LATIN AMERICAN NEWSLETTERS
latin american regional report
Andean Group
January 2007, RA-07-01
ISSN 0143-5248
CONTENTS
ECUADOR
3
Correa to renegotiate all government debt
ECONOMIC OVERVIEW
VENEZUELA
4
21st Century Socialism
Chávez tightens his grip on opposition
media
ECONOMIC OVERVIEW
BOLIVIA
5
Face-off between Morales and
autonomists;
Relations with the US take a knock
ECONOMIC OVERVIEW
DRUGS
10
Ecuador-Colombia relations deteriorate
COLOMBIA
11
The swearing-in conundrum;
Mancuso trial staunches flow of bad
news;
Opponents defend Uribe
ECONOMIC OVERVIEW
PERU
14
García forges ahead with his own
War on Terror
ECONOMIC OVERVIEW
TELECOMMUNICATIONS
Internet usage in the Andes
16
Trouble brewing as Correa
prepares to take office
An energetic and charismatic campaigner, President-elect Rafael Correa
has not let the winning of the presidential election keep him from holding
rallies. On 3 January around 10,000 people gathered in the coastal city of
Guayaquil to listen to Correa advocate, once again, the idea of a
constituent assembly. "We will not allow the dictatorship of anyone," he
said. "Here we are a democracy, and this democracy is the property of 13
million Ecuadoreans, not just a few caudillos or political mafias. The
people voted for a constituent assembly […] and that is precisely what we
will do." The newly sworn in congress, however, appears to have a
different idea.
Even before congress took up office, on 5 January, the main parties were
working on ways to thwart Correa's proposal, and a seemingly petty spat
threatened to spoil the presidential inauguration. As the deputy with the
most votes from the most popular party, Anabella Azín, the wife of Alvaro
Noboa, should have become president of congress, but she refused to take
up the post, citing family commitments. The real reason, however, was to
avoid the perceived humiliation of being obliged to hand over the
presidential sash to Correa, the man who defeated her husband.
Traditionally, the head of the legislature hands over the sash to the head of
the executive, symbolising cooperation between the two branches of
government. This will not happen this time round, but President Alfredo
Palacio has sought to avoid a total breakdown in the handover of power by
offering to give Correa the sash himself. Jorge Cevallos Macías, a confidant
of Noboa and a deputy since 2003, is now president of congress, a role which
gives him the responsibility of setting the congressional agenda.
Over and over again, Correa has insisted that executive decree 002 (001
being the decree that establishes the president-elect as president) will be a
referendum to be put to the electorate on whether to hold a constituent
assembly. Most polls show three out of four Ecuadoreans to be favour of
such an assembly, but few are clear about what form it should take or what
its priorities should be. While the most radical of its supporters want an
assembly with full powers and automatic representation for the trade
unions, the more moderate want to limit its scope and prohibit quotas for
unions.
Among its few supporters in congress are representatives from the Red Etica
y Democrática (RED), the Movimiento Popular Democrática (MPD),
Pachakutik, the Partido Socialista and Izquierda Democrática, but together
these deputies make up under a third of the 100-member chamber. Correa's
own political organisation, Alianza PAÍS, did not field any congressional
Latin American Andean Group Report
1
January 2007, RA-07-01
candidates for the legislative election in a deliberate snub to an institution it
considered to have been devalued by corruption and incompetence. As
such Correa is totally committed to the realisation of a constituent assembly,
without which he will have very little power.
Febres Cordero
Congress's first sitting
was also notable for
the retirement of
León Febres
Cordero, former
president (19841988) and head of
the PSC. Febres
Cordero has been a
deputy for over 30
years and one of the
country's main
power-brokers. His
retirement, for health
reasons, means he
loses congressional
immunity and could
face charges for
human rights abuses
committed during his
period in office.
Congress limbers up
If the majority in congress has its way, the executive will be rendered
impotent. As the new 100-member congress was sworn in on 5 January, a
few dozen protesters gathered outside the parliament building to demand
the deputies support the constituent assembly, but the demonstrations were
modest. Four of the main parties in congress oppose Correa's proposal: the
Partido Renovador Institucional Acción Nacional (Prian) of defeated
presidential candidate Alvaro Noboa; the Partido Sociedad Patriótica (PSP)
of ousted president Lucio Gutiérrez; the Partido Social Cristiano (PSC) and
the Unión Demócrata Cristiana (UDC). Together, their members number 69.
Although these deputies acknowledge the desire of the electorate for
significant political reform, they are unwilling to relinquish their mandate,
as the constituent assembly would eventually demand. Instead, the parties
are eager to use their two-thirds majority in congress to break the
"constitutional padlock" which bars deputies from reforming the
constitution within a year of taking office. The parties wish to lift this
prohibition in order to devise their own reforms.
Various ways of breaking this "padlock" have been put forward, but the final
proposal would need the blessing of the executive, something Correa would
be unlikely to give. The president, meanwhile, has the power to hold a
referendum, but he cannot summon a constituent assembly without the
approval of congress. Correa is hoping that a massive show of support for
the proposal by the electorate will force congress to back down, but if
congress manages to force through constitutional changes quickly popular
demand for an assembly could be undermined, putting the pressure back
on Correa.
The president-elect has already expressed his concern that the majority in
congress is working on carving up key government posts between them.
The national judicial council (CNJ), which is obliged to present three
candidates for the jobs of attorney general and head of the national audit
office, has failed to do so; once this deadline has passed, the main parties in
congress are allowed to nominate a candidate for each of the jobs. The
PRIAN is attempting to secure itself control of the position of attorney
general, while the PSP wants control of the national audit office.
To ensure discipline within the parliamentary blocks, congress has granted
the power of expulsion from congress to the excuses and qualifications subcommittee also controlled by the main opposition parties. This subcommittee will have the power to expel deputies who deviate from the
party line. These deviants will be replaced by loyal party hacks. The move
comes in response to the decision by Ximena Bohórquez, a PSP deputy and
wife of Gutiérrez, to support Correa's proposal for a constituent assembly.
Irina Vargas, another PSP deputy, followed Bohórquez's lead. On 8 January
the two deputies were expelled from the party.
However, cracks have already started to emerge in the opposition majority.
On 9 January congress's sitting was suspended following an impasse over
who should be elected to head the supreme electoral court (TSE). The two
frontrunners for the position of head of the TSE are Andrés Luque, from the
PRIAN, and Pedro Valverde from the PSCT. The disagreement shows it will
be difficult for the four main parties which comprise that majority to work
together to formulate constitutional reform.
Latin American Andean Group Report
2
January 2007, RA-07-01
ECUADOR | POLITICS
Guest list
Nine heads of state
have now been
confirmed for
Correa's inauguration.
The presidents of
Venezuela, Chile,
Bolivia, Paraguay,
Brazil, Peru and
Argentina will all be in
attendance, as well
as the president of
Iran, Mahmoud
Ahmadineyad.
Compared to the
inauguration of Daniel
Ortega in Nicaragua,
the US is
underrepresented
with just the US trade
secretary, Carlos
Gutiérrez, and the
ambassador, Linda
Jewell, due to attend.
Correa to renegotiate all government debt
On 15 December President-elect Rafael Correa said he would renegotiate
all types of government debt: commercial, multilateral and bilateral.
Although he had campaigned on the slogan "life before debt", investors
had become increasingly confident that Correa did not mean what he said.
Given the high price of oil, exports of which account for 35% of the
government's budget, and the fact that it only pays 3% of its GDP in
interest payments, analysts were confident he would back down. Now,
however, it is almost certain Correa will renegotiate the debt after he takes
office on 15 January.
"With this level of debt we cannot move the country forward," Correa said
at a news conference in Buenos Aires a day after he met Argentine President
Néstor Kirchner, who presided over the largest debt-restructuring in history.
"A country that spends twice as much on foreign debt as it does on
education cannot develop." The president-elect has yet to elaborate on the
details, saying, "the best strategy is not to give a strategy".
New-look cabinet
In keeping with his revolutionary rhetoric, Correa has made some
changes to the structure of his cabinet. Foreign affairs and foreign trade
will be merged; the ministry of trade, industry, integration and fishing will
be dismantled, with fishing joining agriculture and industry becoming a
stand-alone ministry. The president-elect also intends to make a
telecommunications ministry in order to break up the "mafias" which
currently control the sector.
ECONOMIC OVERVIEW: ECUADOR
Although interest rates are still higher than in the US, despite the
dollarisation of the economy in 2000, there are signs that people are
recovering their confidence in the financial sector. Bank credits which
had fallen to US$1.5bn in 2000 are now up to US$6.4bn. Before the
banking crisis of 1999, bank credit stood at around US$5bn. Bank
deposits have also surged from US$2.5bn in 2000 to around US$7.5bn
at the end of 2006.
Another development is that more companies are now offering credit.
Stores offer their own credit cards, which are not regulated by the
Superintendencia de Bancos. What concerns the central bank and some
economists is that borrowings from store cards are not included in debt
figures and are not tracked by credit scoring bureaux. Overall, about 70%
of consumer credit, which also includes car loans and credit for white
goods, are incurred by credit cards.
One of the major card companies, Pacificard, has seen its portfolio
jump from US$22m in 2000 to around US$315m at the end of 2006.
Pacificard's managers claim that the average Ecuadorean has debts that
are between 10 and 12 times his earnings: in the US the average multiple
36 times income.
The rub for borrowers is that although the economy is dollarised credit
is still expensive. At the end of 2006 interest rates rose from 12.9% to
13.8%. In January rates rose again to 14.8%. This is the highest they
have been since 2004. Prime lending rates in the US are around half this
level. The central bank said that rates had risen because of the uncertain
political outlook.
Inflation: The official inflation rate in 2006 was 2.87% the Instituto
Nacional de Estadísticas y Censos (INEC) reported. In December prices
fell by 0.03%. In 2005 the inflation rate had been 4.4%.
Latin American Andean Group Report
3
January 2007, RA-07-01
VENEZUELA | POLITICS
21st Century Socialism
With an oath adapted from Simón Bolívar himself, President Hugo
Chávez's 27 cabinet ministers were sworn in on 8 January promising “not
to rest arms or soul in the construction of a Venezuelan path towards
socialism”. Socialism was the key word during the ceremony, which
preceded by two days Chávez's own inauguration and finally set out, in a
clearer fashion, some of the president's plans for his next period in office.
In the end, Chávez's definition of "21st Century Socialism" was far more
radical than most analysts expected.
Brownfield meets
Maduro
On 14 December the
US ambassador,
William Brownfield,
met the Venezuelan
foreign minister,
Nicolás Maduro, in
the highest-level
meeting between the
two countries for
several years.
Maduro received the
ambassador for an
hour and fifteen
minutes in his office
in Caracas.
Brownfield described
the meeting as “very
positive”, while
Maduro called it
“frank, but cordial”.
New proposals
Among the most noteworthy proposals were the plans to scrap central bank
autonomy; nationalise CANTV (a telecoms company) and the electricity
industry; change business laws; cancel the broadcasting licence of
Venezuela's largest private TV network RCTV and increase the state's share
of the public-private joint ventures in the upgrading of heavy crude in the
Orinoco tar belt. Chávez described the period 1999-2007 as a "transition
period" which will now make way for a new era, "the National Simón
Bolívar Project of 2007-2021", 2021 being the 200th anniversary of
Venezuelan independence.
In his televised address, Chávez indicated that the key to pushing through
these reforms would be the enabling law (ley habilitante), which he referred
to as the "mother law" of the project. This law would allow the president to
pass laws on specified issues as decrees for a period of one year. Although
this law has been used in Venezuela in the past, its use now seems
redundant given that the legislature is completely loyal to the executive. The
enabling law will allow the swift nationalisation of key industries, such as
CANTV and the electricity companies. "In all those strategic sectors, such as
electric power, everything that was privatised will be nationalised," he said.
"We will recover the strategic means of production."
CANTV, at present the only company operating a landline system in
Venezuela, was privatised in 1991. It is part owned by Verizon
Communication Inc (28.5%), Telefónica (6.9%), the state (6.5%) and its
employees (11.7%). After the announcement, its shares on the New York
stock market plunged 14.2% before trading was halted. In a statement
released by the company, it said it was aware of the president's comments
but that no member of the government had yet spoken to the company.
Most electricity companies in the country are state-owned, but Electricidad
de Caracas, which is owned by US firm AES, will now be nationalised. No
details of either deal have yet been announced. Control of the country's
main telecommunications and electricity provider will provide the
government with a significant source of patronage.
Oil
In his speech Chávez also attacked the role of foreign oil companies in the
Orinoco heavy oil industry. "International companies have control of the
upgrading of heavy crude. No! This should pass become property of the
state," he said. The energy ministry, led by Rafael Ramírez, also president of
state-owned oil company Pdvsa, released a statement saying the four joint
ventures in the region may yet be nationalised. This could be a scare tactic
designed to hurry the companies, including Exxon Mobil, Chevron, Total,
BP, ConocoPhillips and Statoil, into allowing Pdvsa to take a majority share
of the joint ventures. Already those companies operating in the easier-toprocess fields away from the Orinoco have been forced into joint contracts
with Pdvsa in which they are the minority stakeholders.
Latin American Andean Group Report
4
January 2007, RA-07-01
Constitutional reform was another key element of Chávez's speech.
Although he did not specify many of the changes he envisaged (before the
election he had talked about removing the limit on presidential re-election),
he said this would require the convening of a constituent assembly. One
constitutional change he did mention was the abolition of the independence
of the central bank, as enshrined in the 1999 constitution he helped shape.
Prison riot
On 2 January 16
prisoners were killed
and 13 injured during
a clash between rival
gangs in a jail in
Barquisimeto, some
360km west of
Caracas. Violence is
common in
Venezuela's
overcrowded and
understaffed prisons,
where about 20,000
inmates live in 30
facilities built to hold
15,000. Prisoners
often bribe guards to
obtain weapons. At
least 378 inmates
were killed and 883
more were injured
from January through
November in prison
violence last year,
according to the
watchdog group
Venezuelan Prisons
Observatory. Some
411 inmates were
killed and 737 more
were injured in 2005.
The majority of those
held in prison are still
awaiting trial.
Latin American Andean Group Report
Other, more vague proposals for the "National Símon Bolívar Project"
included the launch of a new drive for "Bolivarian popular education" which
would "deepen the new values and demolish the old values of individualism,
capitalism and egotism". Adán Chávez, the president's older brother, who
was ambassador to Cuba, has now taken over the education ministry.
Chávez also spoke about the need to extend communal power, devolving
more authority to the recently created communal councils of 200 to 400
families in order to "dismantle the bourgeois state". Chávez also described
himself as a "Trotskyite", presumably meaning that not only does he envisage
the implementation of a state of "permanent revolution" but also the spread
of such a form of statehood across the continent, if not further.
The cabinet
When he took office for the first time, Chávez's cabinet consisted of 12 posts;
on 8 January the president swore in 27, with 15 new members and 12
continuing. Among the new ministers is Rodrigo Cabezas, a trained economist,
who will take over at the finance ministry. As head of the financial committee
of the national assembly, Cabezas developed the concept of excess
international reserves, but he combined that with the idea that the
government should increase spending constantly in order to make the country
grow. The implementation of this combination drove inflation up sharply in
2006 with the CPI closing at 17% and food inflation at 26%. It will take a
delicate balancing act for Cabezas to get the country out of this trap without a
major devaluation. Since taking office, Cabezas has announced his plans to cap
private companies' earnings to increase health and education budgets.
Another big change was in the position of vice-president. José Vicente
Rangel, 77, one of the president's oldest and closest collaborators, who has
served as both a foreign and defence minister under Chávez, is to stand
down to make way for Jorge Rodríguez, 42. Rangel was seen as one of the
more moderate members of Chávez's inner circle, having condemned the
radicals' attempts to expropriate private property in mid-2006. Rodríguez, a
psychologist by training, whose father founded the Liga Socialista and was
killed by the security services in 1976, was head of the national electoral
council (CNE) from 2003. The opposition repeatedly accused the CNE of
institutional bias in favour of the government, culminating eventually in the
opposition's boycott of the legislative elections in 2005.
Interior minister Jesse Chacón has also been replaced by Pedro Carreño, just
days after a major prison riot left 16 dead. Carreño has a reputation for
eccentric paranoia: he has claimed knowledge of numerous and
occasionally far-fetched destabilisation plots, such as the CIA spying on
Venezuelans through their Direct TV set top boxes. Chacón will now move
to the ministry of telecommunications, a new post, which will presumably
handle the nationalisation of CANTV.
Chávez has also appointed Venezuela's first ever minister from the
Communist party. David Velásquez will be the new minister for popular
participation and will be entrusted with the implementation of the new
communal council law, which he himself wrote. Rafael Ramírez, the
controversial energy minister who was caught on camera before the
elections threatening workers who did not vote for Chávez at the state oil
firm Pdvsa, was confirmed in his post.
5
January 2007, RA-07-01
VENEZUELA | POLITICS
National Terrestrial
Channels
Radio Caracas
Televisión (RCTV) Privately owned
Televen Privately owned
Venevisión Privately owned
Venezolana de
Televisión (VTV) State owned
Visión Venezuela
Televisión (ViVe) State owned
Each state also has a
number of local
channels. Caracas
Metropolitan region
has the most with 12.
All TV and radio
airwaves are obliged
to suspend
programming to
broadcast cadena,
government
information. Under
Chávez this could
range from an
update about an
important public
works programme to
an announcement to
celebrate the
president's birthday.
Chávez tightens his grip on opposition media
"The closing of a mass communications outlet is a rare step in the history
of our hemisphere and has no precedent in the recent decades of
democracy." This was the response of José Miguel Insulza, the secretarygeneral of the Organization of American States (OAS), to the
announcement by President Hugo Chávez that he would not renew the
broadcasting licence of Radio Caracas Televisión (RCTV), the country's
oldest commercial TV station, when it expires in March. For his pains,
Chávez called him a "pendejo" (fool) and demanded his resignation.
Since the introduction of the law of social responsibility in radio and
television in January 2003, the government has succeeded in gradually
eviscerating the opposition broadcast media. Ostensibly designed to protect
children from seeing harmful material, the law made it easier for journalists
and media owners to be sued. After the recall referendum in 2004 two
opposition channels, Venevision and Televen, toned down their coverage
for fear of government reprisals, as did the vast majority of local radio and
TV stations who lacked the financial clout to risk being taken to court.
RCTV, along with Globovisión, have been the most vehement in their
criticism of the government and have done the least to tone down their
antipathy. During the failed coup in 2002, both channels reported the ouster
of Chávez immediately, but switched to showing cartoons and old
Hollywood films as street protests swept him back into office. It is for this
offence that Chávez, newly empowered by 63% of the electorate in
December, branded RCTV as a coup-supporting, destabilising force which
had lost its right to broadcast due to its long record of encouraging the
overthrow of the government. The channel's bandwidth could now be
handed over to community-based media; a public-private cooperative or a
state-controlled entertainment channel.
ECONOMIC OVERVIEW: VENEZUELA
The economy grew by 10.3% in 2006, according to Gaston Parra, the
president of the central. He did not give a figure for fourth-quarter
growth. In the three previous quarters year-on-year growth had been
10.1% (1Q 2006); and then 10.2% in each of the subsequent quarters.
The Venezuelan economy has grown by at least 10% in 10 of the past
11 quarters.
The economy is being driven by an increase in domestic demand. This,
in turn, is powered by the 51% increase in government spending in the
first nine months of 2006. The fastest-growing sectors of the economy
are finance and insurance (up 37%); construction (up 30%) and
manufacturing (up 10%).
Oil exports rose by 20% to US$57.8bn, Parra said. Oil exports account
for 90% of the country's total exports. Imports were up by 32% at
US$31.3bn.
According to the central bank, the government's current account
surplus is 16.3% of GDP.
For 2007, the central bank is forecasting growth of between 5% and 6%
and inflation of between 10% and 12%.
If the government is to lower inflation it will have to do more to control
the money supply. This rose by 84% in 2006.
Inflation: In 2006 inflation came to 14.4%, the same rate as in 2005. In
December the rate was 1.8%, up on November's 1.3%. The lowest rate
in recent months was in October, when the rate was 0.7%.
Latin American Andean Group Report
6
January 2007, RA-07-01
BOLIVIA | POLITICS
New consul for
Chile
President Evo
Morales appointed a
new consul to Chile
on 28 December.
Roberto Finot Pabón,
an expert in
integration, replaces
José Pinelo, who was
removed from the
post without
explanation in
November. Morales
underlined his
determination to
establish diplomatic
relations with Chile,
severed in 1978. He
said that the policy of
"Gas for Sea" was a
political mistake as,
"We should share,
thinking of our
peoples". Morales
also hailed relations
with President
Michelle Bachelet.
"She comes from the
most marginalised
sector, women; I
come from the most
discriminated,
indigenous people.
This unites us…"
Face-off between Morales and autonomists
The confrontation between President Evo Morales and the autonomists in
the east of the country reached a new level in mid December when the
Media Luna departments of Santa Cruz, Beni, Pando and Tarija decided to
stage large cabildos, or rallies, to protest against the "totalitarian"
behaviour of the Morales administration. In the aftermath of the rallies,
which saw the opposition forge a pro-autonomy front, Junta Autonómica
Democrática de Bolivia, to challenge the government, Morales simply
powered on with his mission to reform Bolivia for "the poor majority" in
thrall to "the rich minority".
The biggest rally was held in Santa Cruz on 15 December. The departmental
prefect (governor), Rubén Costas, posed two principal questions to the
crowd, which organisers claim numbered nearly one million people.
Question one: "If the constituent assembly approves a constitution that
contravenes the two-thirds rule or the binding referendum on departmental
autonomy, would you reject (it)?" Question two: "In this eventuality would
you order the prefecture of Santa Cruz to set up an autonomous
departmental authority […]?" The crowd, many of whom were sporting Tshirts inscribed with the slogan "Two-thirds" in reference to the impasse over
voting procedures in the constituent assembly [RA-12-06], responded to
both questions with a resounding "Yes". The rallies in Beni, Pando and Tarija
unfolded in a similar manner.
Significantly, while the prefects demanded that the government recognise
the autonomy of their four departments they stopped well short of
threatening the de facto autonomy or even full independence for which the
more radical fringe, among them some leaders of the powerful Comités
Cívicos, had been calling. It is worth pointing out that only a week earlier, in
a joint manifesto, the leaders of the four departmental Comités Cívicos
stated that "the two-thirds are no longer sufficient to achieve the peace and
unity of the fatherland" - in other words, that their demand for self-rule
trumped the constituent assembly.
Morales, in turn, showed restraint by deploying only a token military force
of some 280 soldiers to the east and allowing the rallies to go ahead,
although there is some speculation that the government helped mobilise
supporters to erect roadblocks to try and preclude widespread attendance.
The opposition in the east is constructing its resistance to the government
around three issues: the two-thirds debate; land reform; and the movement
for greater autonomy. It is also calling for shared administration of natural
resources (gas), land and taxes between the central government and
departmental and municipal authorities.
Evaluating 2006, looking forward to 2007
On 4 and 5 January the government and the ruling Movimiento al
Socialismo (MAS) carried out an evaluation of the first year in power and
discussed political strategy for 2007. The meeting, in Cochabamba, was
attended by 300 people, including ministers, constituent assembly members,
trade union leaders, indigenous people and campesinos. It was presided
over by Morales and Vice-President Alvaro García Linera, who in his
inaugural speech spoke of the need to deepen the "cultural democratic
revolution" in Bolivia, a process he said would last for years until "the
neoliberal state apparatus is dismantled" (see sidebar).
These were not exactly the words of compromise and it seems a safe bet that
Bolivia's remarkable ability to haul itself back from the edge of the abyss
Latin American Andean Group Report
7
January 2007, RA-07-01
(within the democratic norms and structures) will be tested to the full in
2007 as the government and the opposition become increasingly polarised.
Cochabamba
meeting
President Evo
Morales claimed on 4
January that the
opposition is
determined that the
constituent assembly
should fail whatever it
takes. Morales was
presenting a kind of
state-of-the-nation
address at a meeting
in Cochabamba. He
said that in 2006 the
constituent assembly
members for the
ruling Movimiento al
Socialismo (MAS) had
made some mistakes
due to a lack of
coordination and
information; slip ups,
he said, which had
enabled the
opposition to
misinform the public.
Evidence of this could be found out on the streets of Cochabamba while the
meeting was taking place on 4 January. Supporters of Morales, primarily
coca growers from Chapare in the department of Cochabamba, staged a
demonstration calling for the resignation of the departmental prefect,
Manfred Reyes Villa, of the Nueva Fuerza Republicana. Reyes Villa supports
the autonomists in the east but in a referendum on autonomy, held on 2 July
2006, 63% voted for the MAS position of no increased autonomy.
Judicial appointments excite controversy
Jorge Quiroga, the leader of the main opposition, Podemos, is becoming
increasingly vocal in denouncing the government's "anti-democratic
behaviour". He might have had a point on 30 December when Morales
appointed four (out of 10) supreme court justices by decree to fill vacancies.
Morales said he had been compelled to issue the decree because congress
failed to reach a consensus over the appointments. The new judges will hold
their posts in an interim capacity until they are confirmed by congress.
Quiroga reacted by accusing the government of "violating laws and
trampling on our institutions", adding that "it is hard to understand why a
government elected democratically is behaving like this." He said Morales
was in breach of the doctrine of separation of powers. "The head of state is
not entitled to appoint legislators to congress, so he cannot appoint judges
either," Quiroga said. He insisted the appointments should have been made
by congress and endorsed by a two-thirds majority in accordance with the
constitution. Podemos plans to appeal the appointments before the
constitutional tribunal.
ECONOMIC OVERVIEW: BOLIVIA
The Instituto Boliviano de Comercio Exterior (IBCE) issued a warning at
the beginning of 2007 that commodity process would fall this year.
Although the official figure for exports in 2006 has yet to be published,
the government is claiming that exports in 2006 came to over US$4bn,
thanks mainly to a surge in gas exports. Although exports in 2006 set a
new record, the IBCE sniffed that the result was disappointing compared
with Peru or Chile where exports in 2006 came to, respectively,
US$23bn and US$60bn. The IBCE points out that 120,000 Bolivians will
join the labour market this year. In 2006 it claimed that 250,000 Bolivians
left the country in an effort to find work.
GDP growth: The government forecast that GDP growth in 2006 was
4.1% and that in 2007 it will be 5%. It is also forecasting that inflation will
fall from almost 5% in 2006 to 3.74% in 2007. The minimum wage went
up from US$62 a month to US$65 at the beginning of 2007.
Inflation: In December the rate was 0.75% which brought the rate for
2006 to 4.95%, the Instituto Nacional de Estadística (INE) reported. The
December rate was identical to the November rate and the overall rate for
2006 was fractionally higher than the 4.91% recorded in 2005. The main
reason for the comparatively high inflation in December was a 0.69%
rise in the food and drink sub-index; a 2.4% increase in the transport and
communications sub-index. These two factors increased the overall rate
by 0.32% and 0.29% respectively. Santa Cruz had the highest inflation in
the country in December: 1.05%. El Alto, the sprawl around La Paz, had
the lowest inflation in December: 0.34%.
Latin American Andean Group Report
8
January 2007, RA-07-01
BOLIVIA | POLITICS & DIPLOMACY
Relations with US take a knock
Evo Pueblo
Filming for a new film
about the life of
President Evo
Morales, entitled "Evo
Pueblo", is due to
conclude on 20
January in the
Chapare where
Morales shot to
prominence as a
significant leader of
the coca growers.
The scriptwriter
narrates the life story
of Morales from his
birth in 1959 in the
small Andean village
of Orinoca; his youth
as a shepherd, baker
and bricklayer; his
trumpet playing
during military
service; his love of
football; his political
awakening as the
leader of the coca
growers in the
Chapare, culminating
in his ascent to the
presidency. The
British film industry
supplied some
financial support.
A six-member bipartisan delegation from the US Senate, led by the new
Senate majority leader Harry Reid, visited Bolivia at the end of December
to get to "understand" the country better. The suggestion that the visit
might herald an improvement in relations between Bolivia and the US was
undermined by two subsequent actions by the government of President
Evo Morales: the approval of a decree requiring US citizens to obtain visas
in order to visit Bolivia; and an uncompromising message from Morales
that Bolivia would "industrialise" coca with or without the support of the
US.
Morales explained that the introduction of the new visa scheme was no
more than a reciprocal measure as Bolivian citizens are currently required to
obtain visas to enter the US. They have to undergo a protracted application
process: pay US$110 (twice the monthly minimum wage); organise an
interview at the US embassy in La Paz; and then run the risk of being denied
a visa, with no refund of the application fee.
Concern in the tourism industry
Tourism industry officials are concerned that the decision will have a
negative impact on the sector, particularly among US tourists who book a
tour to Peru and Bolivia who might chose to drop the Bolivian leg of the tour
because of the visa rigmarole. Some 40,000 tourists from the US visit Bolivia
every year, accounting for 10% of visitors to the country, second only to
those from Peru.
US citizens will now have to provide documentation at the Bolivian embassy
in Washington to obtain a visa, although the fee for the administration has
not yet been revealed. Jorge Quiroga, the leader of the main opposition,
Podemos, said (with tongue firmly in cheek) that if the Morales government
believed in the application of the rule of international reciprocity perhaps it
should consider requiring Venezuelans to acquire visas in order to visit
Bolivia. Bolivians cannot enter Venezuela without a visa.
First coca-processing plant
Morales will have caused further disquiet in Washington by presiding over a
ceremony marking the start of construction of Bolivia's first coca processing
plant in Lauka Ñ, in Cochabamba, on 30 December. "We do not have to seek
the permission of the US to industrialise coca leaf," Morales said. "This is our
sovereign right," he added. He said that Bolivia could only emerge from
poverty by harnessing its natural resources. The processing plant will mix
coca leaf with anise and camomile to make coca mate and trimate.
Morales has spoken in the past about commercialising a variety of products
made out of coca. During a visit to Havana on 29 April, Morales met
Venezuela's President Hugo Chávez and Cuba's President Fidel Castro to
discuss trade within the Tratado de Comercio de los Pueblos (the Peoples'
Trade Agreement, TCP), a Bolivian proposal to put some meat on the bones
of the Alternativa Bolivariana para las Américas (Alba), set up by Chávez as
an alternative to the Free Trade Area of the Americas (FTAA). The three
countries also agreed to sign a deal to promote alternative coca products
(such as tea and toothpaste) in Cuba and Venezuela.
The concern in the US is that legal outlets for coca leaf could be used to
provide cover for an increased illegal production of coca destined for the
illicit drug market.
Latin American Andean Group Report
9
January 2007, RA-07-01
DRUGS | COCA-SPRAYING
Ecuador-Colombia relations deteriorate
Cenaf
On 14 December
Palacio visited the
border area to
inaugurate a new
border control centre
(Cenaf) in the village
of General Farfán,
close to the Río San
Miguel in the
Amazonian province
of Sucumbíos which
marks the border
between the two
countries. Cenaf will
host various
branches of
government
including
departments from
the ministries of
foreign affairs,
tourism, defence,
public works and
health, as well as
police, migration,
transit and customs.
The centre is meant
to increase the
state's presence in
an area rife with
Colombian guerrillas
and refugees and
which is known to be
a transit point for
drug trafficking.
Ten months after suspending the aerial spraying of suspected coca
plantations along a 10km strip either side of the Ecuador-Colombia border,
President Alvaro Uribe has decided to restart the programme. After
visiting the area in southern Putumayo with his defence minister, Juan
Manuel Santos, Uribe claimed the Fuerzas Armadas Revolucionarias de
Colombia (Farc) had replanted up to 10,000 hectares of coca during the
suspension of spraying. Ecuador reacted furiously: both outgoing
President Alfredo Palacio and President-elect Rafael Correa have
campaigned vigorously to seek international condemnation of the
programme.
Since taking office in April 2005, Palacio has worked hard to end Colombia's
use of herbicide in the region. In a speech to the United Nations in 2005 he
drew the attention of the international community to the damage caused by
the chemicals used, and in February 2006 Colombia agreed to halt the
spraying to allow an independent study to investigate its effects. The
Colombian government claims its own studies have demonstrated that the
herbicide used (assumed to be glysophate) is innocuous and that due to the
weight of the liquid it cannot be dispersed far into Ecuadorean territory.
Palacio, a medical doctor by profession, visited the border area after
Colombia announced the resumption of spraying, treating a number of
children who were suffering from respiratory problems apparently as a
result of the fumigations. Other consequences of the spraying include skin
diseases and eye complaints as well as the killing of cash crops and livestock.
Palacio also recalled the Ecuadorean ambassador to Colombia and
instructed the foreign minister, Francisco Carrión, to write to the
Organisation of American States (OAS) to ask the regional body to intervene
to prevent the continuation of "chemical warfare".
Uribe v. Correa
The president-elect was also uncompromising in his criticism of the Colombian
decision. He called the move a "hostile act" and cancelled a planned trip to
Bogotá on 22 December. A Colombian police chief then claimed there were coca
plantations inside Ecuador too; an assertion flatly denied by Correa and
seemingly undermined by the Colombian press's own investigations. Relations
between the Colombian president and Correa have started badly; during his
election campaign Correa attracted Uribe's ire by refusing, in accordance with
longstanding Ecuadorean foreign policy, to label the Farc a "terrorist" group.
One curious factor in the resumption of the spraying is the timing: it is due
to be completed before Correa's inauguration on 15 January and it appears
Colombia may be attempting to take advantage of Palacio's lame-duck status
as president to tackle the job before the new, and more democratically
legitimate, executive takes over. Another factor may be fear that the funding
for the programme could soon run out, following the Democrat victory in
the US mid-term elections. A six-senator delegation to the Andean region
over the new year did not stop in Colombia, and the concern for the Uribe
administration is that the Democrats are far more sceptical about the value
of the US-funded programme.
q On 28 December, the US law firm Conrad & Scherer filed a suit in a
Florida law court against the US firm Dyncorp on behalf of the Ecuadorean
province of Sucumbíos for the human, environmental and economic
damage caused by the fumigations. Dyncorp is a US firm subcontracted by
the Colombian government to carry out the spraying.
Latin American Andean Group Report
10
January 2007, RA-07-01
COLOMBIA | DIPLOMACY
The swearing-in conundrum
There were indications in 2006 that Colombia's President Alvaro Uribe
intends to make more of an effort to strengthen Colombia's relations
within Latin America. A busy diplomatic agenda at the start of January
might cast light on where his focus will lie in 2007.
Oil ambitions
Both Colombia and
Nicaragua have been
hoping to find
offshore oil deposits
but so far Nicaragua
has held back from
inviting bids for the
exploration of
disputed areas in the
Caribbean. In April
2006 Nicaragua's
energy institute
announced that it
was about to sign
new exploration
contracts with two
US firms (Infinity Inc,
of Kansas, and MKJ
Exploraciones
Internacionales, of
Louisiana) which took
part in the first oil
tendering round, held
in 2005.
Inauguration time
There are three inaugurations within a week in the first half of January.
President Hugo Chávez of Venezuela and President Daniel Ortega of
Nicaragua were sworn in on 10 January, while Rafael Correa of Ecuador is
due to be inaugurated on 15 January. Colombia's relations with all three
countries are always fragile, as demonstrated by diplomatic spats with the trio
over the course of the last year. Uribe decided to attend Ortega's inauguration
rather than that of Chávez, where Colombia will be represented by its
ambassador to Caracas. The snub is made less dramatic by the fact that the
two presidents are being sworn in on the same day and that Chávez's main
allies in the region - Evo Morales of Bolivia and Correa himself - are also just
attending the Ortega inauguration. However, it should be noted that Chávez
will be flying to Nicaragua after he is sworn in for his third term.
Uribe chose to make a fresh start with Nicaragua under Ortega. Colombia's
relations with Nicaragua this year risk being dominated by the disputed
ownership of the island of San Andrés, a case which will go the International
Court at The Hague in July 2007. Nicaragua also wants to drill for oil in
waters claimed by Colombia. Uribe's decision to attend Ortega's
inauguration is a goodwill gesture which suggests Colombia doesn't want its
relationship with his new government to be defined by their legal wrangling.
It is not yet clear whether Uribe will attend Correa's swearing-in. Colombia's
relationship with Ecuador is being tested by Uribe's decision in December to
renew fumigations of coca crops near the Ecuadorean border, an issue
which strained relations with both Ecuador's outgoing president, Alfredo
Palacio, and Correa himself. (See page 10) Colombia's ambassador to
Ecuador, Carlos Holguín, is convinced Uribe will attend, but the president
himself is remaining tight-lipped on the issue. It will be difficult for Uribe to
visit while the two governments trade accusations, especially since the alleged
presence of leftwing rebels on Ecuadorean soil exacerbates any border row.
However, a hostile administration in Quito is counter-productive as far as
Uribe is concerned, precisely because it views cooperation on the border as
crucial to the success of his campaigns against the cocaine trade and the
Fuerzas Armadas Revolucionarias de Colombia.
Foreign minister in Europe
With the Democrats' re-emergence casting a large shadow over
Colombia's relations with the US, the European Union's (EU) importance
as a possible source of support for President Uribe's government has
increased. Foreign Minister María Consuelo Araújo travelled to the EU in
January to test the water.
Araújo arrived in Portugal on 8 January at the start of a two-stage visit
which also took her to Spain, the UK, Germany, and Belgium. The foreign
minister's agenda included giving impetus to the free-trade talks between
the EU and the Andean Community, Europe's growing cocaine
consumption, and shoring up European support for a possible prisoner
swap with the Farc. Most importantly, however, Araújo will be looking for
European assistance for the paramilitary process. She might not be the
ideal person for the job: her brother stands accused of collaborating with
the Autodefensas Unidas de Colombia.
Latin American Andean Group Report
11
January 2007, RA-07-01
COLOMBIA | POLITICS AND JUSTICE
Mancuso trial staunches flow of bad news
It was meant to be the defining moment of the paramilitary peace process
to date, but the testimony by the Autodefensas Unidas de Colombia's
(AUC) former military chief, Salvatore Mancuso, has so far been an
underwhelming event. As far as the government is concerned, this is just
as well.
Paramilitary
numbers
The prosecutor's
office announced at
the start of January
that it is investigating
100,000 cases
against former
paramilitaries as a
result of accusations
by 25,000 of their
victims. Meanwhile,
there are thought to
be somewhere
between 30 and 60
new criminal groups
made up of
demobilised
paramilitaries.
Mancuso in the dock
Mancuso started his testimony to a court in Medellín on 19 December, as
stipulated by the peace and justice legislation on which the paramilitary
peace is founded. At the time his hearing started, almost daily revelations
regarding the extent to which the AUC had penetrated Colombia's
institutions were serving to undermine virtually every aspect of society.
The expectation was that Mancuso, who once claimed that paramilitaries
control a third of congress, would come to the dock naming names and
outing all those in senior positions within the establishment who have links
to the AUC. Those who weren't awaiting the scandal were instead hoping
for some explanation regarding the paramilitaries' appalling crimes: some
2,000 people have accused Mancuso alone of crimes against humanity
during his 20 years or so serving as a paramilitary.
Both groups have so far been disappointed by Mancuso's testimony. He has
spent most of his time justifying the establishment of the AUC in the 1980s as
a response to the government's failure to protect landowners from leftwing
guerrillas such as the Fuerzas Armadas Revolucionarias de Colombia.
Mancuso's revelations that he enjoyed the support from the military were
hardly news, and he denied knowing about the AUC's political connections.
These, he said, were the purview of Carlos Castaño, the paramilitaries'
former political chief, who was killed on the orders of his brother Vicente in
2004. Mancuso said that Castaño did not share information with him,
adding that he disagreed with much of what Castaño did. In doing so
Mancuso was trying to put across the idea that he was a subordinate to the
former political chief, although when the hearing adjourned for the
Christmas break he did promise that "All the names will be revealed, the
times, the places, the acts, with all the clarity the country needs" when
proceedings resume on 15 January.
Reasons to be silent
Such a dramatic parting shot means that interest in the next phase of Mancuso's
testimony will be no less intense. However, there is a good reason to doubt
whether the he will be any more informative. Mancuso is no longer among the
most powerful AUC leaders, and he is therefore not in a strong enough position
to play paramilitary whistleblower. As the fate of Carlos Castaño showed, the
paramilitaries have no compunction about killing their own, and there are
major power struggles going on at the highest levels of the AUC.
Mancuso was hugely reluctant to provide details of his activities as head of
the Bloque Catatumbo for fear that he might implicate other paramilitary
chiefs. He claimed to have forgotten many of the names of his collaborators,
and though he did promise to try and remember over the interim period,
there's every chance he won't. This does nothing for the credibility of the
peace process, whereby only those paramilitaries who cooperate fully with
the courts will be entitled to lenient penalties. However, Uribe might well be
thankful for Mancuso's reticence: his testimony has distracted attention
away his under-fire government without creating any more scandals.
Latin American Andean Group Report
12
January 2007, RA-07-01
COLOMBIA | POLITICS
Opponents defend Uribe
“Sonia" trial begins
On 8 January the trial
of Anayibe Rojas
Valderrama, alias
"Sonia", a former
commander of the
Fuerzas Armadas
Revolucionarias de
Colombia (Farc)
began in Washington
DC. Sonia was
extradited in March
2005 and stands
accused of
distributing and
exporting cocaine in
the US. According to
the prosecution,
Sonia was the head
of financing for the
Farc's Frente 14, and
as such supervised
the purchase of coca
paste from peasants,
its transition to
cocaine and its
subsequent
distribution to drug
traffickers.
Two of Alvaro Uribe's most prominent opponents offered their support to
the president in mid December. César Gaviria, the head of the Partido
Liberal (PL), and Senator Gustavo Petro, of the leftwing Polo Democrático
Alternativo (PDA), both forsook the opportunity to launch into Uribe at
the height of the para-political scandal, though this might have more to do
with political expediency than a sense of charity for the embattled
president.
The opposition pair intervened amid a flood of accusations linking
paramilitaries of the Autodefensas Unidas de Colombia to politicians at a
local and national level, including members of the government. Uribe
himself was implicated by two fugitive paramilitary leaders who said that
the AUC had bankrolled his re-election triumph in 2006. However, Gaviria
was not one of those who demanded Uribe resign. Rather, he came out in
support of the president, saying that the para-political scandal was not as
bad as people were making out and praising Uribe for transferring the 59
AUC leaders to a maximum security jail. Petro, meanwhile, expressed his
concern that Uribe's life might be in danger from people who were
determined that the truth about the AUC's influence would never emerge.
Petro's position is the easier understood. Although he did claim to have
received intelligence about a plot to kill the president, the senator was using
the opportunity to make a point about the peace process as a whole,
specifically the possibility that such an unscrupulous group might escape
virtually unpunished for their crimes. Gaviria's intentions are harder to
divine. Under his leadership the PL has recovered from a disappointing
electoral performance last year to represent a genuine opposition to Uribe.
It might be that he is trying to portray the PL as a moderate opposition party
compared with the more leftwing PDA; in this context, not seeking the
downfall of a still-popular president seems prudent.
ECONOMIC OVERVIEW: COLOMBIA
In the first 10 months of 2006 the country's exports were 15.6% higher
than for the first 10 months of 2005. The Departamento Administrativo
Nacional de Estadística (DANE) reported that exports in the first 10
months came to US$20.15bn, up from US$17.4bn in the same period of
2005. The trade surplus, however, fell from US$1.31bn in the first 10
months of 2005 to US$187m in the same period of 2006.
Traditional exports (oil, coffee, ferronickel and coal) increased from
US$8.5bn in the first 10 months of 2005 to US$9.8bn in the same period
of 2006. The main reason for the increase was a rise in oil revenues. It
is worth noting that coal exports, which go mostly to the US, have
doubled in the past couple of years to around US$3bn a year. Drummond
Corp, a US-based coalmining company and Glencore from Switzerland
are investing almost US$1bn between them to double their coal
production from Colombia. The coal fields are on the Guajira peninsula
in northern Colombia.
Oil revenues for the whole of 2006 came to around US$6bn, up 80%
on 2004. Foreign energy companies committed US$1.5bn to explore for
crude oil and natural gas in 2006, Armando Zamora, managing director
of the Agencia Nacional de Hidrocarburos, said.
Inflation: In November inflation was 0.24%, up considerably on October's
minus 0.14%. This brought the rate for the first 11 months of 2006 to
4.24% and the rate for the 12 months to November to 4.3%. Inflation in
2006 will be considerably lower than the 6.5% rate recorded in 2005.
Latin American Andean Group Report
13
January 2007, RA-07-01
PERU | TERRORISM
Best-performing
stock market
Peru was the world's
best-performing
stock market in 2006,
producing a 182%
gain, principally due
to surging exports of
copper, gold,
fishmeal and natural
gas. Gains picked up
further after the
government revealed
that GDP growth hit
7.7% year-on-year in
October, an 11-year
high. Venezuela's
stock market finished
fifth, up 85%.
García forges ahead with his own War on Terror
President Alan García's target to completely rid the Apurímac-Ene valley
of any lingering members of the Sendero Luminoso before the end of his
term in 2011 seems more urgent than ever after a guerrilla ambush in the
Ayacucho area on 16 December left eight people dead.
The attack pre-empted the launch of a major government offensive against
the Sendero Luminoso. Defence minister Allan Wagner had travelled to the
valley one month before the ambush to announce that an army unit of 1,500
soldiers would join police and military at the 31 "anti-terrorist" bases
operating in Ayacucho and Huancayo, departments where the near-extinct
guerrilla group still operates in the drug trade.
Five policemen, two government officials and a civilian, all taking part in an
anti-narcotics patrol, were killed in December's ambush. Wagner told
reporters that "Los Sanguinarios", a remnant column of the Sendero
Luminoso, was responsible for the attack.
The column of 220 armed guerrillas is led by a senderista known as
Camarada Alipio, according to Wagner. The minister ordered a 500-strong
combined military-police force to track down the attackers, and eight
alleged members of the column were arrested. The authorities have
ventured that Alipio may have displaced another Sendero Luminoso leader,
Camarada Artemio, from overall leadership of the guerrilla group.
Death penalty debate
García did not waste the opportunity to use public outcry over the attack to
push forward his agenda. He had sent a bill to congress on 1 November
asking for the death penalty to be applicable for terrorists, and used the
ambush as justification for such a drastic measure.
Speaking to congress on 18 December García said, "We must provide judges
and the government with the necessary tools to end these subversive acts.
When it comes to terrorism, there is no other answer than punishment of
the highest severity possible."
Currently the death penalty in Peru is only considered legal in cases of
treason during times of war. Reinstating it would mean breaking with
international treaties such as the Pact of San José, Costa Rica which Peru
signed in 1977. This states that it is impossible for countries who have
abolished the death penalty to re-establish it.
García called a meeting of the leaders of his Apra party on 8 January to
discuss the possibility of partially withdrawing from the pact. Discussion
about the bill is due to begin in congress on 10 January, but with only 30%
of the seats in congress García may find it hard to cobble together the simple
majority required for it to pass.
The bill has not received the support of the two right-wing parties which
García has relied upon to pass legislation before; the Unidad Nacional (UN)
and the Alianza por el Futuro, the party which supports former president
Alberto Fujimori. Guido Lombardi from the UN and Luisa María Cuculiza
of the Alianza said that their parties' official line is to reject the bill, but that
their members can vote according to their consciences.
Neither can García rely on the total support of his own Apra party. Critics of
the executive, such as Apra congressman Javier Valle Riestra, have been
Latin American Andean Group Report
14
January 2007, RA-07-01
Kidnapped
photographer
released
Jaime Rázuri, a
Peruvian
photographer
working in Gaza for
Agence FrancePresse, was released
on 7 January six days
after being
kidnapped by the
Islamic Army.
According to the
deputy foreign
minister, Gonzalo
Gutiérrez, who
travelled to Gaza to
negotiate Rázuri's
release, "The captors
were making
demands of Hamas;
the people who
kidnapped Jaime did
not make any
demands of Peru, his
nationality was in this
case purely
coincidental."
strident in their denunciations of Garcia's bill. Speaking on the national
broadcast station, Radio Programas del Perú, Valle Riestra said that he opposed
the reinstatement of the death penalty because he did not trust Peru's
"indecisive, totalitarian and undemocratic judiciary" not to make mistakes.
If it does eventually pass, the death penalty bill will be the second time that
García has provoked outcry among the international human rights
community. The first was a law designed to regulate the activities of nongovernmental organisations (NGOs) operating in Peru, and was passed
with 60 votes to 26 on 5 December.
NGOs who fail to provide details of their funding or to register with the
state-run Peruvian Agency for International Co-operation face fines or even
a ban from the country. José Miguel Vivanco, Americas director of Human
Rights Watch, said that "the restrictions envisaged flagrantly violate Peru's
international obligations to protect freedom of expression, association and
assembly."
"Agrarian Revolution"
A deal signed on 5 January between the regional government of Piura
and a Texan-based company called Maple has been hailed by President
García as the "beginning of the agrarian revolution". Maple has invested
US$120m in a project to produce 30 to 40 million gallons of ethanol per
year on land along Peru's northern coast. The company purchased
10,684 hectares of land which will be used for sugar-cane cultivation,
and will also build an ethanol-distillery. Northern Peru is the best area for
growing sugar cane due to its ideal temperature conditions and low
rainfall. García praised such projects for helping to make Peru less
dependent on petroleum; "Until today we used fuel to work the land.
From today onwards we are going to sow the earth in order to create
energy and fuel; this is what we call a revolution, changing the logic of
an activity."
ECONOMIC OVERVIEW: PERU
The economy grew 7.5% in 2006, its highest growth rate since 1995, the
government said on 28 December. The economy minister, Luis Carranza,
added that the country this year should post its biggest fiscal surplus
since 1970. The minister expected a surplus of around 1.6% of GDP.
Carranza said that the main reason for the economy's good year was
the surge in international metal prices. He said Peru's trade surplus
reached $8.55bn in 2006, compared with a surplus of $5.26bn in 2005.
The economy should grow between 6% and 7% in 2007, Carranza
claimed. Local analysts reckon that the central bank will probably
continue to keep the benchmark interest rate at a four-year high even
though inflation is falling and the Nuevo Sol is appreciating. There is
some evidence that the high level of interest rates is attracting inflows of
speculative capital. The bank met on 4 January and voted to keep rates
at 4.5%. The country's inflation rate is the lowest in Latin America, and
came in below the bottom of the central bank's 2006 target of between
1.5% and 3.5%. The Nuevo Sol gained 7% against the US dollar in 2006
and touched an eight-year high of NS$3.19 on 4 January. The central
bank bought US$65m worth of US dollars on 3 January to try to check
the Nuevo Sol's rise against the dollar.
Inflation: Inflation in 2006 was 1.14%, the lowest rate for five years, the
Instituto Nacional de Estadística e Informática (INEI) reported. In 2005
the rate was 1.49%. The average monthly rate for the 12-month period
was 0.09%. In December the rate was 0.03%, well up on the minus 0.3%
rate recorded in November. In October the rate was 0.04%, much the
same as September's 0.03%.
Latin American Andean Group Report
15
January 2007, RA-07-01
REGION | TELECOMMUNICATIONS
ATPDEA
US president George
W Bush signed into
law a six-month
extension of the
Andean Trade
Preferences and Drug
Eradication Act
(Atpdea) with
Ecuador, Colombia,
Peru and Bolivia on
20 December. The
extension to the law
has been granted for
only six months
rather than a year in
order to encourage
Ecuador and Bolivia
to negotiate a free
trade agreement with
the US. Peru and
Colombia have
already signed free
trade agreements,
and if the US
congress fails to ratify
them before Atpdea
expires at the end of
June there is a
special clause which
will permit another
six-month extension.
A six-member
bipartisan delegation
from the US Senate,
visited Bolivia,
Ecuador and Peru
over the new year.
Internet usage in the Andes
Peru is one of the countries with the highest rate of broadband growth in
the world, according to statistics released by the Spanish
telecommunications company, Telefónica. By the end of 2006 it had
468,000 broadband customers, which is a growth of 36% on 2005. It
predicts that it will have 565,000 users by the end of 2007 and over a
million by 2011.
Telefónica, whose "Speedy" product has a virtual monopoly over broadband in
Peru, has prospered due to high levels of investment in expanding the
network to reach regions where broadband facilities did not exist before.
Nonetheless, Lima still represents 70% of the Peruvian broadband market.
According to the director of Premium de Telefónica del Perú, Rainer Spitzer, the
company will spend a further US$250m on its broadband service over the next
four years. While the number of internet cafes in Peru is growing, a low level
of PC penetration could provide an obstacle for broadband growth. This led
Telefónica to join forces with INTEL and Microsoft in a programme launched in
March 2005 called PC Perú, promoted by the ministry of production, which
allows Peruvians to buy personal computers at accessible prices.
Peru is rated 49th out of 68 countries in the Economist Intelligence Unit's 2006
e-readiness index (which measures the "state of play" of a country's
information and communications technology); its Andean neighbours
Venezuela and Colombia are ranked 48th and 51st respectively. The number
of broadband users is still comparatively low in Colombia, but grew by 44%
in 2005 while dial-up internet use grew by only 0.1%. In Venezuela CANTV
dominates the broadband market with around 82% of the subscriber base.
LATINNEWS DAILY
The Latinnews Daily Service provides daily briefings and analysis on key
political and economic developments relating to the countries of Latin
America and the Caribbean. Each day a main briefing is supplemented
by four regional sections and a summary of the latest economic data and
statistics.
The Latinnews Daily Service, edited by Will Ollard - head of economics
for Latin American Newsletters, has established itself over nearly a
decade as one of the most authoritative and objective sources of daily
analysis on Latin America. Regular users include: government
departments and agencies; international and regional organisations;
universities and think tanks; major corporations; and the financial
services sector.
An annual subscription to Latinnews Daily is priced at $1415/£935 - or
$920/£610 for academic libraries or institutions. A wide range of multi
- user options are also available. You may register for a free trial of
Latinnews Daily via our web site www.latinnews.com Or email our
subscriptions manager Yolanda Drinot yolanda.drinot@latinnews.com
for further information or to subscribe. She may also be contacted by
telephone at our London office on +44 (0)20 7251 0012
LATIN
AMERICAN
ANDEAN
GROUP
REPORT
is
published
monthly
(12
issues
a
year)
by
Latin American Newsletters, 61 Old Street, London EC1V 9HW, England; Telephone +44 (0)20 7251 0012,
Fax +44 (0)20 7253 8193, Email: subs@latinnews.com. Visit our website at: http://www.latinnews.com
EDITOR: BRUCE DOUGLAS. Subscription rates will be sent on request. Overseas subscription sent by airmail.
Printed by Quorum Print Services Limited, Unit 3, Lansdown Industrial Estate, Gloucester Road, Cheltenham, Glos.
GL51 8PL COPYRIGHT © 2007 in all countries. All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form or by any means, electronic, electrical, chemical, mechanical,
optical, photocopying, recording or otherwise, without the prior written permission of the publishers. Registered as
a newspaper by Royal Mail.
REFERENCES: Back references and cross-references in the current series will be
made thus: RA-07-01 will indicate Andean Group Report, 2007, issue 1.
Latin American Andean Group Report
16
January 2007, RA-07-01