, and that he too was worried about Chile's `renewal of war material'. More will come from Bolivia, which on 23 March celebrates the Day of the Sea, commemorating Colonel Eduardo Abaroa, killed in action during the 1879 War of the Pacific with Chile.

President Nicanor Duarte believes that now is not the right moment to convene a constituent assembly. He also says that he is not obsessed with the idea of running for a second term. At the same time, he believes that it is `absolutely necessary' to reform the 1992 constitution so as to make the presidency stronger — and to remove the ban on immediate reelection.

For now, the reform that has become a talking-point in Paraguayan political circles is precisely that of allowing reelection. The 1992 constitution bars the President or Vice-President from running for a second consecutive term. The idea was to prevent the recurrence of a phenomenon such as the 35-year rule of the serially reelected Alfredo Stroessner. Prominent figures of the ruling Colorado party and of the opposition have come out in favour of lifting that ban.

Duarte wants a more thorough overhaul of the 1992 constitution which, he says, `emerged in a climate of mutual mistrust between the actors who took part in its elaboration.' The result, in his view, `does not allow efficient, dynamic governance and creates institutions that gratuitously bloated the state bureaucracy.'

He describes the régime created by the constitution as `a quasi-parliamentarian system which does not allow fluid and dynamic governance, and instead of promoting a system of reciprocal control of the powers has engendered a series of counterweights that bog down the administrative process.'

What he would like to see is the transfer of more powers to the executive, `so that it can become stronger, in the best sense of the word.' He would also like to overhaul the body set up to appoint judges — not surprising, given the recent example of the selection of new supreme court justices (WR-04-11) — and amend the electoral system to allow for a two-round presidential contest and enable expatriate Paraguayans to vote.

President Duarte is taking his anticorruption campaign to the Entidad Binacional Yacyretá (EBY), the body that runs the Argentine-Paraguayan Yacyretá hydro complex. Last week he appointed Carlos Goiburú as interim director, in place of Luis Fretes, who is seriously ill, and announced that the EBY's books would be audited by the comptroller-general's office.

The EBY's binational status had been used as an excuse to exempt it from such audits, and it had been plagued by corruption scandals since it was being built. Former Argentine President Carlos Menem used to call it `a monument to corruption'. Last February Duarte got Argentine President Néstor Kirchner's blessing to `open up the EBY to investigation by the competent jurisdictional entities'.

Duarte must have been getting firsthand information about the goings-on in the EBY. That was where he briefly parked his old associate Roberto González after removing him from the interior ministry because of his involvement in a smuggling scandal. In early March Duarte ended González's brief golden exile and brought him back into the cabinet as defence minister (WR-04-10).

When he announced the audit, Duarte said he had received four separate reports of corruption, apart from which, he noted, the body suffered from `overpopulation' and the payment of `very high salaries to people who have no qualification and do not carry out necessary work.' For example, González was earning more than Duarte at the EBY.

Government and central bank officials in Uruguay face the prospect of prosecution for their part in the country's recent financial crisis, particularly as regards the collapse of major banks. Isolating the ruling Colorado party, the opposition in congress has already agreed to remit to the judiciary the results of an 18-month congressional investigation, on the grounds that some irregularities detected could be punishable by law.

The leftist Encuentro Progresista-Frente Amplio (EP-FA), favourite to win the forthcoming elections, and the Partido Nacional (better known as Blanco), agreed to hold former economy minister Alberto Bensión and the former members of the central bank board for the `errors committed in the face of the crisis in the financial system.'

A vote formalising these decisions was put off on 19 March when a Colorado legislator, Angel Fachinetti, died of a heart attack. Congresswoman Silvana Charlone of the EP-FA said that the next government would certainly press for prosecutions.

BRAZIL | Bank relents, lowers rate a little. The central bank last week lowered the benchmark interest rate by a quarter of a percentage point to 16.25% - its first reduction so far this year. Finance minister Antônio Palocci predicts that for the rest of this year `monetary policy will follow a descending curve.' Business associations, however, have criticised the cut as insufficient — which is hardly surprising, given that the real rate (after the cut) remains at an internationally exorbitant 10.6%.

Businessmen are also worried by reports that the IMF views the low rates charged by the state-owned BNDES as tantamount to a subsidy, and wants this corrected. News of this development came from planning minister Guido Mantega. The BNDES lending rates are one of the few monetary instruments left to a government that is committed to respecting the central bank's autonomy in these matters. If they are forced up by pressure from the Fund, and the central bank remains cautious, the prospects for economic reactivation this year will worsen.

ARGENTINA | High growth confirmed. Figures just produced by the national statistical institute, Indec, confirm that last year's GDP growth rate was way above expectations, at 8.7% - the first increase since 1998. Indec notes that growth in the third quarter of last year was running at 11.3%. The upswing was led by a 17.5% expansion of the productive sectors (with construction up 45.8% and industry, 16.2%), while services grew by 6.2%.

For this year the central bank is projecting a GDP growth rate of about 6%.

CHILE | Relying more on China. The economic dynamism of China has not only helped buoy the international price for copper — always a welcome development in Chile, where the metal accounts for about 40% of its export earnings — but has also made China the leading customer of Codelco, the state copper corporation. Already last year China ranked second (after France), with 16% of Codelco's sales worldwide. For this year it has already signed contracts for 300,000 tonnes of copper, worth an estimated US$750m — which raises it to first place.

The leadership of the opposition Partido Revolucionario Institucional (PRI) last week conducted a long-awaited purge of its congressional bloc, split since PRI secretary-general Elba Esther Gordillo was ousted as leader and replaced by Emilio Chuayffet. Members of Gordillo's faction were removed from committee leadership positions; Gordillo has reacted by retreating to her old powerbase at the teachers' union.

For Chuayffet, one item of the purge was particularly satisfactory as it redressed a personal grievance. Last September Chuayffet had expected to be chosen, on merit, to lead the influential constitutional affairs committee. Instead, Gordillo picked one of her most loyal supporters, Miguel Angel Yunes. Last week Chuayffet removed Yunes and seven other members of Gordillo's Fuerza Reformadora faction from prominent committee positions (five chairmen and three secretaries).

Yunes and two of his comrades in distress, Roberto Campa and Tomás Ruiz González, promptly announced that they would no longer recognise Chuayffet as their bloc leader, but would continue to fight for reform from within the PRI. This creates two separate problems for them, but the second will cancel out the first. The first is that under the house rules of the lower chamber, they cannot set themselves up as an independent bloc unless they resign their party membership. The other is that under the PRI statutes anyone breaking away from the party's legislative bloc will be deemed to have resigned as a member of the PRI.

Gordillo repositioned
Gordillo herself reacted more cannily. In her role as `moral leader of the teachers' she attended an extraordinary congress of the teachers' union, the 20,000-strong Sindicato Nacional de Trabajadores de la Educación (SNTE). There she was voted back into her old job, as president of the SNTE. She followed this up by formally requesting a leave of absence from the chamber of deputies, which was almost immediately granted. This careful two-step manoeuvre has left her - unlike her three colleagues who went independent - firmly within the party, still nominally holding the position of secretary-general.

Just how long she will hold that post is unclear. There are signs that the leadership may throw the party statutes at her as well. An unofficial reaction to her departure from congress was that this had `restored legality' to the PRI bloc. This, it was explained, was because the party rules precluded simultaneously holding elective office and a position in the top party leadership - a ban Gordillo, they say, arbitrarily overrode.

Gordillo's return to her old SNTE bastion suggests that she has decided to start preparing a longer-haul challenge to the current leadership headed by Roberto Madrazo. The opinion polls do not show her enjoying sufficient backing to aspire to the PRI nomination this time round. Her choice to remain within the PRI, moreover, suggests that she will not play on her friendship with Marta Sahagún, President Vicente Fox's wife, and break away to support her bid for the presidency.

The SNTE, like most other public-sector unions, still enjoy much of the power they had in the corporatist structure created by the PRI over its seven-decade rule.

Mexico's political milieu has been left puzzling over an ambush by a number of gunmen on the governor of Oaxaca, José Murat, of the Partido Revolucionario Institucional (PRI). Nobody has stepped forward to claim responsibility, and the opposition alliance in Oaxaca has been openly suggesting that the incident might have been staged by Murat himself.

Murat was attacked on the morning of 18 March as he drove to a breakfast meeting at the landmark Victoria Hotel of Oaxaca city. He was cut off by two cars and a group of gunmen lying in wait opened fire on his vehicle with assault rifles and automatic pistols. The governor's bodyguards managed to pull him out of the car and onto the ground; he suffered only a graze. Less fortunate were two of his bodyguards, who suffered gunshot wounds.

Police later reported that they had found about 30 shell casings at the scene; 20 of them from Kalashnikov rifles, the rest from 9mm pistols. These are the weapons of choice of the drug gangs, but the instant assumption by the governors' spokesman, Carlos Velasco, was that political opponents were to blame. He noted that Murat had received nine death threats and that during his tenure of office he had `touched many vested interests and local bosses.'

This assumption was clearly at work when the state prosecution office ordered police to raid the homes of several anti-Murat politicians in search of weapons. It was, however, the federal chief prosecutor's office, the PGR, that announced on 19 March that a suspect had been arrested — and not in Oaxaca.

Murat, 55, was elected three times to the lower chamber of the federal congress, where he chaired the foreign relations committee. In 1998 he won the governorship of the southern state of Oaxaca, one of Mexico's poorest, with one of the biggest indigenous populations. He is virtually at the end of his mandate.

Local opposition
The state is due to hold general elections (for the governorship, the state legislature and municipal authorities) in August. Murat is barred from standing for reelection; the PRI banner will be carried by Ulises Ruiz. Three opposition parties — the nationally ruling Partido Acción Nacional (PAN), the leftist Partido de la Revolución Democrática and the small Convergencia — have formed a coalition called Todos Somos Oaxaca (`We are all Oaxaca'), which is fielding Gabino Cue Monteagudo as gubernatorial candidate.

Cue was the first to suggest publicly that the attack on Murat might have been `self-inflicted' or staged. He criticised the removal of the governor's vehicle before the forensic experts had been able to examine the crime scene. The coalition has also criticised the raids of homes of its members, and the fact that Murat himself is involved in the investigation.

The governor has echoed calls for a full investigation, `because there are many who would have liked to see my coffin'. The inquiry, he said, `must go after everything, material and intellectual [authors], with no boundary.' According to Murat, the search for the culprits has extended beyond the boundaries of Oaxaca to the neighbouring states of Puebla and Veracruz.

The last attack on a state governor took place in January 2001 in Chihuahua, when Patricio Martí­nez (of the PRI) survived a gunshot wound in the head when ambushed by gunmen using assault rifles. A drugs connection rumoured at the time was denied.

The Ciudad Juárez femicide saga has claimed its first victim in officialdom — or so it appeared from most of the media commentary accompanying the resignation, last week, of Chihuahua state's chief prosecutor, Jesús José Solí­s. One thing is certain: he did not resign of his own volition but, as he put it, `under outside pressures.'

Solí­s had become one of the chief targets for the constellation of groups campaigning for a full investigation of the murders of women in and around Juárez in the past decade. This affair has become a political football and an international cause célí¨bre — even though the local murder rate for women is hardly the highest in Mexico (the capital sports higher figures). What has emerged, though, is that many of the investigations in Chihuahua were plagued by negligence and procedural bungles, and some have involved apparent police malfeasance.

Solí­s has also been held responsible for failing to clean up the Chihuahua police forces. Even after a succession of purges they have remained permeated by corruption. Only weeks ago arrest warrants were issued against more than a dozen members of the state police, including a high-ranking officer, on a charge of involvement in the killing of a number of people on behalf of a local drug baron.

Rights organisations and women's groups have welcomed the chief prosecutor's resignation, saying that it was long overdue.