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Recently-installed President Oscar Berger has taken a bold step: slashing the size of the army by 42% and shutting down most of the country's barracks, all in one fell swoop. With this he not only fulfils long-delayed Guatemalan commitments under the 1996 peace treaties, but also becomes the second Central American country to take a concrete step towards the agreed `reasonable balance' of armed forces in the subregion.

The Programa de Modernización del Ejército de Guatemala, devised by Berger's security adviser, retired General Otto Pérez Molina, is to come into effect on 30 June. It provides for a reduction of the army's strength from the current 27,000 (by far the greatest in Central America) to 15,500 ― more in line with its neighbours. [El Salvador, the smallest country, has 16,000; Nicaragua 14,500; Honduras 12,000; and Costa Rica has no army.] The program also envisages shutting down all but five military bases and what Pérez Molina describes as `three strategic units'.

The 11,500 members of the military due for retirement will receive what is, by Guatemalan standards, a handsome severance package, averaging US$3,260. Berger says the outlay should be viewed as an investment, which will soon translate into substantial fiscal savings. The total severance bill of US$37.5m will be paid off in a couple of years, as the defence budget is reduced. Next year it will be only US$97.5m, compared with an originally planned US$118.7m. Future defence budgets will be pegged at 0.33% of GDP.

Many of the rank-and-file soldiers leaving the force will be offered the opportunity to apply for training in the national civil police academy. This option will not be open to specialists or officers ― which will temper some of the early criticism of Pérez Molina's plan to bolster the police with recruits from the military.

President Berger, who allowed himself the indulgence of describing the program as an `unprecedented historic event', was also quite candid about one possible undesired effect: that some of those leaving the army might join the ranks of organised crime. He said the hoped the `principles and values' of the military would minimise this risk.

Tackling the underside
Actually, many Guatemalans already see a link between the old security establishment and organised crime, via the so-called `clandestine security organisations'. Investigating this will be the task of CICIACS, the special commission set up under the sponsorship of the UN. 

The commission has the power to investigate the structure and activities of illegal groups and clandestine security organisations, their modalities of operation and sources of financing. In particular, CICIACS will seek to identify: the persons responsible for attacks perpetrated against human rights defenders, justice sector professionals, witnesses, journalists and labour and other social sector activities; the links that may exist between these illegal associations and agents of the state, organised crime and private security forces as they adversely affect respect for human rights; and any other illegal activities that may constitute transnational crimes, such as international organised crime and related crimes, which directly or indirectly harm the capacity of the criminal justice system to protect human rights. As to past offences by the military, Berger's formula is, `If there is anything anyone should pay for, there are the courts.'

With the presidential elections less than a month-and-a-half away, President Hip ¢lito Mejí­a appears to be making insufficient headway to close the gap with poll frontrunner Leonel Fernández ― even aided by a light fall in support for Fernández. Some pollsters have already gone out on a limb, predicting that a first-round victory for Fernández is almost a certainty.

The most recent survey by Penn, Schoen and Berland shows voting intentions for Fernández at 63%, two percentage points less than in January. Mejí­a attracts 19% of preferences, six points more than in January. Eduardo Estrella of the Partido Reformista Social Cristiano (PRSC) appears in third place with an unchanged 16%. Most interesting is the fact that the poll shows only 2% of respondents still undecided.

Despite these figures, the pollsters also examine the possibility of a second round: it shows Fernández winning 67:23 against Mejí­a and 64:27 against Estrella.

An earlier poll by Hamilton Beattie & Staff gave Fernández a narrower first-round victory, with 52% of the vote against Mejí­a's 25% (and 17% for Estrella).

The Hamilton poll shows Fernández's popularity rating down six points since February of last year, from 70% to 64%, and his rejection rate at 35%, up from 28% in February 2003. Mejí­a's approval rating has fallen from 39% to 32% and his rejection rate has reached a three-year high of 67%.

Concentrating on popularity, Penn, Schoen & Berland show Fernández in the lead with 71% (5 points down from February), followed by Estrella with 47%, then Mejí­a with 22% (up 9 points since January).

The Hamilton poll shows that only 19% of respondents feel the country is going in the right direction, while 62% believe the opposite. The electorate's negativity regarding the country's direction has risen from 35% to 59% over the last eight polls conducted by the firm.

The Salvadorean army has suffered its first casualties in Iraq. In the first four days of April, one soldier was killed and 15 were injured in two separate attacks against the Al Andalus base of the Spanish-commanded Plus Ultra brigade in Najav.

The most serious incident took place on 4 April, when a large contingent of militias of the al-Mahdi brigade attacked the base with an assortment of weapons in the belief that a Shiite cleric was being held there. In the gunbattle, apart from the Salvadorean paratrooper Natividad Méndez Ramos, a US soldier and an estimated 25 Iraqis were killed.

El Salvador's 380-strong Cuscatlán battalion has been in Iraq since early February, when they relieved the first contingent posted there. Their tour is due to last until July, but since news of the casualties reached El Salvador, the opposition Frente Farabundo Martí­ para la Liberación Nacional (FMLN) has been demanding an immediate withdrawal.

Two other Caribbean Basin countries have military units in Iraq: Honduras and the Dominican Republic. Nicaragua did not send a second contingent at the end of the first one's tour because it was unable to find any donors to foot the bill. It is now offering the unit trained to go to Iraq as a member of the UN force due to be deployed in Haiti when the interim force's mandate runs out in two months' time.

TRINIDAD & TOBAGO | Monitoring regional lending. The central bank is monitoring local commercial banks to ensure that they do not endanger the system by overlending to high-risk Caribbean governments. This was confirmed last week by junior finance minister Conrad Enill, after the economist Dhanyshar Mahabir raised the alarm about a practice that has been growing over the past three years. Since late last year, for example, the government of Jamaica has raised about US$110m through Trinidadian banks.

GUATEMALA | Remittances rising. In the first two months of the year, remittances from Guatemalans resident in the US reached US$378.4m, or 22.3% more than in the same period of last year. At this rate, the total for the year as a whole could be around US$2.3bn, compared with last year's US$2.1bn.

There are an estimated 1.2m Guatemalans living in the US, of whom about 60% are reckoned to be illegal immigrants.

JAMAICA | Expatriates as potential investors. The government is targeting Jamaicans residing overseas as a source of investment funds, according to senator Delano Franklyn, state minister in the ministry of foreign affairs. The Jamaican diaspora is reckoned to be worth about US$40bn.

Remittances by Jamaican expatriates have increased more than tenfold since the mid-1990s, to US$1.3bn last year. 

CUBA | Growth of non-state sector. Data from the labour & social security ministry shows that about 900,000, or almost 20% of the population, are currently working in cooperatives or are self-employed. The official rate of unemployment is 2.3%.

Towards the end of March, President Vicente Fox introduced two judicial reform bills - one of them with great public fanfare, as it is intended to streamline and clean up the workings of an overloaded, corruption-ridden system; the other almost secretly, intended to remove a potential embarrassment as Mexico moves ahead with its campaign against the death penalty in the US.

The big public reform initiative, which entails amending the constitution, was submitted to congress on 29 March. It has several aims. One is to eliminate both the politicisation and the potential for corruption from the prosecutorial, police and judicial phases of criminal justice. The other is to drastically reduce the overload on the courts, which forces judges to cope with up to 500 cases a year.

Under the present Mexican system, common to most countries in the Roman-Napoleonic legal tradition, trials are conducted via documents, examined first by the prosecutors to determine whether there are grounds for trial, then by a judge. A premium is attached to confessions, which has bred a tendency to extract them by coercion. The government's response to this is to adopt several aspects of the adversarial oral trials practiced mainly by countries in the Anglo-Saxon common-law tradition.

To judge from early political reactions, this could be the part of the reform package that would run into most opposition: it is seen as mimicking US traditions instead of improving Mexican practices.

Slowness in the judicial process is also attributable to the proliferation of police forces, and the potential for political interference is enhanced by the fact that the chief prosecutor is appointed by the President and serves concurrently with him.

The Fox package
The main planks of Fox's judicial reform package are:

-Embody in the constitution the presumption of innocence.
-Replace written trials by public, adversarial oral hearings (before a judge, not a jury).
-Introduce plea-bargaining and mediation, to reduce the number of cases sent to trial.
-Introduce separate hearings and alternatives to prison for juveniles.
-Remove investigative police powers from the federal chief prosecutor's office (PGR).
-Make all prosecutorial appointment subject to senate ratification, and de-link terms of office from presidential terms.
-Grant police the power to initiate criminal investigations on its own, without waiting for formal complaints to be filed.
-Merge all federal police agencies.

One criticism that has already been voiced is that the reform package omits any provision for removing police powers from the military.

The quiet addendum
On 30 March the executive quietly delivered to the senate a bill which does touch upon military justice: it removes the death penalty from the available array of punishments. Only very alert members of the public noticed the bill's sudden (laconic) inclusion in the senate's gazette.

Actually, the death penalty - reserved for cases of treason and gross dereliction of duty - has not been applied by courts-martial for 43 years. The reason Fox wants it removed altogether is that it offers a target to those who accuse Mexico of applying double standards in its current campaign against the death penalty in the US. The new bill was sent to the senate just before the World Court was expected to rule on a Mexican complaint against the US (see next item).

What the bill proposes is to establish maximum penalties of 30 to 60 years for the offences now punishable by execution in the military code of justice. The senate has handed it over to the defence committee for a first examination.

Mexicans, starting with the government, have been celebrating a World Court ruling on a Mexican complaint against the US on the treatment of its nationals on death row. The court has ordered a judicial review of the cases cited in the complaint.

Strictly speaking, Mexico's complaint was not about the US application of the death penalty. It argued a procedural point: that the US authorities had failed to inform 54 arrested Mexicans of their right to consular notification - which is mandated by the Vienna Convention on Consular Relations. It is meant to enable officials to provide assistance, including legal counsel, to help ensure a fair trial for their citizens who may be at a disadvantage in criminal proceedings in foreign countries.

It so happens, though, that the 54 Mexicans cited in the complaint had been arrested on capital charges, then tried and sentenced to death. The International Court of Justice (ICJ, the World Court's official name) rejected a US argument that failure to respect the right to consular notification could be rectified by simply raising that fact in a petition for clemency. It said that clemency proceedings were no guarantee that the violations would be redressed, and ruled that it was `for the courts' of the United States to provide `effective' review of the convictions to determine whether the violations caused `actual prejudice' to each defendant.

In an interim ruling in February 2003, the ICJ ordered the US to ensure that three of the 54 Mexicans whose deaths were imminent were not executed before the court issued its final decision. None has been executed, but Oklahoma has set 18 May as the date of execution for one of them.

The Mexican complaint is the third time in five years that countries have instituted proceedings in the ICJ against the US because of the failure of its officials to notify foreign citizens arrested in the US of their rights under the Vienna Convention. In two earlier cases, brought by Paraguay and Germany on the eve of scheduled executions, the ICJ issued interim rulings ordering the US not to execute the death-row prisoners pending a final ICJ decision. The prisoners were nonetheless executed. Paraguay then dropped its case, but Germany pressed for a final ruling. In its final judgment in Germany's case in June 2001, the court ordered the US `by means of its own choosing [to] allow the review and reconsideration of the conviction and sentence by taking account of the violation of consular notification rights'.

The Fox government's decision to allow US security personnel to operate in Mexican airports during the year-end terrorism alert has been condemned by the Comisión Nacional de Derechos Humanos (CNDH, the human rights commission, an independent official body). It says that passengers were abused and that their rights were violated. The CNDH received 279 complaints from passengers about abusive treatment. It investigated the security operations at seven airports: Mexico city, Chihuahua, Ciudad Juárez, Guadalajara, Monterrey, Reynosa and Tijuana.

The authorities were faulted for having allowed US agents to take part in the passport and baggage checks. The Mexican government has insisted that the US personnel were only present for the purpose of exchanging information. The US embassy, though, has admitted that some agents did perform checks, but at the request of their Mexican counterparts.

The CNDH also criticised the ministry of transport and communications because its own agents stood on the sidelines while private security contractors enforced the stricter controls — which, the commission said, `violated the dignity, equality and freedom of transport' of the passengers.

The commission looked into the cancellation of an Aeroméxico flight to Los Angeles on 31 December and 1 January, which the government said had been decided after receiving warnings from the US. Its report notes that US personnel checked the passports of people booked onto that flight both before and after the cancellations. The CNDH says it is considering a `bill of rights' for air travellers.

GROWTH OUTLOOK | Bank ratchets up the optimism. Central bank governor Guillermo Ortiz last week predicted that the economy could grow this year by 3.5% — slightly more than the 3.1% forecast by the government. This, he was careful to note, is not the bank's formal projection, which will only become available later this month. Ortiz told a senate committee that the outlook was `certainly better' than the performance of the past two years, but that the expected growth rate remains `insufficient'.

He issued a warning about the risk of the social security institute, ISS, collapsing as it becomes squeezed between a growing revenue shortfall and the high pensions it guarantees its affiliates.

FINANCE | Bank credit shrinking. One of the factors holding back economic growth is the paucity of bank lending to the private sector. In February it amounted to M$563.9bn (US$51.26bn), or 1.5% less than a year earlier. These figures actually understate the problem: consumer credit, at US$11.1bn, was up 40.6% in the year, while mortgage lending, a meagre US$5.4bn, was up only 1.8%, and lending to companies, at US$32bn, was down 11.1%.

MINING | Deceptive upswing. In January, Mexico's mining output was reportedly up by 12.1% year-on-year, and mostly in the products in which Mexico has substantial shares of the world market (gold, silver, copper, gypsum, lead, sulphur, iron ore and fluorite. Copper, buoyed by the rise in the world price, was up 41.8%; silver was up 17.8%. The impact of the news is somewhat deadened when it is taken into consideration that output in January was actually lower than in December (by 0.49%).

A breakthrough appears to have been reached in the process of `demobilising' the paramilitary organisations. The three big groups that had been negotiating separately have all returned to the fold and together they have implicitly reversed their policy by agreeing to congregate in certain predetermined, government-approved areas. A formula has also been floated which might allow the government and the US to back off from their commitment to extraditing prominent members of the paramilitary. In another development, the top paramilitary leader, Carlos Castaño, has been dropped from the negotiating team with no explanation.

Several of these changes took place just before a 31 March meeting in Santa Fe de Ralito (Córdoba) between 33 paramilitary leaders and peace commissioner Luis Carlos Restrepo. In a manifesto they announced that the Bloque Central Bolí­var and its affiliate Bloque Centauro, plus the Bloque Vencedores del Arauca (BVA), which up to now was negotiating separately, would henceforth do so as part of the umbrella Autodefensas Unidas de Colombia (AUC). They also appointed a seven-strong negotiating team headed by `military' leader Salvatore Mancuso and Adolfo Paz, chief of the Bloque Cacique Nutibara and the Frente Pací­fico. Carlos Castaño is not on the list.

The manifesto also demands that the government grant them the `guarantees' embodied in Law 782 (an instrument promulgated in December 2002 whereby President Alvaro Uribe amended a 1997 law designed to facilitate peace negotiations with illegal armed groups). The guarantees in question include the suspension of arrest warrants against designated negotiators, their protection by the state and, most significantly, the provision of security in the areas where the negotiating parties concentrate their forces prior to surrendering their arms.

Only days earlier the AUC had turned down a proposal by Restrepo to start gathering their forces. They argued at the time that the state was not yet in a position to provide security in the areas the paramilitary groups would abandon.

Sidestepping extradition
At the meeting with Restrepo, Mancuso floated the idea of an AUC commitment to help the government eradicate 50,000 hectares of coca plantations - just under half the total area cultivated with coca according to the latest US estimate. Officials enthused that this might provide an argument acceptable to Washington for Uribe to invoke his discretionary powers and deny certain extraditions (such as those of Carlos Castaño and Salvatore Mancuso).

A day before the AUC manifesto was published the government returned to congress and amended the bill introducing `alternatives to prison' for surrendering fighters found guilty of criminal offences - an instrument that has attracted much criticism at home and abroad. Included in the amendments is a provision for the creation of a `truth tribunal'. Excluded - on specific instructions from Uribe - is the extradition issue. After his recent visit to the US Uribe had reiterated that the government's commitment to the legislation allowing the extradition of Colombians wanted by the US on drug-related charges remains unchanged. It is worth noting that that legislation does not overrule the President's power to refuse extradition.

Just in case, an initiative to reform the constitution reintroducing the bar on extraditing Colombian nationals has been launched by Liberal congresswoman Rocí­o Arias - who has been accused by many, including vice-president Francisco Santos, of `working for' the paramilitaries. Arias has claimed that she already has enough endorsements for her bill to be incorporated in the congressional agenda. It will be interesting to see how much support it commands once in congress: after the last elections Salvatore Mancuso boasted that the AUC commanded the support of 35% of the legislators.

Exposé threat by general
Even before the `truth tribunal' proposed by Uribe is created, the government may be in for some embarrassing revelations. The newsmagazine Cambio claims that an army general on trial for his alleged part in a massacre has been threatening to tell all he knows about military collusion with the paramilitaries if his superiors do not ensure that he is exonerated.

Retired General Jaime Uscategui stands accused of plotting with a paramilitary unit the massacre of 30 peasants in Mapiripán (Meta) in 1997. He was convicted by a court-martial in early 2001, but a later supreme court ruling voided the conviction and ordered Uscategui to be tried by a civilian court. He is now being held at a military prison in Bogotá. His trial is due to begin on 20 April.

Cambio publishes the transcript of a recording allegedly made in mid-2003, in which someone identified as Uscategui threatens to expose the military-paramilitary link, underlining that 'this is extremely serious because it involves something that we have always officially denied: the connections between the armed forces and the paramilitaries.'

Exchange rates
Local currency per US$1
COUNTRY	CURRENCY	Year ago	Previous	Current
		04.04.03	26.03.04	02.04.04
Argentina	peso	2.93	2.90	2.87
Barbados	dollar	2.00	2.00	2.00
Belize	dollar	2.00	2.00	2.00
Bolivia	boliviano	_	7.92	7.92
Brazil	real	3.22	2.93	2.89
Chile	peso	723.00	620.00	608.00
Colombia	peso	2,951.35	2,679.61	2,671.34
Costa Rica	colón	389.61	428.01	428.73
Cuba	peso	1.00	1.00	1.00
Dominican Rep.	peso	24.39	45.86	44.06
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	7.95	8.10	8.10
Honduras	lempira	17.37	18.18	18.20
Mexico	nuevo peso	10.80	11.19	11.25
Nicaragua	córdoba oro	15.04	15.90	15.90
Panama	balboa	1.00	1.00	1.00
Paraguay	guaraní­	6,920.00	5,965.00	5,840.00
Peru	nuevo sol	3.47	3.47	_
Uruguay	nuevo peso	29.40	30.15	30.10
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-04-13

The stockmarket in figures
Market	Index	26.03.04	02.04.04	Variation (%)
Buenos Aires	Merval	1211.30	1197.54	-1.14
São Paulo	Bovespa	21541.01	22948.95	6.54
Santiago	IPSA	1433.87	1488.92	3.84
Bogotá	IGBC	3204.92	3393.72	5.89
San José	BCT	9447.23	9710.34	2.79
Quito & Guayaquil	Interinvest	65.85	65.85	0.00
Mexico	BMV	10432.00	10713.54	2.70
Lima	ISVBL	2952.87	3074.23	4.11
Caracas	BC	26784.16	27112.93	1.23
Source: Daily market reports.

There was some relief when Bolivians were told that an unprecedented suicide bombing of congress on 30 March was the act of a loner, not the beginning of a terrorist wave recently predicted by a special prosecutor. But the relief was shortlived: three days later police found a cache of 1.6 tonnes of dynamite in La Paz, together with 30 bags of ammonium nitrate - a combination capable of producing devastating bombs.

The authorities are looking into possible political ramifications; for now the owner of the house where the cache was found has been charged only with illegally handling explosives and endangering the neighbourhood.

The discovery, however, comes on the heels of the recent statement by special prosecutor René Arzabe, anticipating a full report of an investigation launched in April last year, that `terrorism indeed exists in the country and is growing stronger daily.' He cited as evidence recent seizures of arms and munitions, some smuggled from abroad, some stolen from military arsenals in Bolivia; arms caches found in El Alto, the dormitory city next to La Paz; and reports of connections between local coca-growing activists and `foreign-based groups trying to spread their ideology abroad.' That latter claim has been taken with a pinch of salt, since Arzabe said the links were with Colombia's Ejército de Liberación Nacional (ELN) and Peru's Movimiento Revolucionario Tupac Amaru (MRTA); the former badly battered by the paramilitaries, the latter long inactive. As Arzabe also cites a drugs connection, opposition leader Evo Morales says that all this talk is a setup designed to justify military intervention in coca-growing areas, and maybe even a coup.

Movement on the proposed referendum on President Hugo Chávez 's tenure of office was confined last week to two meetings at the CNE, the electoral authority, where views were sounded out on the mechanics for the `repair' process — the opportunity granted to the opposition to ratify more than 800,000 suspect signatures on the petition. Another meeting, called by the electoral panel of the supreme court, failed to attract attendants other than the opposition — the CNE and the international observers stayed away.

The CNE is expected to announce within the next few days the dates, venues and rules for the `repair' process. The opposition insists that the whole process is invalid -- but at the same time it has been discussing with the CNE practical details such as the security to be provided during the `repair' event.

In the background is the legal battle initiated by the opposition, which has already led to the confrontation of two supreme court panels: the electoral one, which has ordered all suspect signatures, sight unseen, to be deemed valid; and the constitutional one, which has overruled the former, saying it has no jurisdiction over the inner workings of the CNE.

The electoral panel has filed a request for the matter to be resolved by the full supreme court, but up to the time of writing there had been no reaction to this.

COLOMBIA | Vulnerability warning. The central bank has been underlining that it has done its bit to check the appreciation of Colombia's currency, and will continue to do so -- but that the government must do its part as well, by engaging in some serious fiscal adjustment. The bank reports that it bought US$500m between December and January to reduce the vulnerability of the economy, and intended to buy another US$700m between now and July.

It noted last week that the country is highly dependent on external financing and vulnerable to changes in capital flows because of its low level of domestic savings. `There are still weak aspects of the economy,' it said, `that would be adversely affected by a sudden reversal of those flows.' The low savings ratio, it said, `is associated with the high deficit in public finances' — what the government and congress must do is find ways to bring down the public debt to about 45% of GDP.

PERU | Gas & environment. The IDB has sidestepped the environmental debate over the US$1.6bn scheme to develop the Camisea gas deposits, noting that it can only vouch for the environmental credentials of the portion it is financing — the transport of the gas from the deposits to Lima. The bank last week said it hoped the remaining conditions would be fulfilled soon so that it could go ahead with its loan. Environmentalist and indigenous organisations have demanded an independent audit of the project. The IDB notes that the scheme has the potential to save Peru some US$5.2bn in energy outlays over the coming 30 years.

PERU-BOLIVIA | Oceanic outlet. In late April Bolivian and Peruvian authorities will meet to define the location of `Boliviamar', the stretch of Pacific coastline in the Ilo region which, together with the land for a free zone, Peru agreed to grant Bolivia in 1992. Bolivians have fretted over this offer, which could be construed as validating the border drawn by Chile after the War of the Pacific.

President Lucio Gutiérrez has bowed to the pressure from the armed forces and the criticism from some quarters of the opposition, and started sending members of the military back from their posts in the government bureaucracy to their barracks.

The first contingent to return to military duties was a group of 13 officers who had been serving in the planning department, the sports secretariat, the national competitions council, the communications secretariat of the presidency, the Ecuadorean football federation and other such agencies.

He is also hard at work finding something for them to do. The defence ministry and the joint command of the armed forces have been asked to look hard at a request from the UN for Ecuador to increase its contribution to peacekeeping forces from the current 300.

"We shouldn't adopt systems from other countries because Mexico has its own characteristics."

PRI senator Orlando Paredes, on the proposal to adopt oral trials.


"Whether they are integrated into the police or the army, the name doesn't matter as long as they can enforce security."

Haitian rebel Guy Philippe, on what to do with his comrades-in-arms.


"We're tired of waiting while the government just make promises and doesn't keep them."

Jaime Amorim, a leader in Brazil's movement of landless peasants, on the slow movemen of agrarian reform.

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.

Ecuador's President Lucio Gutiérrez is fighting for his survival. Ranged against him are his old allies of the indigenous movement plus most left-of-centre parties and the `social organisations.' His only apparent lifeline is the rightwing Partido Social Cristiano (PSC), but its leaders are unwilling to commit themselves wholly if there is a chance that investigations under way reveal misdeeds of impeachment proportions. Even the military, greatly favoured by Gutiérrez, have become cagey when expressing their support.

Gutiérrez has come in for criticism on many fronts. First, he alienated his indigenous allies by striking a deal with the IMF and embracing economic policies that contradicted his campaign policies. He has been accused of mismanaging the country's oil industry, the main engine of growth and a crucial source of hard currency for a dollarised economy. He is charged with having tolerated, even covered up, acts of corruption, which have besmirched the reputation of the military, from whose ranks he recruited many government officials.

His party, Sociedad Patriótica (SP) has been accused of breaching electoral rules by accepting campaign contributions from a drug trafficker, and more recently, for having accepted aid from a foreign political party (Mexico's Partido del Trabajo, PT). It is the outcome of the investigations into these two matters that could determine Gutiérrez's fate.

Befriending the PSC
Ever since the departure of Pachakutik, the indigenous party, from the ruling coalition, there has been talk of a possible understanding between Gutiérrez and the PSC. In the elections that brought Gutiérrez to power, the PSC chose to position itself as a key power-broker by refusing to field a presidential candidate. Elected without a majority of his own in congress, Gutiérrez's need for new allies increased when, as could have been predicted, an opposition left-of-centre coalition emerged in the legislature. However, the very reasons that motivated his estrangement from Pachakutik made Gutiérrez more palatable to the PSC.

With the umbrella indigenous organisation, Conaie, back on the warpath, and demands growing in congress and the media for ministers to be removed, corrupt officials to be jailed and even for Gutiérrez to resign, negotiations with the PSC began in earnest in recent weeks.
It was mainly to satisfy the PSC that Gutiérrez forced the resignation of his energy minister, Carlos Arboleda, and removed the official who had become the symbol of officially tolerated corruption, Mauricio Galindo, head of the telephone company Pacifictel (already the target of two arrest warrants). Galindo, significantly, is an army captain.

This did not suffice, however, to bring the PSC on board. Its leader, former President León Febres Cordero, made it clear that there could be no question of supporting Gutiérrez if he were found to have been responsible for the electoral misdeeds of the SP. In either of the two matters being investigated, legal experts agree that, if found responsible, Gutiérrez would have to step down and face trial. This could also be the fate of his Vice-President, Alfredo Palacio.

A matter of who decides
Apart from what the investigations turn up, the outcome of this situation depends on the ensuing procedures deemed applicable to a sitting President. Former President Rodrigo Borja, leader of Izquierda Democrática (ID), has been arguing forcibly that it would be up to the supreme electoral tribunal, TSE, to decide on Gutiérrez's culpability. Others favour turning to the supreme court.
There is a political rationale to this: the alternative would be impeachment proceedings in congress, a political process ultimately dependent on how many votes there are to convict and how many to acquit. That is a scenario in which the PSC could be decisive - as long as it could argue that the legal case against Gutiérrez was not conclusive. Borja, of course, does not want to leave the PSC in the role of arbiter - but there is not shortage of opposition politicians who do not trust the TSE or the supreme court either. The PSC and the Partido Roldosista Ecuatoriano (PRE) have stated their preference for a congressional solution.

Unease in the armed forces
Over the past couple of months there has been much public criticism of the number of active-duty military officers serving in government positions. The military high command has become increasingly sensitive to this, particularly because of the army's exposure to suspicion of involvement in acts of corruption. This has persuaded Gutiérrez to set in motion an orderly return of the officers to their units.

As this began to take place, rumours began to circulate that some members of the military were conspiring, if not to stage an outright coup, at least to force Gutiérrez out of office. The President got defence minister Nelson Herrera to convene the military high command for a public display of loyalty. The result was a communiqué‚ in which the military, `in response to tendentious and arbitrary rumours' manifested their absolute internal cohesion and support for the country's institutions and legally constituted authorities, and called to strengthen a `unity in which good sense, the national interest, the constitution and the rule of law prevail.' They also tagged on a call for a `national dialogue'.

The government's spin doctors portrayed this as a ringing endorsement of Gutiérrez. Some local analysts point out that the military chiefs chose their language very carefully, in such a manner that their statement can also be read as coinciding, say, with the PSC, in interpreting that Gutiérrez would forfeit any claim on their loyalty if he were found to have breached the constitution or the law.

Gutiérrez apparently realised that some reinforcement was needed, so he told the top brass that a `small' pay increase for all ranks would be forthcoming in midyear. Military pay now ranges from US$220 a month for a private to US$1,546 for a colonel with 28 years' service - a decent wage in Ecuador.

As these lines are being written, there is a strong chance that the Venezuelan opposition will scuttle the possibility, faint as it is, of holding a referendum on President Hugo Chávez 's permanence in office. It has painted itself into a corner by reaching an agreement with the electoral authority on the `repair' of suspect referendum petitions which merited high praise from the international observers, and then arguing that the implementation of that agreement was unacceptable.

Leaders of the Coordinadora Democrática (CD), the umbrella opposition body, have been arguing that the detailed regulations issued by the electoral council, the CNE, negate the agreement they had reached. Their case has been called into question by the biggest opposition party, Acción Democrática (AD), which has accused some of its partners in the CD of saying one thing in private and the opposite in public - particularly regarding its dealings with the CNE and the stances of the international observers.

On 14 April, Jorge Rodrí­guez, one of the five members of the CNE, announced that those whose names appear on 876,017 suspect petitions will be able to ratify their signatures between 20 and 24 May in 2,569 polling stations across the country. This would finally bring to a head the whole matter: if the opposition manages to get 600,000 of these petitions ratified, the referendum must be called; if not, its next chance to unseat Chávez will be in general elections in 2006. This was greeted with an effusive communiqué‚ by the OAS and Carter Center observers, saying, `We salute the efforts made by the authorities of the Consejo Nacional Electoral (CNE) as well as the representatives of the Coordinadora Democrática and the Comando Ayacucho [umbrella of the pro-government camp] with the aim of producing an agile, simple, secure and transparent mechanism to culminate the petition process for a recall referendum.'

Suspect change of heart
However, two days later, on the strength of a draft set of detailed norms for the `repair' event issued by the CNE, several CD leaders began to spread the word that the terms were unacceptable. Their stance was summed up by Felipe Mujica: `If this is the final set of CNE rules, the opposition will not take part in the "repair". This draft does not reflect the spirit of what has been discussed and agreed.' Among those sounding the harshest note were the leaders of Primero Justicia (PJ), who insist that only the wholesale validation of the suspect petitions is acceptable.

The impression that they were being somewhat less than candid about the agreement was strengthened by the `leaking' to a columnist at the newspaper Ultimas Noticias of a text message by AD leader Henry Ramos accusing some of the 16 members of the Coordinadora of duplicity. `There is,' he said, `some really repugnant and disloyal conduct regarding the recall referendum process [...] seeking to please sectors that want to scuttle by whatever means the repair process.' Ramos later confirmed the accuracy of the report, adding that AD is `not prepared to play along with, or remain silent vis-í -vis new adventures or strikes, such as those of 11-12 April 2002 and December 2002, that have cost the Venezuelan people dear.'

The adecos (AD supporters), said Ramos, would remain committed to seeking a recall referendum, following the advice of the international observers and exhausting all possible legal means. The AD is the sole survivor of the `old' political setup that Chávez set out to eradicate. It is the largest single opposition party in the national assembly and it retains much of its party organisation throughout the country. For this reason, it has argued against those fellow-members of the CD who have proposed boycotting the state and municipal elections due just after mid-year.

One remarkable feature of Ramos's statements is that they were not carried by most of the solidly anti-Chávez media; they were even ignored by Globovisión, the all-news TV channel whose owner is usually portrayed as close to AD.

Government officials tend to be written off as paranoid when they maintain that the opposition is not really interested in an above-board recall referendum, but rather in being able to accuse the government of denying them that opportunity, so as to justify another coup attempt. Recent developments, with the addition of Ramos's outburst, suggest that at least some opposition leaders are seeking something like that outcome.

Fuelling that impression is a recent survey conducted by Globovisión, which suggests that in a recall referendum the vote would go 54% to 37% against Chávez . Pro-government critics have dismissed this on the grounds that the sample was small (500 people) and mainly drawn from middle-class neighbourhoods, which are not renowned for their sympathies towards the President.  

Perhaps more interesting is that such a result would leave Chávez in office, since the vote against would have to exceed that which took him to power in the first place (59.8%). Put another way, to unseat Chávez the opposition would have to muster about 3.8m votes, or 400,000 more than the referendum petitions it collected (invalid and suspect ones included).

One of the largest paramilitary organisations has announced that there will be no more `demobilisation' until the government guarantees that their fighters and leaders will not go to prison or be extradited to the US. The government has just submitted to congress a bill that envisages prison terms for some and does not bar extradition.

The announcement of a halt to `demobilisations' came from three leaders of the Bloque Central Bolí­var (BCB), Javier Montáñez, Julián Bolí­var and Ernesto Báez - who were all on the negotiating team agreed with the government at the end of March.

In the mean time, Liberal congresswoman Rocí­o Arias - often portrayed as the `point person' for the paramilitaries in congress - has announced that she will submit a second draft bill suspending the extradition of any rebel taking part in peace negotiations. The paramilitary leaders have often boasted that they command the support of about a third of the members of congress.

The government is becoming increasingly hemmed in on this issue. A commission created last year by President Alvaro Uribe to look into the infiltration of the national police by paramilitaries and drug traffickers has submitted a report describing penetration as pervasive in 18 of Colombia's 32 departments.

President Carlos Mesa has decided that the safest course of action is to give way on the demands made by the protesters of 2003. He has sacrificed his hydrocarbons minister, sidestepped congress and set a date for the referendum on the future of the gas sector, announced higher taxation of oil companies and amended the offer of gas to Argentina to make it conditional upon the referendum.

On 14 April Mesa replaced hydrocarbons minister Antonio Araní­bar (who had resigned under heavy pressure over the plans to export gas to Argentina) with Xavier Nogales, hitherto minister of economic development. That post was entrusted to academic economist Horst Grebbe. Nogales promptly announced that, tired of waiting for congress, the referendum on the future of the gas industry will be held on 18 July.

Secondly, he announced that the export to Argentina of a daily 4m cubic metres of gas will be effected under renewable six-month contracts (which allows for a cancellation should the referendum translate into a ban on exports). To round things off, Nogales announced that oil companies, currently paying 18% in royalties, would be subject to additional taxation that will raise the state's take to 50% by 2012. All this may not suffice to head off a wave of planned protest actions, not all of which focus on the oil and gas issue.

BOLIVIA | Warning on oil & gas future. Bolivia may have received a lifeline in the form of greater demand for its gas caused by the power crisis in Argentina, but according to the state oil company, YPFB, if it doesn't increase output it runs the risk of turning into an oil importer in 2006. YPFB's export manager, Roberto Cuadros, notes that Bolivia currently produces 41,000 barrels per day of oil and condensates, and that demand is at 36,500bpd and rising fast. If current trends remain unchanged, he says, by 2006 the country will find itself having to import 4,500bpd.

COLOMBIA | Industry spurred by exports. Industrial production in Colombia in February was 6.8% higher than a year earlier, while sales were up 7.1%. The national association of industrialists, Andi, attributes this mainly to the increase in exports. These were up 26.8% year-on-year in January. Particularly remarkable was the increase of 82% in exports to neighbouring Venezuela - a sign that fence-mending by both governments has outweighed political and security ructions.

COLOMBIA | Cost of housecleaning. The liquidation of failed state enterprises over the past 10 years has landed the public purse with a bill for US$2.7bn, or 3% of GDP, according to deputy comptroller-general Luis Bernardo Florez Enciso. Liabilities of entities in liquidation amount to US$1.77bn and, he said, US$1.5bn are still needed to balance the books. He says a good portion of the cost is due to the multiplicity of liquidation régimes for the public sector.

PERU | Oil & mining lead growth. Peru's GDP in the first two months of the year was up 3.55%, with an accelerating trend. Growth leaders were mining & oil (up 14.2% in January and 17.4% in February, with world prices accounting for most of the upswing), followed by electricity & water (up 4.7% in the two-month period). Below-average expansion was recorded in fishing (2.8%), manufacturing (2.5%) and agriculture (2.1%).