Southern Exposure

Desde as Entranhas dos Labirintos Latinos.

Monday, December 29, 2003

No Argentina Weekly Roundup This Week

I'm juggling family, friends, work, other sorts of work, research and an unexplainably messed up sleep schedule (my body seems to refuse to sleep before I've been at least thirty hours awake), so there hasn't been much blog-time available this week. Luckly, in Argentina, as in Latin America in general, the holidays are also the traditional beginning of vacaciones, and there hasn't been much to report anyway. High-profile kidnappings, a nascent political fight between Kirchner and Duhalde (the man who pretty much put him in power in the first place), more moves in the Great Argentine Debt Game... Everything I'd like to blog about will still be there in a couple of weeks, barring anything major and unexpected.

You should never ignore the major and unexpected. After all, this is Latin America...


Tuesday, December 23, 2003


The news from Brasil as we head into the holiday break:

Statute of Disarmament - calling it a Christmas present for the millions of Brazilians who fight against violence, President Lula signed into law the Estatuto de Desarmamento, which greatly restricts legal access to firearms, increases penalties for illegal possession or use of them, and mandates the immediate destruction of all seized firearms as soon as they are no longer needed for evidence.

The Central Bank cut interest rates by another percent, to 16.5%, their lowest rate since 2001. This represents a reduction in real interest rates - (rate - inflation) from 15% to 9.25% in the past year. Despite this boost to Brazil's economy, retail interest rates are not keeping pace - credit card interest still hovers around 10% per month.

Brazil's 2004 harvest is expected to exceed 2003's record levels by up to 6%, promising another year of strong foreign exchange earnings from the sale of its soya crop.

Brazil's unemployment rate dropped significantly in November for the first time in a year, dropping from 12.9% down to 12.2% in the past month. The rate had risen from 10.9% last November. However, the average worker's take-home pay has fallen by 13% over the same period, suggesting that the new jobs are lower-paying, possibly seasonal work ahead of Christmas. The weekly research "Focus" shows a final prediction for 2003 GDP growth in Brazil of just 0.13%, although the forecast improves to 3.52% for calendar 2004.

A bus travelling from Sуo Paulo to Fortaleza crashed in Minas Gerais state killing 21 passengers. What makes this case tragic is that the bus company was not certified for inter-city travel and the driver was attempting to flee fiscalizaчуo - monitoring - at the time of the accident. The driver survived the accident.

A dozen armed men dressed as medical workers carried out a daring rescue of a kingpin traficante from his hospital bed in Leblon, one of Rio's poshest neighbourhoods. The traficante had been injured at the weekend in an auto accident, and was guarded by only one MP.

The Staheli case is slipping from the news, although there are some new developments from time to time. Police report they were able to extract DNA from "a man, not the husband" from under Michele Staheli's fingernails. This corroborates the earlier report of her putting up a struggle, and may be the most significant clue yet to the identity of the assailant. The most significant line of enquiry is still with the family's driver. Blood found on his car showed DNA from several persons, consistent with his report that he had helped two women who had suffered domestic accidents in recent weeks. The driver was called to the scene of the incident and was reported to have touched Todd Staheli to check if he was still breathing.

Brazil's Under-20s won their championship match against Spain, giving Brazil simultaneous possession of all three football world titles - the World Cup, the Under-20s and the Under-17s. Brazil's CBD confidently predicts victory in the 2006 World Cup - the "hexa", for Brazil, currently the only country ever to win the Cup five times.

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Monday, December 22, 2003

The Presidential Game

In a contest of pure strategic skill, Argentina's Néstor Kirchner could eat George W. Bush for breakfast. Make it Cheney or Rove. Or Cheney and Rove.

Consider Bush's strategic scenario: an omnipresent, easy-to-hate enemy
of the US, the magically growing american productivity numbers, record
corporation profits to turn into campaign donations, and a severely split
Democratic party. Pfui! Piece of cake.

Argentina is a whole other game. The field is smaller, yes, and the stakes
less, but, ah, the complexity of the game! The ambiguities! I'll use last
week as an introductory tutorial on what it takes to play Argentina's
Presidential Game (this will also count as this week's news roundup,
in case anybody is following them).

You're the President of Argentina. The first thing that lands in
your desk: debt. Your country owes a huge amount of money in terms
of GDP, but unlike the US you can't just keep issuing more debt,
as nobody in its right mind is going to believe you're going to
pay it without some strong guarantees (the USA in 2040?). Anyway,
even if you could issue new debt, the payments would
be so high that you'd have no way of meeting them without (a)
spiraling into an(ohter) exponential curve of growing debt, or (b)
slashing government services so badly that the country's economy and
population would take an enormous hit - a dilemma I propose to call
"Arnold's Choice". What'd be your move?

Kirchner's is a deadly but very interesting -if you happen to
have nothing at stake- game of chicken against the financial
international community. "We'll pay this", says Argentine,
where "this" means an incredibly low amount of money, and far,
far in the future. "You've got to be kidding," say the private
creditors. _"You'll have to pay us this much" (a much, much
higher amount that Argentina's offer). Both sides just look at each
other across the table and try very hard not to blink, diplomatically
speaking. It's a daring move, in some sense an unavoidable one, but
it takes a lot of care to pull it off. Just last week, for example,
you'll had have to pay your IMF dues, while announcing in public
that you won't cede to the Fund's pressure, and then you quietly
issue the new fiscal laws the IMF has asked you to. In short, you
keep bridges open while building enough internal support to make
it clear that you don't actually need to cross them. The
reason a lot of people in New York and London is following this
is that if Argentina "gets away" with this, you'll begin to see a
whole lot of new "final offers" from other developing countries.

That's just part of the foreign side of the game. I won't even get into
international relationships (e.g., our scheduled bi-annual diplomatic row
with Uruguay, or the intricacies of the G-20's group and individual
agendas). Instead, let's take a look at the internal front.

It's Saturday, December 20. You take a peek out of your Presidential office window towards Plaza de Mayo, and see it teeming with piqueteros protesters commemorating another year after the protests that finalized De la Rua his administration. They are there to *cough*subtly remind you*cough* that whatever happens once, could in principle happen twice. A small bomb hidden in a trashcan has just exploded, wounding more than 20 people. You just know that they are going to blame the Government, and that your Government (and the piqueteros that more or less side with you) are going to call it a self-attentate (Argentina is that kind of country).

Ironically, piqueteros and their marches are more or less financed by
the Government's social plans, but you can't take those away without
starting some really violent backslashes, and probably another one-way
helicopter trip out of the Casa Rosada (yes, that's the Argentine White
House, and no, don't get me started with the name). What's worse, while
the piqueteros' frequent disruption of roads and plazas is starting to
seriously annoy the all-important political mainstream, you've been forced
to explicitly forbid police forces to restrain them, risking violence,
maybe a dead body or two in national tv... you know how it ends.

The "alienate almost the entire world after the 9/11 goodwill spike"
level of diplomatic skill just won't cut it. You'll need to get back to
the oldest of all power games: ruthlessly take control of resources, and use them to divide, isolate and co-opt the opposition. Put your sister in charge of most social plans (and by 2004, practically a "super-minister" in that area), as your wife is already powerful Congresswoman, and give the money of the social plans primarily to those opposition leaders that are open to "dialog" with you.

Unsurprisingly, it seems to be working. There were actually three
different marches to Plaza 25 de Mayo, each of them representing a
different sector of the piqueteros movement, each of them fighting the
other two as much as they fight the government. Keeping this up, you
actually have a chance of neutralizing the piqueteros movement without
violence or plunging the country into chaos.

It's not an easy path to walk: according to numbers released last
week (and going to be re-released in another version the next one;
it's a tale of political manipulation of indexes which I don't have
the time to cover here), 14% of your active population is thoroughly
unemployed -imagine that, dear US reader-, while if you actually
do the obvious thing and consider those in the social plans as
unemployed, the number climbs to 20%. Imagine managing that
social climate in a country that is well-aware that it popularily
threw down a too-timid democratic government two years ago, and
that has just received certain confirmation that their labor
laws were directly paid off to the Senate with funds from the SIDE
(Argentina's intelligence service).

But if you happen to keep everything sort of in track, if you can
avoid either turning Argentina into a financial pariah or ruining
the country to pay its debts, if you can keep the piqueteros
under control with your police forces tied down, if you can win
or survive the tens of political struggles I didn't have time or
space to comment on here, then you get to reap the fruits of the
favorable international climate (namely, China's demand for soy,
and your weak currency-backed tourism revival), in the form of last
week's numbers for Argentine growth:

Argentina's third trimester showed Year-to-year growth
of 9.8%, putting it among the top five countries in the world in that
statistic (interestingly enough, the others include China, Russia and
India). Total growth for 2003 will amount between 7.5% and 8%, and for 2004 the absolute floor is a healthy 4%.

Next week: If it's a slow news week and I get morbid enough, I
might tell you about Padre Grassi's trial. Padre Grassi is/was a popular
catholic priest accused of, you guessed it, sexual assault of minors. It's
an old and ugly tale with lots of politics and media issues all over
it, and frankly I rather not touch it (or him) with a ten-foot pole.
But his lawyers just got denied a legal move declaring incompetent the entire
damned judicial system in the State of Buenos Aires, and another trying
to declarate unconstitutional the (relatively new in Argentina) oral
public trial. If that's the level at which this trial is going to play
out, I'll be hard pressed not to cover it.

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Friday, December 19, 2003

One of the demands from Bolivia's October protests was a constituent assembly to re-found the country and, essentially, rewrite the rules of the democratic game. It's now clear a constituent assembly will happen, though its format's still undecided. But it's important to note that this demand — fervently launched by Mallku, Evo, Solares, and their lot in October — has been picked up by very different quarters — namely, the comites civicos of Santa Cruz & Tarija (along w/ other similar groups). So. What does this mean?

While I agree that a constituent assembly, while a messy/complicated proposal, is not inherently a bad thing, I'm not sure that Mallku et al realize exactly what they're proposing. In a rush to change the constitutional balance of power in Bolivia, they may've written their own doom.

The current constitution, despite several progressive amendments from 1994, is still essentially centralist. National political power rests in La Paz, w/ little room for departmental autonomy (Bolivia has nine departments, or states) — department prefects are appointed by the president, not elected. This means that national decision-making is highly centered in La Paz, from where funds for the nation's interior are dispersed (the Bolivian political world is divided into the exterior [foreign countries], the capital [La Paz], and the interior [w/ somewhat the same meaning as "frontier" or "hinterlands"]).

Of course, the 1994 Law of Popular Participation (passed under Goni's first administration) changed that. It broke up the country in 311 municipalities (now 315), allowed citizens to vote for their local government, and distributed 20% of the national budget to the municipal governments on a per capita basis. This reform, internationally hailed, meant to foster local democratization. In some measure it failed (local governments became ensnared in party politics); in some measure it didn't go far enough (still no departmental or provincial self-government).

And this is where the constituent assembly comes in. After October, civil society in Tarija & Santa Cruz joined the crusade to re-found the country w/ a new democratic system. While Mallku et all want a more participative democracy, they're likely also to see a new state structure that gives greater autonomy to departments. There's too much pressure from too many sectors to avoid a sort of "federalization" of Bolivia (which is not necessarily a bad thing, either). But what does this mean?

Santa Cruz & Tarija keep Bolivia's economy afloat. And the economic discrepancy between these departments and La Paz grows as businesses relocate after October's violence. Not to mention that departments like Potosэ & Oruro are in worse shape than La Paz. And it goes beyond gas & oil. Santa Cruz & Beni (another camba department) have higher agriculture production than the kolla regions.

A new constitution will most likely give greater autonomy — including decision-making control over local resources — to the departments. Whereas Santa Cruz once fought a bitter, and still-remembered struggle to retain 11% of the profits from its oil wells in the department, it probably won't accept much less than full control in the future. Neither chapacos nor cambas believe that their gas & oil belongs to "the nation" — they believe it belongs to them. Look at it this way: Should politicians in Washington decide the fate of Texas' oil wells? Or Texans?

And what this finally means, is that the new Bolivian constitution might actually heighten national socioeconomic inequalities. If the benefits of economic growth are limited to the east, and if the benefits of that growth stay in the east, then the economic hardship of campesinos in La Paz, Oruro, Potosэ will increase. They may win the right to participate all they want, but they'll have fewer economic resources to decide about.

Ecuador News Round-Up

The news from Ecuador this week:

Rumble in the Jungle
US media outlets are reporting on the ongoing battles between Ecuador's indigenous population and oil companies that want to drill in the Amazon jungle.

Reuters says: "In the northern Amazon, Indians are suing a U.S. oil company over environmental damage they say ruined their land and made people sick. Further south, indigenous demonstrators have led violent protests to keep firms off their property."

The New York Times reports: "As international energy companies move into the Amazon basin to tap some of the last untouched oil and natural gas reserves, more and more natives are fighting to keep them out."

And OneWorld weighs in: "On the eve of an historic march to protest plans for oil extraction on their sacred homeland and denounce the series of human rights violations that their community endured over the last year, members of the Kichwa nationality from Sarayacu were violently attacked and detained last Thursday by pro-oil forces, while en route to Puyo, the nearest city and site of the march."

Education Protests
In Quito, approximately 5,000 Ecuadorian teachers, students, and parents recently protested a lack education funding. The demonstrators clashed with police, who responded by firing tear gas.

The AP says: "Ecuador's 120,000 public school teachers went on strike on November 11, demanding that Gutierrez's government deliver on promises - which ended a monthlong strike in July - to raise teachers' monthly salaries by US$10 and invest US$11.7 million to build new schools and refurbish old ones. Public school teachers in Ecuador earn between US$160 and US$350 a month."

Lucio Watch
I mentioned not long ago that Ecuadorian president Lucio Gutierrez may be the next Andean leader forced from office. In addition to allegations that his presidential campaign received money from a drug trafficker, the Ecuadorian Indian movement has announced that they'll soon begin protesting what they say are Lucio's broken campaign promises.

While there've been no new developments, stay tuned: Gutierrez's authority is weak, and if the country's indigenous movement truly ratchets up the pressure, like they did in Bolivia, Lucio may fall. At this point, we may be experiencing the calm before the storm.

Liga de Quito: Ecuadorian Champions
Liga de Quito defeated crosstown rivals Nacional 2-1 to claim the Ecuadorian league championship.

That's it for this week.


Thursday, December 18, 2003

Venezuela News this week

It was indeed the week before Christmas as everything slowed down, politics appeared not to matter as Venezuelans began celebrating the Christmas they did not enjoy a year ago due to the general strike. The Government and the opposition continued trading barbs, the Government accusing the opposition of massive fraud in the petition drive to recall Hugo Chavez, and the opposition refusing to hand in the signatures until the Electoral Council guaranteed that the rules for evaluatoong the signatures would not be changed after the signatures were handed in. On Tuesday the Electoral Council put an end to the threat, announcing by a unanimous vote that the rules would not be changed retroactively as had been suggested by some pro-Chavez lawyers. Thus, tomorrow, if safety and the Chavistas allow it, the 3.4 million plus signatures will be handed in to the Electoral body, giving it thirty days to verify and count whether the required 2.4 million valid signatures are there.

The only negative note before the holiday season was the sudden appearance of violence against reiligious icons. In less than two weeks there have been a number of visible as well as stealth attacks on images of the virgin and churches. Some icons have been desecrated in a twist that is very unusual for a country where most everyone was at least born a Catholic. The first attacks took place during a pro-Chavez march , which the Government tried to blame on the opposition. However, the pictures tell a different story as the Vice-President is seenencouraging the mob in their path of destruction. Other incidents have been ocurring at night, the Government blames the opposition, but the church blames the Government, calling it "irresponsible". Not a pretty affair, not a pretty picture.

Merry Christmas everyone!

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Wednesday, December 17, 2003

Latin America in 2003 in half a dozen economic factoids

This year's defining economic factoids, courtesy of the United Nations Economic Comission for Latin America, via the often perceptive Financial Times:

  • LatAm is exporting... $41 bn trade surplus (its first in 50 years!)

  • ... -thanks in part to high commodity prices- ... Overall commodity prices rose 15.9 per cent

  • ... and it's actually fiscally conservative! Most countries are running primary fiscal surpluses.

  • Nonetheless, income per capita is low...: Below 1997 levels

  • ...and it shows... More than 10 per cent overall unemployment rate.

  • ...pretty bad. Almost 45 per cent of Latin Americans live below the poverty line.

Argentina: Explosives Lost & Found, Both Chemical And Political

Last Thursday, people still mostly unidentified stole 700kg of high explosives from a mine operation in the southern state Neuquén. You can do a lot with 700 kg of that stuff, up to an including leveling pretty much an entire city block. Needless to say, everybody was quite worried, as hypothesis from mass jailbreaks to terrorism were put forward. To general relief, the explosives (although not the equipment that had been stolen with them) were found ditched in a nearby canal last Monday by some kids. Police suspects that the thieves were after all not very sophisticated, and lacking the capability to move the explosives out of the zone, were forced to leave them behind.

President Kirchner is now the pro-tempore President of the Mercosur (much as Berlusconi chairs the EU at the moment). His "inaguration speech" at Montevideo, Uruguay, was nonetheless mostly directed at the IMF, saying that he would "resist pressures", making a veiled reference towards the IMF's delaying of its approval of Argentina's fiscal goals. There is a game of "hot potato" going on between Argentina and its creditors. Whoever ends up holding -being forced to fully pay or selling by a pittance- is something that will heavily influence the issuing of soberan debt elsewhere. Unless somebody blows up something, I think that this negotiation will be Argentina's top story in international media.

But the story of the week is without doubt the "coimas en el Senado" ("bribes in the Senate"). A bit of background:

Once upon a time -April 2000, to be exact- an Alliance of Radicals (remember, Radicals in Argentina are left-centrist, Liberals are in the right) and the left-of-left-of-center front FREPASO had won the elections following the two Menem presidencies. Fernando de la Rua was president, Carlos "Cacho" Alvarez was his VP, and honesty and sobriety were the Government's watchwords.

Enter the IMF. Both the Fund and local business wanted a law "flexibilizing" working conditions, making easier and cheaper to hire or fire people, and diminishing the power of unions. Unions in Argentina -with strong ties to both the Justicialist Party and, as of late, with leftist organizations- are quite strong, and there's even a number of labor rights written into the Constitution itself. Businessmen argued that the high costs involved were squashing profits and rising unemployment, and as the IMF was backing everything, the Administration felt that this was a law that they wanted to pass. The problem was that it was a hugely unpopular law, and there was, let's say, strong resistance in Congress (remember that De La Rua didn't have a majority of his own in the Senate).

To cut a long story short, the law was eventually passed by the Senate, and today, although only partially implemented, is still a factor shaping work relationships in the country. There were, in any case, multiple accusations of bribery to the members of the Senate, and apparently protesting De La Rua's slow hand to look into matters, Vicepresident Alvarez quit his post. There were some investigations, reports, etc, but eventually the thing, and later De La Rua's presidency, died down anyway.

About three years later, that is, a couple of weeks ago, former Senate Secretary Mario Pontaquatro told the magazine TXT that he, in fact, had delivered a $5 million bribe (U$D 5 million at then-current rates) to a number of Senators, at the bequest of De La Rua. The funds had come from the discretionary funds of the SIDE (Servicio de Inteligencia del Estado, State's Intelligence Service), an intelligence budget under very little supervision, and often suspected of being used to finance all kinds of illegal activities, and Pontaquatro gave a detailed account of the story.

As it stands now, the scandal is shaping up big. Pontaquatro has given a judge a list with the names of the allegedly bribed Senators, and former President De La Rua, along with other people involved, has been forbidden to leave the country. Both the media and the government are expressing lots of interest in this case, and it's not outside the realm of the possible that De La Rua or former Senators could spend some time in jail for this.

Not as shocking, or as useful, as the revelations would have been before or just after the law was voted, but I'll take what I can.

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Tuesday, December 16, 2003


The week's news from Brazil

"Lulawrence of Arabia" returned from his Middle Eastern journeys and announced that his travels weren't over, with trips planned next year to China and India. He also announced that Brazil is expecting a visit of Vladimir Putin, as the four cornerstone nations of the G20 work to form a new economic bloc to counter the power of the EU and the US.

Brazil's Senate finally approved the state pension reform legislation. The legislation will take effect immediately, with the first big change being a 30% reduction in all pensions over R$2400 (about US$800). Merry Christmas, middle class Brazil! Lula has been quoted as saying he wasn't thrilled with the structure of the reforms, but satisfied that at least some progress had been made.

Brazil's Minister of the Fazenda, Antonio Palocci, said that for 2004 the economy's priorities must change from a too-close focus on the interest rates to a focus principally on development. Minister of Labour Jaques Wagner said that Brazil will create 2m jobs in 2004.

The PT (Workers' Party) cracked its whip this week and expelled four of its congressional party members, three for voting against the party on pension reform and one for releasing an old recording of Lula criticising one of his present-day allies.

At least 39 PMs (policemen) were arrested on contraband charges, accused of helping cross-border smugglers import large quantities of illegal and contraband items such as alcohol and bootleg CDs. A typical crime was noted - accepting a R$500 payment to allow a bus full of contraband goods to enter Brazil through customs.

O Caso Staheli - police announced yesterday that the results of the blood analyses conducted on both Todd and Michele showed there were no drugs or alcohol in either of their bodies. The Staheli children were allowed to leave Brazil, along with the bodies of their parents. This suggests all suspicion has been removed from that line of enquiry. The family lawyer is still pressing for a further exploration of Todd's business dealings, both in his current work on the Brazil-Bolivia pipeline and on his former dealings (Shell employees are demanding answers, too). Police announced the discovery of a "secret passage" in the house, but gave no further details. They are currently investigating traces of blood found on the family car, although the driver was called to the scene by the neighbours and had a legitimate reason to have blood on his hands, having helped to move the Stahelis before police arrived. Police continue to search the lake behind the house for a weapon. Images from a neighbour's closed-circuit video camera revealed someone moving toward the lake about 2:30AM; police are working to enhance the images.

Futebol - the regular football season came to a close this weekend after a series of matches that decided which teams would be relegated to the Second Division (Segundona). Bahia showed its Second Division potential by losing at home 0-7 to Cruzeiro (the champions) in a match that cannot have been fun for Bahia's goalkeeper (if he even bothered to show up!). Fortaleza fell three slots into the relegation zone by losing to Ponte Preta, who secured their own safety with the win. Fluminense and Grъmio also secured their positions in the First Division for another season. In a sense, it's a shame to see the Premiership lose two Northeast teams, gaining one more from Sampa and one from Rio. The next two years' Brasileirѕes will see four teams relegated each season as the CBN tries to undo the silliness they concocted by expanding the premiership to 24 teams to prevent big-market teams from being relegated. Brazil's Under-20s beat Argentina (sorry, Marcelo) 1-0 and will play Spain for the Under-20 championship.


Monday, December 15, 2003

Samuel Doria Medina's — the richest man in Bolivia — officially left MIR (Movimiento Izquierdista Revolucionario) after 17 years, citing his objections to the party's participation in Goni's government. Of course, Doria Medina's rivalry w/ MIR chief, Jaime Paz Zamora, has been long & complicated. W/ most "traditional" parties in disarray (especially MNR & MIR) after October, many predicted Doria Medina's break w/ MIR — his public participation in a hunger strike along w/ other public figures/celebrities in October was a clear indication.

So. W/ much fanfare, Doria Medina officially formed a new political party — Frente de Unidad Nacional (FUN) — on Friday. Nation-wide municipal elections are less than a year away. And Doria Medina's a multi-millionaire. But despite his one-hour speech at the party's founding, the party's ideological platform was left unclear. There's widespread skepticism that this'll be yet another personalist, populist party.

DATOSs (Bolivia's US News & World Report) recently ran lengthy interviews w/ Doria Medina (published before launching his new party), Tuto Quiroga, and Juan Carlos Durсn. All three players are back in the political arena in the post-October realignment.

Jorge Quiroga Ramirez (aka Tuto Quiroga) was vice-president, until Banzer stepped down a year early (2001) due to health reasons. After a carefully managed re-entry into the country following the October revolt, Tuto began making his presence felt in the media. It's unclear whether he'll also form a new party or try to rebuild the shattered remains of ADN (Acciѓn Democrсtica Nationalista) — which polled less than 5% of the 2002 vote.

In the late 1990s, ADN split into two factions: the dinosaurios (the old guard) and the pitufos (the young turks). Banzer, who'd retired from political life after several unsuccessful presidential campaigns, returned to restore order and run as ADN's presidential candidate in 1997. Tuto Quiroga (a pitufo) was there to "balance the ticket."

Accused by Doria Medina of being "more rightwing than Bush", the mild-mannered Tuto Quiroga's a 21st century technocrat who believes, on the whole, in neoliberal economics. In his rhetoric, however, Tuto has more in common w/ center-right European proponents of "capitalism w/ a human face". Early October polls showed Tuto the most popular Bolivian political figure.

Juan Carlos Durсn, on the other hand, clearly wants to rebuild his party, MNR (Movimiento Nationalista Revolucionario). He argues that Goni's principal mistake was transforming MNR into a party of encorbatados, a middle-class "tie-wearing" organization. Durсn, a popular ex-mayor of Santa Cruz (Bolivia's largest city) argues that MNR should focus on competing for the electoral space occupied by Evo Morales' MAS, engaging in a direct debate. He also places much of the blame for the October crisis on Tuto, claiming his presidency contributed to the economic crisis that fueled the 2003 political meltdown.

Ironically, the MNR (Goni's party) has the best chance of surviving. Not only is MNR the oldest party, but most analysts have long considered it the most modern, programatic, institutionalized, and disciplined party. Along w/ the unpopular Executive Decree 21060 (the foundation for the nation's neoliberal economy since 1985), the MNR's also responsible for such progressive reforms as the Law of Popular Participation (which created municipal elections) and the Bonosol (a nationwide pension fund for the elderly). The MNR still retains strong support in the country's oriental provinces — especially Santa Cruz & Tarija — the economic "engines" of the country. Few forget the cruceёa deputy, Roxana Sandoval, boldly standing in parliament, rejecting Goni's resignation, and proclaiming "God save us from these narco-terrorists!" while staring across the aisle at Filemon Escobar.

The post-October political landscape's clearly uncertain. The Bolivian party system's taken a tremendous beating (especially the traditional "systemic" parties). The lack, for too long, of the links between political parties & civil society necessary to produce a public sense of representativeness & legitimacy were clear. Disdain for "crooked politicians" is a worldwide phenomenon. But it acutely increased in Bolivia for years. Worse yet, the parties did little change that image. That has to change. And soon. After all, liberal, representative democracy is impossible w/o political parties.

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Sunday, December 14, 2003

Truly a Day of Victory in Argentina

As I write this, I can hear through my window cars honking and people screaming in joyous celebration of victory. In my TV screen the Obelisco, but a few blocks away from my apartment, is surrounded by thousands of people waving flags. A bit above half of the country, I'd guess, is currently celebrating.

No, it has nothing to do with Saddam Hussein's capture. Argentine soccer team Boca Juniors defeated the Italian Milan, bagging for the second time in three years the national, southamerican and world cups. Hussein's capture has barely rated a mention on the news channels so far.

What can I say? National priorities and all that.


Saturday, December 13, 2003

Quick roundup of Brasilia's G20 meeting yesterday

The Short Version:

  • Lula: Maybe we should just make a free trade area between ourselves...

  • Lula's advisers: ..But what we ultimately want are still the consumist, overspending, developed markets.

  • The G-20, in chorus: Free trade - good. Protectionist barriers - bad. At least for the stuff we want to export.

  • The WTO: We're with you in this one, guys.
The Really Short Version: Everybody said pretty much what they have been saying for the last years.

Probably the only strategic goal of this meeting was the showing of an united front to the rest of the world. Both elementary game theory and plain common sense tell you that the bargaining position of a group is higher when the rest of the negotiators are convinced that the group is going to work together.

Thanks to one of the most, shall we say, untactful foreign policy-wise US administrations in a long while, for the time being it looks like the G-20 group is actually doing so. That's, I think, the real news here.


Friday, December 12, 2003

from the International Herald Tribune

JOHANNESBURG The police here and in Brazil say they have arrested 14 people in a trans-Atlantic scheme to buy human organs from impoverished Brazilians for sale to desperate and ailing recipients in South African hospitals...

... According to the police in Brazil, the operators of the ring canvassed poor neighborhoods for people willing to sell one of their kidneys. Those who volunteered were then flown to South Africa, where the transplants were performed.


Thursday, December 11, 2003

Venezuela weekly review

-The National Assembly approved the 2004 budget in the amount of US$ 31.22 billion. The budget assumes a dramatic increase in tax collection of 37% and an increase in oil income of 19%. Moreover, the budget assumes the Government will borrow US$ 11 billion between new internal and external debt. Debt payments will be 45.5% of the budget.

-The Chavez administration continued claiming there was fraud in the petition drive for Chavez' recall. Chavez kept saying the Electoral Board would do the "right thing" as the opposition claimed to have gathered 1.2 million signatures more than necessary for Chavez' recall. The Electoral Board will verify the signatures with each verifier fom that office being surrounded by a Chavez supporter, an opposition supporter and one representative of the OAS and another from the Carter Center. Hard to question that process, no?

-The Venezuelan National Assembly approved a new US$ 1.5 billion issue which may come to market as soon as next week and no later than mid-January.

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Bolivia Roundup

The two worker's syndicates involved in Bolivia's October revolt — Jaime Solares' COB and Roberto de la Cruz' COR — are threatening to close the national parliament. They're opposed to the return of ex-ministers (Goni's cabinet) to the legislature.

Unlike most presidential systems (but like most parliamentary ones) the Bolivian cabinet is often chosen from the legislature. It's a common mistake to analyze Bolivia's political system from the perspective that it's a presidential system. The only thing Bolivia's institutional design doesn't have in common w/ most parliamentary systems is that parliament can't call for vote of no confidence and the executive can't dissolve the legislature to call for early elections. Hence, there's the potential problem of "what if" Goni decides to return to parliament himself (he was, after all, elected as a senator at the head of his party's electoral list).

Likewise, many ex-ministers were elected to the Senate and House of Deputies in 2002. Legally, they're entitled to return to their seats once their functions as ministers are ended (until then, suplentes occupy their seats). It's not uncommon for Bolivian presidents to dismiss cabinet ministers, who then return to their parliamentary seats. Regardless of their participation in an unpopular government, these men & women were elected to parliament and have a right to exercise their functions in their respective chambers, unless sanctioned by some due process (legal proceedings against Goni & his cabinet are still in process, as are legal proceedings against the uprising's other protagonists).

Interestingly, Evo Morales and MAS have opposed the COB-COR strategy, which marks an important contrast (and perhaps Evo's much-hoped-for evolution?). He and his spokespersons announced that MAS supports the democratic system and "will arrive in the seat of power via elections." The fear is that if popular protests are unleashed again, a military coup could easy follow.

Meanwhile, the Bolivian anti-drug police (FELCN) today discovered a cache of weapons en route from Santa Cruz to Villamontes. The weapons were sophisticated, including FAL & AUG assault rifles, as well as anti-tank munition. It's unclear whether the weapons were to be used by subversive groups in the country (e.g. cocaleros) or if they were en route to Paraguay, an area of heavy al-Qaeda activity for years.

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Mexico And the China Factor: Save the Last Waltz for Me

This week Marcelo was once again on about the positive economic relations which are developing between China and Argentina. At the other end of the scale is Mexico. This article from the Providence Journal once more illustrates the problem. And it isn't that Mexico's wages have rocketed upwards, more to the point is that China's wage advantage is enormous. And Mexico has failed to really get the full advantage from the good times, the infrastrucure hasn't been built. The principal labour market problem still is demographic: the 1 million workers who enter the labour force every year. On the China front, if you want to know more about how the 'my job just went to China syndrome' is a little wide of the reality, you could check out my piece 'who stole my job', where you will find that manufacturing jobs are even disappearing in China at a rapid rate: the culprit - increased productivity and the transition to a services economy.

Blue-smocked, blue-jeaned and youthful, maquiladora assembly plant workers stream across busy Porfirio Diaz Boulevard, nine hours of labor -- the fruits of NAFTA dreams -- behind them and the destiny of Mexico in their future. The debate in Mexico and the United States over the North American Free Trade Agreement centered on this generation: Young people, given productive lives, would be able to raise their standard of living and buy American products -- spurring U.S. exports and jobs, suppressing illegal Mexican immigration and cementing a win-win-win scenario among Mexico, the United States and Canada.

"NAFTA for Mexico has been a success in terms of increasing trade and foreign investment until about 2000," said Kevin P. Gallagher, a research associate at Tufts University's Global Development and Environment Institute. But the benefits of trade -- the billions in foreign investment -- were to be used to finance development, according to stated goals in Mexico's National Development Plan. "They missed the opportunity to take their foreign investment and build domestic demand and the economy. Now that their investment has dried up, there are no legs for growth," Gallagher said.......

But real wages in Mexico are lower today than when NAFTA was approved and have not kept pace with productivity gains, a study by the Carnegie Endowment for International Peace found. The rural sector has lost some 1.3 million jobs, causing farm families to depend more heavily on the $12 billion in remittances sent annually from the United States. Neither poverty nor the flow of undocumented workers has abated.Mexico's weak economic growth can't absorb the 1 million young people who enter the work force every year, so the flow of undocumented workers to the United States has ballooned from an estimated 200,000 a year in 1994 to more than 300,000 a year today, according to Mexico's National Institute of Statistics. Government statistics show that while extreme poverty has fallen sharply, the number of people classified as poor or extremely poor has risen from 62 million to 69 million, out of a population of more than 100 million..................

Since 2000, factories in Chinese export zones have replaced towns like Reynosa as the favorite factory floor of U.S. multinationals. More than 300,000 Mexican maquiladora workers have lost their jobs since 2000, some because of the U.S. economic downturn, some because of an outflow to Central America but more because of the exodus to China. Mike Allen, president and chief executive of the McAllen Economic Development Corp. and Foreign Trade Zone, said Reynosa has competed well with China compared to other border towns that have lost scores of assembly plants.
Prospective companies arrive with a list of Chinese costs and tell Mexico, "You match this," he said.

For Mexico, the migration to China costs more than jobs. Of equal concern is the drop in foreign direct investment that was to finance economic advancement. "We are now witnessing the beginning of the end of the preferential agreement," said Mexico's former deputy trade minister, Luis de la Calle, who ran Mexico's NAFTA office in Washington. "We reached the end of the benefits of NAFTA in 2003." Mexico failed to use NAFTA's initial flood of capital to invest in education and urgently needed infrastructure projects such as power plants, roads and water treatment facilities, said Tufts' Gallagher. This lack of infrastructure is glaring along the border. While Reynosa's skies are relatively unpolluted compared to other border cities, and manicured new industrial parks house modern facilities, the city's water treatment plants have not kept pace with the growth in population. Snaking to the border near Reynosa's international bridge is a canal choked with lime-green slime. A recent report by the Fitch credit rating agency, "Boom Times at the Rio Grande: U.S.-Mexico Border Region Expands," warned that lagging infrastructure was causing Mexico to become uncompetitive. "The long delay or the postponement of investing in all the infrastructure is really putting Mexico at a huge disadvantage compared to China," said Gersan Zurita, managing director of international public finance at Fitch. "It is limiting the potential growth of the country."

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Getting Endorsed

I am essentially repeating here a modified form of a post I have just put up over at Fistful of Euros. Understandably the focus is different: who - if anyone - should Latin America endorse in the US presidential elections?

As it happens here the big news of the week must be the endorsement of Howard Dean by Al Gore. A somewhat smaller, but still interesting, development - although this isn't exactly new, but simply new to my attention - is the fact that someone has created an Economists for Dean weblog.

They contacted me this morning and I discover that I've been blogrolled - along with Paul Krugman and Brad Delong, among others. Now the first question which reasonably arises here is what place do non-US citizens have in a US presidential election? Normally my answer would be, precious little. I say this not simply because elections are not one of my strong points, but also because I think we have to respect due political process. The Americans choose their president, the British their Prime Minister and the Germans their Chancellor, and there the story ends. But at the moment something seems to be different.

It is different because the current US administration seems to see part of its function as 'remodelling the world' - and in this case we are all, each and every one of us, affected. It is also different because the Bush administration is fuelling a level of rhetorical abuse and international tension of the kind that I, for one, cannot remember having seen before. So if we want to live in a more peaceful world, one were each of us has a say, and one which has a much lower level of verbal pollution, then we'd better listen up and start thinking. In a global world you need to think globally.

So I am convinced, not of the need to endorse any specific candidate, but of the need to dis-endorse Bush. Having said that I have, in the past, come pretty close to endorsing Wesley Clark. I have been tempted by Clark since he seems highly intelligent, knowledgeable in the key global strategic questions, and above all do-able, in the sense that he could win. This is the famous voice of pragmatism. Equally pragmatic would be my willingness to support Colin Powell, if he would only give us the opportunity, or even, at a push, Swartznegger: anyone with whom dialogue would be possible. This is certainly not a party partisan argument I'm trying to push.

But what about Howard Dean? Actually he does seem quite attractive on the face of things. He is, after all, the David going out to do battle with Goliath. Whatsmore he does seem to be the candidate of the new technologies, and his endorsement by Gore only serves to underline this. It is my firm opinion that one of the greatest lasting failings of the Bush administration, as far as the average American is concerned, will turn out to be the emphasis on old economy interests.

On the negative side, they tell me that Dean has been flirting with protectionism. Undoubtedly there are other weaknesses there of which I am not aware. So what I would like to do here is throw this open to debate, there seem to be a number of pertinent questions to ask:

- should Latin Americans involve themselves in US elections?
- if they should, and going by the running field we have to date, is Dean the man?
- and would it be better or worse for the candidate to have support from Latin America?

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Wednesday, December 10, 2003

Brasil - The Staheli

One blogger, though, Lenin Guerra, posts a lament, lest we be too quick to blame the general state of violence in Rio (emphasis added).

Deu no New York Times: a morte do casal de executivos da Shell, Michelle e Zera Todd Staheli, está totalmente vinculada a violencia no Rio de Janeiro. O jornal americano classificou o Rio como uma das cidades mais violentas do mundo. Casos como esse contribuem cada vez mais para a estagnacao do nosso turismo internacional. Um pais com mais de 8 milhoes de quilometros quadrados, que tem em territorio Amazonia, Pantanal e praias das mais belas do mundo, recebe apenas 5 milhões de pessoas por ano. Naum aproveitamos nem o eco-turismo. O Brasil responde a apenas 10% desse tipo de turismo. Ou seja, dos que querem ver natureza no mundo, só 10% escolhem o Brasil. Nossos 5 milhoes sao pouco se comparado a França (75 milhões), Espanha (52 milhões) e os Estados Unidos (48 milhões). Acontecimentos como o assassinato desse casal tendem a nos deixar estagnados, senao caindo, no ranking mundial do turismo ¿ atualmente estamos em 29º. O turismo é uma forma interessante de ingresso de capital a um país. É uma pena que continuaremos perdendo esse filao. Agora responda com sinceridade: depois de ler quase semanalmente notícias como essa, se voce fosse estrangeiro, voce viria passar férias no Brasil ou no México?
Lenin decries the automatic connection between the case and Rio's violent side, and the connection between high-profile cases like this one and Rio's stagnant tourism industry. "After reading almost weekly news like this, if you were a foreigner, would you spend your holidays in Brazil or in Mexico?"

This crime has few clues, and detectives are pointing inside the household (although, to be fair, the family's lawyer today told police they need to "put a foot outside the house", indicating that he suspected a professional hit rather than someone close to the family).

Lenin directs his concern to the bigger picture - this can only hurt Brazil's tourism, and at a time when it should be at peak (yes, 90 degrees here today). He worries that Brazil - the 5th largest country in the world, and a country including the Amazon, the Pantanal and the most beautiful beaches in the world - is only 29th in world tourism. 5 million tourists in Brazil don't compare very well with 75 million in France, or 48 million in the US.

Of the Staheli case, I tend to think that after the initial shock and outrage it remains for the police to put together the evidence and make the best conclusion they can, and to take the pressure off of random Rio violence as the automatic culprit. Rio has its violent hot-spots, but they tend to be places where no foreigner would find himself. Still, no doubt the case is high profile (as our referrer logs continue to attest). So without wishing to sound overmuch like a cheerleader, I can merely remind you, Brazil is a beautiful country, Rio is a wonderful city, and Cariocas are the friendliest people in the world.. Brazil is still "my beach".

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Last week (and twenty years) in Argentina...

This hasn't been a week on momentous events in Argentina, but there's a definite pattern of revisiting old battles, and of forces maneuvering in the current ones.

With the formal beginning of President Kirchner's mandate [if De La Rua had served his whole term], today the country is celebrating a full two decades of democratic -if some times patchy- government, a remarkable achievement by all accounts. There was never during the past twenty years any massive support to military uprisings, not even during the looting at the end of Alfonsín's presidency, a couple of minor coup attempts, or the the bizarre breakdown of the political system during and after the ousting of De La Rua. My personal, completely unscientific, unpolitely worded explanation of this phenomenon: the last military government f*cked things so badly at so many levels -the "Guerra Sucia", the "Desaparecidos", the botched attempt to recover the Falklands (known as Malvinas down here), the economic breakdown- that not only could former President Menem downsize the military and eliminate the draft with total confidence, but also leftist and student groups can safely "escrachar" (Argentine for "go to their houses, paint graffiti and loudly insult them for hours") ex-members of the regime wherever and whenever they find them. True, it's technically illegal, they are old and powerless men anyway, and I have an instinctive mistrust for any kind of group "punitive" action, but it's hard to muster in oneself sympathy for former members of so... evil a government.

Also related to the 1982 Falklands/Malvinas War, the British government finally acknowledged that some of the ships used during the conflict had carried nuclear weapons, an admission that sparked a strongly worded demand for apologies from the Argentine government, one that hasn't been met by their British counterparts, who claim that there was never any plan to actually use the weapons, and that they don't have to explain their military arrangements in any case.

It certainly gives another layer of meaning to Charly García's war-related song "No bombardeen Buenos Aires", "Don't bomb Buenos Aires" (if you can, check it out).

Now for more current battles:

Argentine media has focused on an aggravating streaks of robberies in the Buenos Aires zone of Villa Urquiza. Despite the name "Villa", it's a middle-class residential and commercial zone located in the NW of the city of Buenos Aires. Now, although the frequency of muggings and robberies to business is absolutely *not* acceptable, it's fair to point out that it's probably not that high compared to other zones of the city. But you know how it goes: by coincidence there's a couple of medium-profile hits close enough in time and space, the media catches the "story", the neighborhood people rationally seizes the opportunity to wrestle a much needed modicum of extra security from the government... And it goes on until the news cycle dies and the media can find another two-events "trend". This kind of journalism helps the specific groups covered -and God knows they often need and deserve all the help they can get- but it's not, strictly speaking, analytically solid. In any case, the security situation is perhaps the weakest front of the current administration.

The Union Industrial Argentina, which represents powerful business interests, has asked the government to deal in a firmer way with the piqueteros, who they perceive as increasingly arbitrary and violent. President Kirchner has not so far made any signal of a toughening of his stance toward this kind of protests -in fact he joined by surprise a protest in the southern town of Cutral C&oacteu;-, a political no-brainer given the fair amount of support or at least tolerance from the general populace toward the piqueteros. De La Rua's fall was in part sparked by the deaths of two young protesters during the December '01 manifestations, and Kirchner is definitely not willing to test the same waters. But if the unspoken convivence pact between the middle class and the piqueteros were to break up, and there are already some tensions, things could get bad. At the very least the government would have to chose between tolerating an unpopular, unlawful protest or engaging in violent represión - a Devil's choice for President Kirchner.

In economic terms, negotiations between the government and the privatized utilities are gearing up, in particular with the water company Aguas Argentinas. While opinions inside the government are divided about whether or not to grant a temporary rate hike "to further negotiations", there is a consensus about securing both a "social rate" for the poorest users, and the lowest possible overall rates for the general population [one can guess that's not exactly what the companies have in mind themselves]. The government has also said that it's considering the creation of a "super-entity" (you've got to love the name) to supervise and monitor the performance and services of the utilities. And german company Siemens has opened a case at the World Bank to get U$D 500 million in compensation for the rescision by De La Rua's government of a contract made by President Menem to supply the Argentine population with national IDs [note that we already _have_ national IDs -the Documento National de Identidad, or DNI- the contract was purely for the manufacture of a more sophisticated document, not the implementation of a new system].

And in unsurprising news, the country's external creditors considered unacceptable Argentina's offer of payment terms and proposed another one, which the Argentine government in turn considered unacceptable. I expect I will have to find new ways to say this during the next months to avoid becoming too repetitive.

Also unsurprisingly, Chinese and Argentinean officers predicted more trade between both countries next year, including mutual investments and technology transfer [Argentina has a surprisingly modern agricultural sector]. Arentina's national airline is even in negotiations to open a Buenos Aires-Shanghai route.


The Green Onion Controversy

No, this is not a story about a historic R&B combo, but rather the lastest will you won't you (or rather, did you, didn't you) story in the great globalisation of food debate. According to MSNBC

Deadly scallions traced to Mexico

Federal health investigators have determined that a deadly outbreak of hepatitis A among restaurant diners in Tennessee, Georgia and Pennsylvania was caused by green onions produced in Mexico, the U.S. Food and Drug Administration said on Tuesday. More than 500 people were infected in the outbreak and three died.........

FDA investigators pinpointed a link between the three outbreaks and green onions from Mexico after visiting four Mexican companies last week. They found poor sanitation and inadequate hand washing facilities and also had concerns about the quality of water used in the fields, packing sheds, and the making of ice, which can help spread the disease.........

The investigation has been difficult because no reliable methods exist to find the virus in green onion samples collected in the field. Instead, health workers analyzed the hepatitis A viruses in infected consumers and found they were virtually identical to those found in residents who live along the U.S.-Mexican border. Mexico has stepped up inspections and controls for green onions and is working with the FDA to ensure the safety of produce shipped across the border.
Meantime the Pitsburgh post-Gazatte put it rather differently:
FDA finds need for improvement but no hepatitis links in Mexico

The Food and Drug Administration said yesterday that its investigation of four Mexican firms implicated in recent hepatitis A outbreaks uncovered several questionable practices that could allow infectious diseases to spread.

But the agency said there's still no explanation for exactly what contaminated the green onions linked with three deaths and more than 600 illnesses during a November outbreak among patrons of the Chi-Chi's restaurant at Beaver Valley Mall.

The place of contamination isn't clear, either, with the FDA saying it's continuing to investigate in both Mexico and the United States.

Based on interviews and observations conducted last week, U.S. investigators identified concerns ranging from poor sanitation practices and inadequate hand-washing facilities to questions about worker health and hygiene. Investigators also questioned the quality of water used by green onion growers in fields, packing sheds and ice makers.

Any of those issues "can have a role in the spread of infectious diseases such as hepatitis A," the FDA said in a statement of preliminary findings posted on its Web site.

A Mexican official last week provided a somewhat different version of what the investigators had uncovered, saying water problems were found at just one farm.

Dr. Javier Trujillo, undersecretary of food safety and quality, also asserted that there was no conclusive link between the Mexican companies and the Beaver County outbreak or earlier outbreaks in Tennessee and Georgia.

Dr. Tony Fiore, a hepatitis expert with the Centers for Disease Control and Prevention, said the preliminary results announced by the FDA weren't surprising.

"The team went down there anticipating it would be extremely hard to find out exactly what happened," Fiore said. "The hope was to find one particular practice that clearly was way outside the norm, but instead what they found were a number of practices that could stand to be improved."

The U.S. investigative team included three people from the FDA and one from CDC. The CDC representative has returned home, Fiore said. The FDA statement left it unclear whether its investigators had returned or not.

When U.S. investigators visited the Mexican companies, none of them were actually harvesting or handling green onions and none of the firms had field workers or packing shed workers present, FDA said yesterday.

Scallions that sickened the Chi-Chi's patrons would have been harvested in September. Green onions linked to restaurant outbreaks this fall in Tennessee and Georgia would have been harvested in late July or early August.

There are no reliable methods to find hepatitis A virus in samples collected in the field, so the FDA did not collect environmental or green onion samples for analysis, the agency said.

No one firm's scallions are common to all of the outbreaks under investigation, the FDA said.

Mexican growers have criticized the FDA for singling them out and not their counterparts in the United States. While green onions served at restaurants in Beaver County, Tennessee and Georgia were all traced to Mexico, the agency has not yet determined the origin of the onions served in two North Carolina restaurants where there was another outbreak.

The FDA said it was pleased to see that some farms visited were making or had just completed improvements to their water systems and other physical facilities.

In an interview last week, Trujillo said that investigators found Dos M Sales -- one of the firms implicated by FDA -- was rinsing onions with water that did not meet water quality requirements. That company's packing house, located in an arid region west of Mexicali, used water from a natural reservoir that did not meet standards, Trujillo said. But there was no evidence of hepatitis A virus in the packing house, he added.
Is Beauty simply in the eye of the beholder?

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"o Brasil que exporta, alimentando a ditadura que nуo se importa"

Since taking office, President Lula has spent an extraordinary amount of time outside Brazil, ostensibly attempting to establish a new political and economic alliance of developing countries. While the people broadly support Lula's travels (52% support them, 30% oppose them), local critics are beginning to suggest that he ought to spend more time at home, minding the store; making sure his government is delivering on the promises he's made. Lula has visited 23 countries in his first year in office.

A persistent criticism is that the government cannot even spend the money that has been budgeted. I've noted before that a little caution here might be worthwhile (there's no point in pouring it down the same sinkholes as the predecessors). [aside: Perhaps they're spending it on travel - already R$500m spent on travel and per diems by the government this year.]

Claudio Shikida over at Economia Everywhere tackles this theme, and raises an important question about Lula's objectives in undertaking his most recent visit to the Middle East. He proposes:

Mais vale um frango brasileiro exportado na Sэria do que uma eleiчуo democrсtica no paraэso de Assad: "o Brasil que exporta, alimentando a ditadura que nуo se importa" [English].

The quote is a lovely play on words with export/import and "importa" meaning "to matter". The Brazil that exports, feeding a dictatorship that doesn't matter.

He goes on to challenge the Lula agenda in the Middle East:

Coisas que devem incomodar muita gente:

1. Qual o custo e qual щ o benefэcio de se fazer um discurso na Liga ┴rabe sem pedir mais democracia no Oriente Mщdio?

2. Como a resposta politicamente correta - do ponto de vista do governo - р questуo anterior deve domar a lєgica para se compatibilizar com o discurso comum (e mais comum em 2002, durante a campanha eleitoral) de щtica na polэtica?

Meu palpite: o cсlculo econЇmico dos diplomatas estс correto. Vale mais um frango exportado do que um opositor livre na Lэbia...para o governo brasileiro. Revoltante? Talvez. Mas hс sempre aquele argumento de que dar mercados gera maior retorno do que dar democracia, pelo menos no curto prazo. Serс este dilema algo empiricamente testсvel? [English].

His conclusion: business as usual. The short-term gain of exporting is worth more to Brazil than the political gain of increased democracy in the region. And this may be true, but it's a challenge to the ethical stance that Lula maintained in opposition.

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Tuesday, December 09, 2003

Part of the Bolivian government's new gas & oil plan was finally unveiled today. And, yes, it's pretty much the same as what Goni's plan proposed. After international gas & oil exports pronounced the obvious — that Bolivia can't afford to industrialize its gas reserves (something that's very capital and technology intensive, two things which Bolivia lacks) and that it's internal market wouldn't justify the cost (since there are so few Bolivians) and let's not forget that few companies are interested in investing in such a high-risk market (since the October uprising raised the threat of nationalization) — the government pronounced that the export of gas was, after all, the most viable alternative. Now Mesa's government announced that the taxes on gas & oil companies will go up from 18% to a reasonable 26% (not the 50% demanded by some). So, essentially, the so-called guerra del gas produced no significant results, beyond crushing the fragile tourist industry and raising the risk for international investment.

Meanwhile, the erradication of coca in the Chapare (and now also Yungas) continues, w/ Mesa slowly taking a firmer stance against the rising death toll among the police & military. Likewise, the war against corruption still shows no significant results. And parliament's still mired, unable to vote for a new Defensor del Pueblo. Plus, no one has any idea what the "referendum on gas" will ever look like (debates on question wording continue) or if it'll ever be more than just a public rubber stamp. However, thanks to Venezuela's Hugo Chavez (who may soon be out of power), nationalist rhetoric against Chile continues (which always gives Bolivians something exterior to focus on). All this while the exchange rate slowly creeps up to Bs. 7.78 to the $US (when I arrived, it was Bs. 7.71).

So. As the holiday season quickly approaches, Bolivian politics has gone back to the same old, same old. Perhaps this gives credence to Quispe's anger that this is "la misma chola con otra pollera". But. When a country's bankrupt, it really doesn't have many options, does it?

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The Wal-Martisation of Brazil?

Yesterday it was announced that here in Brazil, two large supermarket chains, Pуo de Aч·car (currently Brazil's largest) and Sendas, the largest in Rio de Janeiro state, where Pуo is not very well-established yet, are planning a merger. The details were fuzzy, but it looks like some kind of a share swap and joint operation will be taking place.

Pуo de Aч·car (which is the trading name of its parent, Companhia Brasileira de Distribuiчуo, a public company traded in New York [quote]) currently has 446 stores in Brazil; family-held Sendas has 79. Combined operations will give the new company 525 stores, more than twice as many as their nearest competitor (French Carrefour, which, however, has about similar turnover to Pуo at present).

Enter Wal-mart. At present, Wal-Mart has a toe in the door here, with 22 shops and R$1.75bn in turnover (Pуo R$10.8bn, Sendas R$2.52bn). But Wal-Mart is considered front-runner in acquiring No. 3 retailer Bompreчo from troubled Dutch group Ahold. CBD would like to have Bompreчo, but the market considers it too much of a debt burden on CBD for them to buy the chain outright from Ahold, who need the cash. Wal-Mart presumably doesn't have the same liquidity issues. Buying Bompreчo would give Wal-Mart 138 stores and over R$5bn in turnover.

There's a very interesting piece on BBC Brasil today about "little Pуo, little Sendas and big Wal-Mart". The author, Lucas Mendes, points out some facts about Wal-Mart in Mexico:

A gigante americana entrou no Mщxico hс doze anos. Hoje tem mais de 600 pontos de vendas e emprega 101 mil pessoas, mais do que qualquer outra empresa no paэs. Fatura mais do que toda a ind·stria de turismo.

Suas vendas representam 2% do PIB mexicano, 30% das vendas de todos os supermercados e 6% das vendas no varejo. Ela nуo sufoca sє a concorrъncia mexicana. Nos Estados Unidos, os n·meros sуo semelhantes. [English]

He then asks the key question:

Serс que o que щ bom para o Mщxico serс bom para o Brasil ou, no Rio, o pуozinho e a sendinhas vуo bater no walzуo? [English]

Lucas points out that the Mexicans and Americans are happy with Wal-Mart, but to me it rather begs the question as to exactly how good this is for Mexico. For now, it looks like Pуo/Sendas may be one move ahead of Wal-Mart. Myself, I am surprised that Wal-Mart is moving so slowly (it may be that they are just having trouble growing themselves quickly in Brazil, but that hasn't stopped Wal-Mart before).

[Full disclosure: I am a CBD shareholder]
Where credit is due: the sales / stores figures came from O Globo 8 December 2003

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The week's news from Brazil

Last week the government agreed to extend the top tax rate at 27.5% for the next two years without concessions to higher-rate tax payers. The move extends an earlier temporary amendment, first approved under the previous government, which shows signs of becoming more or less permanent.

Otherwise it's been a fairly quiet week on the political front, with Lula and his entourage making a tour of Middle Eastern states, the first such tour by a Brazilian leader since the 1870s (in the imperial era). Lula visited Syria, where he called on Israel to give back the Golan Heights and for progress on Palestinian statehood, followed by a stop in Lebanon. His visit then took him to the United Arab Emirates, then Egypt. He will call in on Libya on his way back to Brazil later this week. The object of the visit has been to increase Brazil's prominence on the world stage and to re-order world economic relations - an ambitious agenda, which was at least supported by the signing of some new bilateral trade deals in the region.

Brazil's industrial output shrank in October following three months of growth. The slowdown is attributed to the economy catching up with itself, and further growth is expected in the months to come as interest rates and inflation are forecast to continue their downward trend. A survey of Brazilians shows that 44% reckon unemployment is worse under Lula, while 52% of Brazilians are not expecting to receive their cherished "13th salary" this month. In spite of the unemployment figures and the lack of money, 73% believe that 2004 will be better for them. A good sign.

In Sуo Paulo this week, neo-nazi skinheads forced two youths to jump from a moving train. The two youths were dressed in punk clothing and wore mohawks. One remains in a profound coma at risk of losing his life, while the other had his arm amputated above the elbow.

And in central Rio, the continuing dispute between police and camelЇs (street vendors, often selling pirated CDs and software) claimed its first life, as a policeman was shot in the face while attempting to scatter the vendors on the street. In spite of the campaign, which is supported by established merchants, it seems pretty much 'business-as-usual' on the streets, from my own observations.

The Staheli case is still in the news, although the lack of new information has slowed down the reportage. A new study of the weapon found in the house - actually a kind of war axe (with no blade) - showed no evidence of blood, leading police to think it was not used. This axe was a souvenir the 10-year-old boy had bought in Scotland during a family holiday. It is curious that he had showed the axe to young friends of the family who had been over the night before, and that it was found in the daughter's room despite the boy saying it had been secured in his wardrobe the night before. The state Secretary of Public Safety said he found it strange that there were no signs of entrance or exit from the house and yet the weapon had not been found. It may be that the axe belonged to a "crossed-axe" display and that another axe is missing. Police are interested in interviewing more of the children's friends, including their daughter's "boyfriend", now reported as being 14 and having been present in the house the night before. Today police will be conducting a reconstruction at the crime scene. The older children are still prohibited from leaving Brazil.

Futebol - the race for the bottom continues hotly contested. By losing while the others tied for last position at least managed a draw, Bahia claimed the lanterna from Ponte Preta (who drew 1-1 with Flamengo at a match I attended). There are still five teams in contention for relegation, including local side Fluminense, who lost 5-2 to champions Cruzeiro in Belo Horizonte, much to the joy of the handful of Flamengo supporters in attendance at the cavernous Maracanу. Next weekend's matches will be decisive.

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Monday, December 08, 2003

A good article from "The Economist", and some extra notes

This The Economist's article posted at Bonobo Land by Edward is a remarkably good one, but it can bear a few extra notes (an article, as a poem, is never finished, just abandoned):

As Edward noted, a decisive source of fiscal income has been the taxes on agricultural exports, chiefly among them soy products, of which China is a big consumer. Although income from internal demand is rising, next year's expected slowing down of Chinese growth will certainly impact negatively on Argentina, as it will impact all commodity exporters.

The Economist is right pointing out that a big factor in Argentina's rebound has been the output gap left by the collapse of a few years ago. It's one of my reasons to be somewhat bearish about Argentina in the middle term; the "1998's GDP in 2005" figure is sobering. That output gap, on the other hand, gives the Kirchner administration some breathing room to negotiate with creditors, as the country can still grow for a while without resorting to the capital markets.

Unemployment, too, is part of the output gap, but I should remark that, unlike India and China, Argentina is a country just coming out of a collapse, not rising from a previous lower level. A good part of Argentina's poor were middle class but a few year's ago, and are understandably trying to go back to their previous status. Societal expectations being different, the kind of low wage-driven capture of outsourcing possibilities might never be a workable option for the country on any big scale.

It's also important to note that even in the best of cases, the average Argentine is not overly warm any more to foreign capitals. The image of banks bailing out of the country as quickly as they could -in some cases deliberately hollowing out their Argentine branches- leaving middle-class and old people without their life savings, is not one that will pass away from the Argentine political psyche any time soon. So there's an image problem for capitals there, although not an insurmountable one.

Overall, The Economist's implicit assessment of President Kirchner as a ruthless and pragmatic political operator working out of a base of strong internal support seems correct. If he can manage the three outstanding threats to his political control -keeping the unemployed piqueteros in line, preventing the security issue from exploding, and maintaining his political alliance with former President and Buenos Aires' de facto caudillo Eduardo Duhalde- then he will have a chance to work on the most difficult of Argentina's problems: finding a path for growth that can work in the long term.

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Saturday, December 06, 2003

Presidente Lucio: Storm Clouds on the Horizon

Ecuador News Round-Up

The news from la mitad del mundo this week:

Things are still looking bleak for Ecuadorian president Lucio Gutierrez.

The nation's indigenous movement is stepping up pressure on Lucio; they say they helped get him elected and now he's turned his back on their cause. Reuters says Pachakutik, the political arm of the movement, is demanding his resignation.

In addition, Gutierrez, whose approval rating is about 15 percent, continues to be mired in a campaign contribution scandal. He's accused of accepting $30,000 from a suspected drug trafficker. Congress is investigating; if the charges turn out to be true, the Ecuadorian constitution requires that the president step down.

This excellent report from the Council on Hemispheric Affairs provides an in-depth look at Gutierrez's problems--and issues this ominous warning:

Gutiщrrez would be wise to draw a lesson from the recent events in Bolivia, where former President Sсnchez de Lozada was forced to resign in the face of mounting social and political unrest, as well as from the current plight of Peruvian president Alejandro Toledo, who could face the same sequence of events as his La Paz counterpart.

Finally, for more details on Lucio's woes, see this World Socialist article. But take it with a grain of salt, natch.


Prison Break in Quito!

Reuters tells us that "sixteen prisoners have escaped from an Ecuadorean jail by digging a tunnel so elaborate that it had electric lights. The prisoners escaped late on Tuesday from Quito's main Garcia Moreno prison in the heart of its colonial section by digging an illuminated tunnel that was nearly 85-feet (25-metres) long and nearly 2-1/2 feet (70 cm) high."

Electric lights! Necessity, as they say, is the mother of invention.

That's it for this week. I'm signing off from Cuenca.

Friday, December 05, 2003

Good news for everybody involved

The BBC reports that the nine Bangladeshi nationals that had been detained over suspicions of terrorism have been released, as no evidence of links to terrorist organizations or activities could be found.

I feel better, I bet they feel better, we all feel better. And Miguel (inside the comments to the previous post on the matter) was probably right - the argentine press was just taking its time checking stuff. Of course, they work under the pressure of having to show a finished information product, while we bloggers have the option of letting you "inside the kitchen", so to speak.

More bits of information about the suspected terrorists in Bolivia

As you can read in Bolivian authorities are currently interrogating 9 (not 16 or 20 as previously reported) Bangladeshi nationals, arrested after the French authorities warned of a possible plot to hijack a plane in the La Paz-Buenos Aires route and crash it against US targets in the Argentine capital. The article lists their names and ages, all of them between 24 and 30... Which means nothing by itself, but I would be less worried about this news item if they had been either younger or older, given the usual profiles of suicide hijackers. It's important to note, however, that there still hasn't been any confirmation of their planning any attack at all, so let's not get ourselves trigger-happy here.

An scary (if the suspicions are true) extra tidbit of information: They were going to board a plane in Dec 2nd, but the flight was cancelled by Aerolíneas Argentinas.

What's very curious is how little coverage this is having on the Argentine press, even the online one. I can think of two possible reasons:

* They (a collective, not very analytically sound "they") know or suspect that the story is for some reason bogus.

* They know or suspect that the story is true, and want to keep it toned down for a little (while the government figures out a position other than "boy, we got lucky!"?)

The problem with these ideas is that I can't very well imagine the Argentine press working as a coherent, well-disciplined whole, even in the relative honeymoon the Kirchner administration enjoys. Perhaps most editors just don't find the story very interesting...

No, that doesn't sound right either. If you have a better idea, or -better yet- have direct knowledge of what's going on at the moment inside Argentina's news organizations, clue me in, please.

More on the Staheli Murder(s)

Our referrer logs are full of Staheli-related hits, so I thought I'd publish a brief update.

Michele Staheli died yesterday after 4 days in critical condition. Her condition worsened during the week and she was said to have no neurological function and no recovery was expected. She suffered cardiac failure caused by the swelling in her brain. Her body has been sent for autopsy, and it is believed that the same weapon - heavy and sharp, was used on both Todd and Michele. Police are looking at a sample of her blood as well to see if the Stahelis might have been drugged.

The case continues to be front-page news here in Rio. Every day this week O Globo has given a full page of commentary to the latest developments. It's high-profile because a foreign executive was involved, and it's such a mysterious crime, with no obvious weapon, criminal or motive.

The crime left so many unanswered questions: Related to work? There were reports of heated telephone calls late last week. Threats relating to his role on the Brazil / Bolivia pipeline project? Related to a previous job? Professional hit? Then why were they left alive and agonising? And the assassin seemed to know the home intimately. They were killed in bed, and appeared to have done nothing to defend themselves. Drugged? Nothing was stolen. They had been in Rio only 3-1/2 months. They were devout Mormons. The security cameras were not working. The electric perimeter fence had been disabled. No fingerprints were found. No weapon. No one seen entering or leaving. A friend says that other ex-pats in the condominium are now planning to leave, seeking more secure arrangements.

The police have barred the older Staheli children from leaving the country. Police want to interview their 13-year-old daughter. Despite earlier reports, she is said to have a boyfriend, an American, "bem mais velho" (much older) who has been in Brazil for some years. A letter from the mother to the daughter discussing an irregular domestic matter was found in the house. A machete from a decorative display in the home is missing.

Police are still also interviewing others close to the case: the housekeeper, the driver, a man who did some work in the home and had access, the neighbours who responded to the children before the police were called - all are being asked to reproduce as many details of the situation as they can.

There's such a mix of outside and inside factors that it's hard to speculate on exactly what happened. Or rather, it's hard to stop speculating. And on top of it all, the language barrier is said to be a factor since the police involved do not speak any English. Two FBI agents have arrived in Rio and are assisting in the case.

Thursday, December 04, 2003

Terrorists heading towards Buenos Aires caught in La Paz?

Argentine TV news channel Cronica has just informed that around 20 "terrorists from Pakistan" have been arrested in La Paz, Bolivia. They were suspected, Cronica reports, to have intended to travel to Buenos Aires (as you might recall, there was a cautionary report about possible terrorist activities targeting Argentina).

Now, Cronica is... well, anybody who have ever watched it knows that it's not exactly self-restrained in its reports (picture big yellow or white letters over a red background with a soundtrack of -I swear- band music), and I haven't found any online mention of this. On the other hand, they are quite good at catching things early, and if this turns out to be the real thing, well, you read it online first in Southern Exposure!

BTW, I think this might have quite an effect on Argentine's foreign stance, interacting with the country's not very pro-US mood and deep feelings about the bombings a few years ago. We'll have to see how this develops.

Update on the Bolivian arrests

All the information available so far seems to come from release of ABI (the Bolivian government's press agency). It indicates that 16 Muslim people from Bangladesh -that's not the same country as Pakistan, Crónica!- have been arrested following a tip by French authorities that they could be implicated in a (presumptive) plan to hijack a plane in the La Paz-Santa Cruz-Buenos Aires route and direct it against US targets (most likely, I presume, in Buenos Aires). You can read about these reports in Reuters Alertnet (other articles, like Wired's, are just rehashings of Reuter's somewhat skeptical notice of the ABI press release).

As in most cases where (presumed) links to terrorism are present, there are more assumptions, maybes and coulds than hard data. We'll have to see how this develops.


As an aside unrelated to the story itself, let it be noted that, as far as I can tell, Southern Exposure put the story online well before Reuters did. That's (part of) what this "New Media" thing is about, not online newspapers with pop-up advertising...


Wednesday, December 03, 2003

La Comisiєn de la Verdad

A travщs de Caretas me he enterado que el Presidente Toledo finalmente se pronunciс sobre el informe de la Comisiєn de la Verdad acerca de la guerra desencadenada por Sendero Luminoso, el grupo terrorista que mсs muerte y dolor ocasionє al Peru entre los aёos 80's y 90's.

Yo no he leido a·n el informe del Presidente, que, al parecer, estuvo bien. Pero lo mсs sensato que he leido al respecto hasta el momento fue esta columna de Jaime Bedoya en la misma revista. Aquэ tienen sєlo el final:

El "conflicto armado interno" (CVR dixit), fue la obra de un enajenado que quiso llevar al genocidio una naciєn de identidad fracturada. Este valiente se rindiє ante un dictador amoral y su asesor delincuente a cambio de una torta, algunas noches con su mujer, y una canciєn de Frank Sinatra. En el camino murieron miles de peruanos que en su gran mayorэa no hablaba castellano y que al parecer el estado oficial consideraba prescindibles. La responsabilidad moral de estos peores aёos es directa y prсctica. Toca a todos y empieza con una simple pregunta: Y Que hacэa yo mientras corrэa tanta sangre ajena?

Cada quien responda como pueda.

PD= Me choca eso de calificar de "valiente" a ese sujeto, pero ni modo.

Brazilian Government First to Adopt New "CC-GPL"

Tuesday, December 2, 2003

The Brazilian Committee for the Implementation of Free Software will release code under the Free Software Foundation's General Public License, with Creative Commons providing new human- and machine-readable packaging

Rio de Janeiro, BRAZIL, and Tokyo, JAPAN - The government of Brazil today announced its adoption of the CC-GPL, an innovation on the Free Software Foundation's (FSF) General Public License, for the release of publicly funded software. Brazil is the first adopter of the new CC-GPL, which combines the proven utility and popularity of the GPL with Creative Commons' innovative user interface.

"Brazil's adoption of the CC-GPL is extremely significant," said Lawrence Lessig, Creative Commons' chairman and professor of law at Stanford University, from Tokyo, where Creative Commons is presenting its projects in Japan this week. "Brazil has recognized that code produced and funded by the people should be made available to the people, and it has pioneered a tool that provides the best of both the Free Software Foundation and Creative Commons."

"Brazilian government adoption of the GPL is an enormous step forward in the cause of software freedom," said Professor Eben Moglen of Columbia Law School and General Counsel of the Free Software Foundation. "We welcome the chance to work together with Creative Commons to make the GNU GPL even more attractive to governments, which are recognizing that the principle of 'share and share alike' is the most efficient, most equitable, and most pro-development licensing strategy for software the public pays to create or to acquire."

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Bolivian politics is usually rather odd. The last few months, of course, that's taken on greater proportions. A president was toppled, after all, in a populist coup. Now there's a popular joke about the new president, Carlos Mesa. Why is Mesa like Carnaval? Because you're not sure if he falls in February or March.

In two months, Mesa's gone from distant academic to populist to constitutional democrat. Immediately after taking power, Mesa decided to say "yes" to all the popular demands, but asked for time to consider all requests. At first this was troubling, he overly encouraged many of the populist dirigentes, who took full advantage of this to increase their pressure for such demands as 1,000 free tractors, shorter school years, indemnity for all who died in the guerra del gas, immediate land grants, nationalization of the oil & gas industry, legalization of coca, elimination of the tax code, etc.

Just over a week ago, Mesa decided to (using a Bolivian expression) "put his pants on" and start negotiating w/in the framework of the constitution. If Quispe wants to call his ministers "bitches" and walk out on meetings before they even begin, then he won't deal w/ Quispe anymore. Things like that.

Since Mesa took office, two police officers were killed and almost a dozen wounded by land mines in the Chapare (where Evo's followers grow coca). While Bolivia's human rights organizations never denounce these acts (which leads to their lack of credibility among much of the population), Mesa finally declared those acts (along w/ the torturing & killing of campesinos who choose not to grow coca) exactly what they are: terrorism. And so, Evo and the rest of the cocalero movement was put on notice that they can't pretend to negotiate w/ clean hands on the issue of narcotrafficking.

Meanwhile, in parliament, Evo's right-hand-man, Filemon Escobar (a MAS senator) attacked a fellow member of parliament. Escobar was upset that former cabinet members who were elected to parliament in 2002 were returning to their seats. A regular hothead (this isn't the first time he's done something like this) threw a glass at the head of Hugo Carvajal (an MNR senator). The broohaha made the front page of most papers today.

And at the main university (UMSA), the fight between sectarian groups ended yesterday w/ a Trostkyite victory after they seized the head of the student assembly (Diego Salazar), stripped him of his clothes, beat him, and forced him to read a confession of his misdeeds while blood poured from his head. Of course, Salazar today launched a formal suit for assault & battery against the Trostkyites. So the fight continues.

A group of campesinos from Warisata & Sorata have camped out in front of the Ministry of Justice, demanding that the families of those killed or wounded in the gunfight between soldiers & campesinos (who ambushed the army in October) receive indemnities, as Mesa promised. Problem: the government (which is broke) promised a sum that displeases the families. Of course, you can't put a price on a human life. But. The government can't even afford the Bs. 5,000 set aside. So. Who knows how long the campesinos will sit in front of the ministry.

At least a group of police are escorting them and keeping them from blocking the Prado. Good thing they're there, too. Because pace├▒os are so angry at protesters these days, that the poor campesinos have to hear constant whistles, taunts, and insults (such as "Why don't you ask Quispe for money?!") from passersby.

Hunger strikes "until the ultimate consequences" continue throughout the city. A recent editorial chided that this must be the most popular passtime in La Paz. If you're fired from your job, you can go on hunger strike to demand your job, the resignation of your boss, and "┬бel gas no se vende!"


Mexico II: The China Syndrome

Mexican President Vicente Fox completed the first half of his six-year term on Monday amid increasing criticism that he has failed to live up to promises made during his election campaign: especially those related to economic growth and reform. In the last two years Mexico's economy has been struggling to pick up steam following a recession in 2001. In 2002 GDP expanded a modest 0.9 percent. Right now Mexican growth is lagging far behind the breathtaking spped of the U.S. recovery. The Mexican central bank forecasts gross domestic product growth of 1.5 percent for 2003, way behind the 8.2% rate recorded by the United States in the third-quarter GDP. This has to be worrying for Mexico since about 90 percent of its exports go to the United States. Obviously high on the candidates list for culprits comes China, what else. One thing which is interesting to note is that some countries in LA - Brazil, Argentina - seem to be seeing the China factor as a plus, whilst others - Mexico - are definitely having a hard time of it.

Despite Mexico's proximity to the United States, local exporters say they will not reap the benefits of a U.S.-China spat over import quotas for Chinese bras, knit fabrics and robes. The United States last month slapped import quotas on the Chinese products but Mexico, home to 13,000 apparel manufacturers, has lost past trade advantages and will struggle to fill the gap left by fewer Chinese textiles.

"The Americans are going to come looking because we are the nearest neighbors but in the end it will come down to price and our prices, these days, are high," said Saleh Penhos Erfeli, director of lingerie makers Mas Lenceria. Penhos, who used to export 24,000 robes a week to the United States but since 2000 has shipped nothing abroad, said an overvalued peso currency and higher labor costs have eaten into Mexico's apparel export advantages. "The problem with Mexico is that it is no longer a third-world nation but it is not yet a first world nation and we are not competing on price any more," said Penhos. Mexico's clothing industry lapped up business with the United States and Canada immediately after the North American Free Trade Agreement took effect in 1994. A huge peso devaluation in 1994-95 also gave apparel exporters a big price advantage.

But by 2000, Mexico's advantages had disappeared. Other nations -- from Africa to the Andes -- ushered in mirror trade pacts with the world's No. 1 economy, leveling the playing field. The final nail in the coffin came when China joined the World Trade Organization in 2001.

Mexican exporters said other textile countries with cheaper labor costs than Mexico and similar trade pacts with the United States would also seek bra and robe export orders left open by the Chinese quota cap that is not yet in place. "The market that is going to open up in the United States, the slice of the pie that will emerge, is going to be sought by Mexicans, Guatemalans, Hondurans, Koreans, Taiwanese and by Vietnamese," said Raul Garcia, director of the National Apparel Chamber. "It's not going to be an automatic opportunity for Mexico's clothing industry." Noel Slater, export manager for underwear maker Van Dior which employs 1,000 people, said he no longer makes bras for export because of price restraints. Slater focuses foreign sales on less labor-intensive lingerie such as panties and boxers.

"Because of lower costs the Chinese can be more labor-intensive and they end up with marvelous bras," Slater said. Mexican textile workers are paid about $50 to $75 per week, a third more than their Chinese counterparts and also more than workers in other emerging textile nations such as Honduras and Vietnam. Mexico's labor costs rose 50 percent between 1999 and 2002 as the peso held rock solid against the dollar and inflation outpaced U.S. price hikes. Garcia of the National Apparel Chamber likened China's government-aided and undervalued-yuan economy to handing out subsidies for industry. "We are never going to be able to compete with this type of economy," Garcia said.
Source: Forbes

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