As expected, it was all a false dawn. Hugo Chávez broke into a party with no invitation with a clear intent – diverting domestic attentions from the severe food shortage the nation is experiencing. It worked for some time. Obviously, one must not forget the possible links between the Ecuadorean and Venezuelan governments and the FARC, which resulted in general discontent by Hugo Chávez and Rafael Correa.

The row, which generated fears of a military conflict, cooled off with OAS intervention, which did exactly what Brazil should have done. One more time, Brazil’s foreign policy showed little interest in solving neighboring crises. The same had happened when Uruguay and Argentina were fighting over the installation of paper mills, and so was it again.

The now famous hug occurred in the Dominican Republic, during the 20th Rio Group Summit. It featured Uribe and Chávez, as requested by Dominican president Leonel Fernández. In spite of the apparent peace, the crisis is not over. Chávez and Correa are still sympathetic towards the FARC, and the political antagonism between Uribe and his neighbors is becoming more and more evident. Border violations occur on a daily basis and, whenever convenient, Chávez and Correa will accuse Colombia again.

Besides, Brazilian president Lula was the target of plenty of internal criticism from advisors and party colleagues. According to them, the president missed an important opportunity to resurface as the continent’s leader. Failure to participate in the Rio Group Summit made Lula miss one of this year’s most important images in South American politics. The coming together of Uribe, Chávez and Correa might have been orchestrated by Lula, who stayed in Brazil instead of attending the important summit. The Brazilian president justified his absence due to the celebrations of the 200th anniversary of the arrival of the Portuguese royal family in the country. With his decision to send chancellor Celso Amorim to represent him, Lula missed an opportunity to consolidate his leadership. Since the beginning of the diplomatic crisis, the Brazilian was having daily talks with the stakeholders. Advisors close to Lula regret mostly that a strategy to isolate Hugo Chávez went wrong at the most deciding moment. Taking advantage of Lula’s absence, the Venezuelan changed his tone of voice and left the event as one of the engineers of the diplomatic agreement. Chávez asked for peace and advocated the creation of a group to exchange hostages for imprisoned guerrillas.

Colombia

In spite of the diplomatic row that heavily involved the government actions, the country managed to obtain some relevant results in terms of domestic policy. Business missions aiming at increasing Colombian exports such as coffee, banana, processed food and consumer goods were relatively successful.

Uribe continues seeking foreign investors for the country. Tax incentives are the main attraction the government is offering to investors willing to establish their businesses in Colombia. With Argentina on the verge of a severe energy crisis, Venezuela in chaos and Peru still not showing the necessary confidence, Colombia is the main destination (alongside Chile) for European and US companies interested in establishing themselves in Hispanic America.

Bolivia

The people’s referendum on the new Constitution, scheduled for May 04, has been suspended indefinitely. The reason came from the National Electoral Commission, which put the blame on not having enough time to prepare the referendum with the required electoral guarantees. There are no technical, operating, legal or political conditions for the referendum to take place. The commission’s decision is a blow against Bolivian president Evo Morales’ plans to implement a new Constitution that, according to him, will give greater voice to Indigenous peoples, women and the poor. However, opponents of the constitution reform understand that it would place Indigenous peoples above the rest of the Bolivian population.

As an energy supplier to both Brazil and Argentina, Bolivia is proving a failure. As he nationalized several facilities, Evo Morales promised that natural gas extraction would become more professional and that the waste caused by previous governments and administrators would cease. Almost two years later, the country cannot export the amounts agreed upon with Brazil and Argentina, and might even not be able to provide enough natural gas for their domestic consumption.

The Bolivian government has launched a plan to save energy in the country, but has ruled out the possibility of importing petroleum-liquefied gas during winter. The proposal to save energy was presented by the hydrocarbon minister Carlos Villegas. It is called “National Plan of Energy Efficiency” or “energy revolution.”

Argentina

President Cristina Kirchner has completed 100 days in office. As expected, her term has seen a continuation of policies implemented during the four years of Néstor Kirchner’s presidency. According to government sources, Néstor runs an office with a large staff inside the Casa Rosada. Rumor has that government command stems from there, whereas Cristina takes care of diplomacy abroad and acts as a spokeswoman for the decisions made at Nestor’s cabinet.

The political moment is far from good. Strikes and roadblocks by farmers all over the country will cause Cristina’s approval rates to drop. The negotiation, which is vital for the Argentinean economy, should occur shortly in the next week.

The positive economic scenario against fragile opposition, which is more interested in reorganizing aiming at the 2009 legislative elections, favors Cristina. As a consequence, 54% of Argentineans see her in a positive fashion.

Due to Cristina’s reliance on Néstor’s previous government, her profile could not yet be seen. In the foreign arena, we can see that she has greater negotiation skills than her husband.

Conflict between the Revolutionary Armed Forces of Colombia (FARC) and the Colombian government have been going on for over 30 years. However, for the first time has now a government managed to inflict severe losses on the “narcoguerillas.” Backed by US war equipment, Álvaro Uribe’s government has obtained expressive results against the FARC – which have been historically strong thanks to drug trafficking and donations by foreign intellectuals who haven’t really thought the whole situation over.

Faced with the military attacks, the FARC are having to retreat and give up territories they have been controlling for years. The areas near Venezuela, Brazil and Ecuador – very porous due to a lack of border controls – are mostly made up of rain forest, which makes it impossible to determine on which side of the border you are.

After presidential elections in Venezuela and Ecuador, we have seen an interesting depiction of Northern South America geopolitics. Historical partners Venezuela and Colombia are now in very contradictory terms. There is a huge gap between Uribe’s pro-US stance and Chávez’s “socialist” government. And having a neighbour showing opposite ideology, along with high social development figures, economic growth, political stability and massive people support, is the worst that could have happened to Chávez. For Venezuelans currently experiencing food shortage, an increase in violence and a lack of correlation between government expenditures and the return expected by the population, Colombia does not look that bad.

Ecuador, led by Rafael Correa, is but an extension of Venezuela. Correa’s foreign policy boils down to following whatever Chávez wishes. They do not hide their dream of having one South American nation. Nevertheless, Colombia impairs any manifestation of such will, however distant it might seem to be.

Colombian incursions against the FARC occur almost on a daily basis. Also daily, the FARC hide on the other side of the border, where they used to think they were “safe” from any military attack. Border violation occurs almost every day, and that was never seen as a problem. The raid by the Colombian military against the FARC’s refuge on Ecuadorean soil was a mix of luck and competence.

On the day of the action, Colombian government intelligence had received information that a number of FARC guerrillas were just 2 km away from the border, on the Ecuadorean side. Up until then, they did not know that Raúl Reyes was among them. They thought he was Ivan Rios, the FARC number 3, who ended up killed a few days later by the guerrillas themselves. Aware that the FARC’s lair was located on foreign land, the military also knew they were not allowed to do their “search” outside their territory. The attack needed be clinical, direct and quick.

A few hours before the action, the US intelligence service, who helps the Colombian government locate the FARC when they are in remote rain forest areas (thanks to satellite monitoring), sent some info regarding the exact location of the guerrillas, besides the presence of Raúl Reyes rather than Ivan Rios, who was the initial target of the Colombian Army. Pinpointing the exact location became even easier during the military air strike, as Raúl Reyes used an easily traceable phone to communicate. Via satellite, the US managed to trace his exact location and, more (or less) surprisingly, with whom Reyes talked. According to information later disclosed, Reyes was speaking to Hugo Chávez at the exact moment the strike occurred. That made things a lot easier for the military, as, without satellite phone, it would have been quite hard to locate the FARC in that part of the rain forest.

The strike on Ecuadorean soil was very quick, killing at least 30 guerrillas and providing secret information stored on three of Reyes’ laptops found in the camp. Soon after the military returned to Colombia, Quito became aware of the incursion, and Correa tried to get more information about the event. Venezuela’s strong participation in the case owes to the close ties between Reyes and Chávez. Besides the phone conversation at the exact moment of Reyes’ death, Chávez had agreed to “loan” him US$ 300 million.

Chávez knew how to bypass the problem, and he proved very clever. Since his country was experiencing severe shortage (food, fuel, basic supplies), and Colombia was going through a much better time, Chávez used this opportunity to criticize his opponent, Uribe, and to create a climate of national commotion as a smokescreen to the shortage problem. Although he was not formally affected by the Colombian raid, Chávez made it clear that he repudiated the event and sent troops to the border. As he knows that camps similar to those in Ecuador exist in Venezuela, he would love to see Uribe conducting similar operations. The Venezuelan president needs as many conflicts as possible to divert attention from the severe domestic problems the country is undergoing.

Given how violent the attack against the FARC was in the original search for Ivan Rios, the guerrillas became afraid of similar strikes. Rios was killed three days later by FARC members, as they feared new Colombian attempts to search for him.
The border problem was solved in a relatively easy fashion. In a certain way, everybody got what they wanted. Chávez made Colombia apologize and, but for a moment, diverted the focus from his domestic problems. Rafael Correa won, as his act of power against Uribe made his approval rates rise. Meanwhile, Álvaro Uribe consolidated his domestic power even further by reaching an incredible 84% approval rate. Conversely, 90% of Colombians have a negative opinion on Venezuelan president Hugo Chávez. According to Gallup manager Jorge Londoño, “Uribe’s image owes to the last diplomatic effects.” However, he recalls that the diplomatic solution reached during the Rio Group summit has not yet made an impact with the public opinion.
Another interesting figure is that 82% of Colombians approve of the policies adopted by the government to tackle the FARC. Compared to the previous poll, approval for the security policy increased by 15 percentage points.
The Organization of American States (OAS) acted swiftly and effectively, but failed to solve the problem.

We should pay attention to what may unfold from now on. The antagonism between the so-called “Chavist” countries (Venezuela, Ecuador, Nicaragua and Bolivia) and Colombia continues on a high. The FARC are still admired by the former and fought by the latter. They remain hiding in camps in neighbouring countries, as the Colombian military continues hunting them. If necessary, Uribe will gladly authorize fresh attacks similar to the ones he ordered in Ecuador. And the region’s security may be at stake because Uribe is certain that he did the right thing, in spite of his apologies to his neighbours. Uribe will not hesitate to attack. If domestic issues persist, Chávez will certainly try to find enough evidence to start a new crisis with Colombia.

If, by miracle, the domestic situation improves in Venezuela, we can be sure that Chávez will not mind any Colombian incursions, as he knows this is part of the game and has been done on a daily basis for years.

The food shortage has aggravated in the first quarter of 2007, according to 77% of Venezuelans. It the third worst problem for the population, below violence and cost of living. The figures were released by consultancy firm Alfredo Keller y Asociados after a poll conducted between February 8 and February 22. According to the poll, the rise in insecurity is a matter of concern to 31% of Venezuelans. The percentage of people worried with the food shortage increased from 6% to 13%.
As regards corruption, only 7% believe it will decrease. Concerning Chávez’s defeat in his project to reform the constitution, 65% believe that the government should not implement a socialist economy, whereas 31% understand that the executive should install a socialist regime. Regarding the possibility of re-election for indefinite terms, 60% are against it, with 31% in favour.
Survey results point out that the domestic scenario is currently negative for Chávez. The food shortage, directly affecting his support base, is increasingly worrying Venezuelans. Besides, controversial issues such as implementing a socialist regime and unlimited re-elections are still refused by the population. Although he controls the means of communication and the political system, Chávez is facing public opinion resistance in his willingness to make deep changes in the nation.

Thiago de Aragao is the FPC’s Latin America Associate based in Brazil.

thiago@arkoadvice.com.br

+55-61-7814-0922

Venezuela
Venezuelan president Hugo Chávez is trying out a new discourse. He is changing the typical left-wing rhetoric for one focusing on solving issues that are specific to his grass and roots – security and basic food supply. This change of posture aims at regaining the confidence of his “light” supporters who did not provide enough support during the referendum.

There is no doubt that Hugo Chávez’s image became strongly tainted with his defeat in the late 2007 referendum. Over the course of one year, confidence in president Chávez has dropped nine percentage points, as informed by the Datos institute. According to the poll, his approval rate has fallen from 39% to 30%. Re-building his image is a two-front effort: domestic and international. Domestically, Chávez has started to provide financial support to students’ centers in several universities and institutions across the country so as to bring them to his side. It should be noted that students took an independent stance during the movement against the referendum. If they were against the government, they didn’t either support the opposition. This uncertainty has created a silent battle between government and opposition in order to “conquer” the student masses. This is crucial for the government’s future, as it is certain that a new referendum will be held in approximately two years for the people to decide again on the same proposals put forward by Chávez.

Besides, Chávez has been obtaining significant support amid the population. If in direct proposals, such as last years’ referendum, Chávez did not achieve the victory he expected, we can notice that, in indirect terms, the population is lining up alongside him and trusting in the centralized government Chávez is creating. Venezuelans are the nationals to provide the lowest support for market economy, according to a Latinobarómetro poll. Even accepting that private enterprise is necessary for development, they believe that the State should be the sole responsible for solving the population’s problems, as only the State has the necessary means to do it. A total of 67% believe that “the State is capable of solving all the problems.”

Internationally, Chávez has put some effort into participating in the hostage release sponsored by the FARC. Given that many countries regard the FARC as a terrorist organization, Chávez did not help his cause by saying that they are not a terrorist group, but rather a people’s movement willing to fight in the name of the people.

Another important fact last month was the creation of another government-owned company – the PDVAL, in charge of producing and distributing food. It is a PDVSA subsidiary aiming at taking food directly to consumers. Initially, the company will produce milk, sugar, rice, cooking oil, chicken, and pork. The company is part of the government’s strategy to put an end to the shortage of basic food supplies in supermarkets. This is expected to increase the offer of products and regain the support of those voters who had chosen Chávez but failed to support him in last year’s referendum. This measure is related to a new attitude by the Venezuelan government, who shifted from an ideology discourse centered on structural reforms towards solving specific social problems by means of State intervention.

Despite the government’s particular solutions, fear of an economic crisis is stronger than ever. The stabilization of oil prices in the international markets will spark a crisis in the Venezuelan economy very soon. The advertence was made by economist Pedro Palma Durante. He recalled that a US recession will reduce the oil demand in all countries. As a consequence, oil prices will slow down. Palma does not rule out that oil prices may range around USD 30. Thus, the economist emphasized that funds from oil sales need to continue rising for Venezuela to keep their current growth rate.

However, Venezuela is shielded against the current US economy slowdown, even though the US is their main oil customer. The comment was made by the Venezuelan Finance Minister, Rafael Isea. Although he acknowledges that this crisis may impact the demand and prices of the nation’s main export product, he said that “the impact would be neither severe nor immediate.” According to Isea, trade relations between Venezuela and other nations create “a type of shielding.”

Bolivia
Bolivian president Evo Morales has completed two years in power but has little to celebrate. Due to the deadlock in drafting the new Constitution, the nation is experiencing a political crisis that has split the country. On one side, Morales’s allies; on the other, his opponents who reject the new Magna Carta. Out of the nine departments, five have decreed autonomy from the central government. As a result, he ends his second year in office having to administer a climate of polarization. For many political analysts, you could have seen this scenario coming. In his first year, Morales nationalized the hydrocarbons industry, breaching contracts and scaring new investment away from Bolivia. With that decision, oil companies started operating as state subsidiaries. Despite this climate, his allies play the current government up. His party, the MAS (Movement towards Socialism), boasts that the country was not controlled by the market in the last two years.

However, Bolivians are still fully dependent on natural gas exports, even though they do not have the necessary oil exploration infrastructure – they rely on technical assistance from companies such as Venezuelan state-owned oil company PDVSA. The government has announced that will honor the contracts concerning natural gas supply to Argentina and Brazil. According to the Brazilian ambassador in La Paz, Maurício Dorfler, the current output level is enough to ensure supply while meeting the domestic demand. Today, Bolivia supplies approximately 30 million cubic meters of natural gas to Petrobras on a daily basis.

Ecuador
Highly popular (55%) and after having met his campaign promise to install a Constitutive Assembly to draft a new Constitution, the Ecuadorean president Rafael Correa has completed one year in office. He finished his first year with a 57% approval rate, as informed by the Cedatos institute. Compared to the beginning of his government (January 15, 2007), there was a 16-percentage-point drop, as Correa used to have a 73% approval rate. According to the poll, Correa’s credibility fell 20 percentage points compared to 2007, that is, from 68% (2007) to 48% (2008). On January 15, 2007, Correa took office after beating right-wing millionaire Álvaro Noboa in a run-off, promising to install a Constitutive Assembly and aiming at changing the nation’s political and economic system after one decade of instability.

President Correa has affirmed that his “citizen revolution”, which is his political project, will cause conflicts with conservative groups that oppose his government. To him, the right wing will try to destabilize the nation to impede the intended reforms. Aiming at implementing some proposals, Ecuador’s Finance Minister, Fausto Ortiz, said that the government will cut 34% of the funds previously allocated to foreign debt service in 2008 and re-direct these monies to social investment. This equals to USD 1 billion.

The country will certainly see a stormy year caused by resistance in certain spheres of government, financial system and means of communication. To president Correa, this will occur because the constitution reform will dismantle hegemonic parties.

Representatives from the Ecuadorean government and from the opposition are talking about a possible prolongation of the Constitutive Assembly, given the current disorganization and the fact that only bills sent by the Executive are approved. Whereas some believe that the new Magna Carta will be finished by May 24, others advocate extending the work for eight months. According to the local media, the process lacks a schedule with proposals that would facilitate progress.

Argentina
An unprecedented phenomenon is occurring in Argentina. In her first weeks in office, president Cristina Kirchner has retained 75% of the civil servants who worked under former president Néstor Kirchner. Political analysts tend to explain that the October election did not result in a new government, but rather in a re-election with a different president. Besides, it is believed that Kirchnerism wants to stay in power for longer. Among the alternatives, Néstor could be a candidate in 2011, and Cristina in 2015. Or Cristina would stand for re-election in 2011 and Néstor would wait until 2015. Analysts also qualify Cristina’s government as a “two-headed presidency,” for, even having left the Casa Rosada, Néstor continues participating actively in the current government’s political decisions.

The Argentinean government believes it is shielded against the crisis threatening the US economy. This is because the Central Bank’s record $47 million reserves, the five consecutive years of economic growth and fiscal and trade surpluses will protect the nation. Besides, it is understood that the country has become accustomed to living without external financing as a result of the debt default, and thus is less exposed to external crises. For all the optimism, economic analysts speak with caution.

Colombia
Colombian Álvaro Uribe was elected Latin America’s most popular president, with a 78% approval rate. The study was carried out by Consulta Mitofsky, a Mexican consultancy firm. Hugo Chávez (Venezuela) came second with 61%, followed by Mexico’s Felipe Calderón and Costa Rica’s Oscar Arias, both tied at 60%.

Proof of Uribe’s popularity is in how he is dealing with the crisis with Venezuela and in the government’s progress against the FARC. Nowadays, 80.53% of all Colombians approve of how president Álvaro Uribe dealt with the diplomatic row between their country and Venezuela. The information was released after a poll conducted by RCN radio. Only 12.21% do not agree with Uribe’s performance during the crisis.

Nevertheless, the row is nowhere near being solved. Colombian regional officials understand that the militarization of the Venezuelan border with Colombia, as decreed by Venezuelan president Hugo Chávez, may bring conflict to the communities living on both sides.

Uribe also won an important ally in keeping the FARC as a terrorist group. In response to his Venezuelan counterpart, Uribe said that, as long as the FARC do not put an end to torture and kidnapping, they will remain classified as a terrorist group.

The EU has refused to take the FARC off the list of groups classified as terrorists. More than that, Europeans reaffirmed all their support to the Colombian president. The announcement was made by the EU’s high representative for the Common Foreign and Security Policy (CFSP), Javier Solana, after a meeting with Uribe in Brussels. This succession of positive facts (the EU’s recognition of the FARC as a terrorist group, Colombians’ support to his security policy, the way Uribe conducted the diplomatic row with Venezuela, and Uribe’s highest approval rate among all heads of state in the Americas) has consolidated the Colombian president’s leadership role.

Paraguay
After a controversial primary, former Education minister Blanca Ovelar was confirmed as the winner. She defeated former vice president Luiz Castiglioni and will be the Colorado Party candidate in the April election. The Colorado Party has governed Paraguay for 60 years. Their main rival will be former bishop Fernando Lugo, who leads the opinion polls. Everything indicates that problems in the party primaries (Castiglioni complained of fraud) will split the party. Due to these problems, there is a movement led by Senate hopeful Lorenza Alfonso, of the Republican Force bloc (a movement of Colorado origin which supports Lugo), intending to convince Castiglioni to leave the Colorado Party and join the opposition campaign. If this occurs, Fernando Lugo’s will become stronger. Not necessarily due to the force Castiglioni would provide him with, but due to the weakening of the Colorado Party.

Thiago de Aragao is the FPC’s Latin America Associate based in Brazil.
thiago@arkoadvice.com.br
+55-51-7813-3277

A special report from Thiago de Aragão on travelling in the entourage Of President Lula of Brazil to visit the unique Venezuela of President Hugo Chavez.

The re-election of the Kirchners means a downward turn for Argentinean democracy and an upswing of populist-family politics in the country. Much to the surprise of those who were anticipating an exciting dispute for the country’s reins, the campaign revealed a candidate who scarcely had to show any skills because the opposition failed to create a single opportunity with which to corner her.

Campaigning ran very smoothly for Cristina Kirchner. While her opponents bickered about each other, a confident Cristina strode ahead working as though she was already the country’s top official. Cristina’s international trips, during which she met with leaders such as Angela Merkel (Germany), Nicolas Sarkozy (France), Lula and Bill Clinton, helped consolidate her image as the country’s future president.

However, Kirchner’s victory doesn’t necessarily mean in victory for Argentina. Her administration is likely to turn out a highly faithful continuation of her husband’s government. Some occasional changes may be seen throughout her office, but any such change will have more to do with Cristina’s personal characteristics than necessarily with her management style.

Inflation could well be one of the major issues that Cristina will have to face first. While Nestor put a great deal of energy in assuring both the population and foreign investors that the inflation index fluctuated somewhere between 7% and 9%, independent non-government experts pointed that inflation was in fact between 17% and 20%. This major difference will not be easily masqueraded in the beginning of 2008 as it was during 2007. Cristina’s popularity may be in for a plunge if the Argentineans perceive prices as running upwards and this situation reaches an unbearable stage. In Buenos Aires, the one and only province where Cristina didn’t win the poll, the pressure exerted by the opposition and people surveillance will likely be greater.

The energy crisis is day by day becoming a reality in Argentina and can also prove a major problem. The energy supply has reached its production limit and rationing schemes have been put in force more often than not. Gas imports from Bolivia are expected to increase, as is the overall instability in the neighbouring country. If Bolivia confirms predictions and turns into a powder keg, the energy crisis will consolidate in Argentina, the country’s industry will be suffer greatly and Cristina will incur great difficulty maintaining the stability of the economy, even artificially, as her husband had been doing so far.

As far as it affects Brazil, one shouldn’t expect significant changes. After all, the family is the same and Nestor will have a key role in Cristina’s administration. However, Cristina’s ability to talk is much greater than that of Nestor. We may expect tangible improvements in the Brazil-Argentina dialogue in this respect.

VENEZUELA

Discussions about constitutional reform dominated the landscape in Hugo Chávez’s country. Despite much apprehension around the proposed reforms, we now know it will not introduce anything new beyond what has been disclosed. The voting carried out in Venezuela’s National Assembly means practically nothing in terms of legitimacy as 100% of the representatives are Chávez partisans.

Nevertheless, an increase in strength and mobilization was noticed in student protests against the government last October. Even though the rallies were sporadic in fashion, they represent a solid threat to Chávez’s stability and institutions. The following deserve attention among other measures of lesser importance:

– Unlimited re-election.

In the centralized, one-party-only regime that Chávez is building, not only will he dominate the totality of the representatives at the National Assembly but his ability to perpetuate himself in power will be restricted only by his own appetite. And even if Chávez eventually leaves office, he will still hold enough power to appoint his successor, will invariably come from the ranks of the United Socialist Party of Venezuela (USPV).

– Increase of the presidential term from six to seven years.

This measure is engineered to mitigate the impact of the unlimited re-election proposal. An increased presidential term means greater spacing between elections, which can reduce potential tension caused by the opposition. This typically happens during electoral campaigns. Chávez intends to spend as little time as possible in campaign for re-election since this situation would attract a barrage of criticism, both internal and external.

– Elimination of central bank autonomy.

Following the rationale of concentrating powers in the Executive branch, there would be little sense in having a legitimating Legislative branch if the Central Bank was allowed to go on formulating its own policies. By bundling autonomy up in his own hands, Chávez will be sufficiently empowered to intervene in the economy at his own convenience. We know that in Latin America political scandals tend to do little harm to a leader’s popularity if the economy is solid, or at least appears to be solid (as with Argentina).

– Lowering the work hours from eight to six hours a day.

Generally speaking, Chávez’s package carries a stigma on account of the increased amount of powers he will concentrate in himself. The reduction in the number of work hours is a true populist measure engineered to soften the negative aspects of other measures in the package. Since the voting and the referendum concerning the measures will be carried out in one single instance, by reducing the number of work hours Chávez ensures that classes C and D (his main electorate) will vote yes and “forget” about the other more important topics.

Not surprisingly, the project has been approved via three voting sessions at the Constitutional Assembly. Now it has only to receive the population’s approval via referendum. Communication vehicles in Venezuela have refrained to criticize “Chávez’s Big Package” after the RCTV episode, a stance that reduces opportunity for the opposition to show some strength or organisational power.

CHILE

Argentina’s President Elect Cristina Kirchner wouldn’t wish to follow the same path of her Chilean counterpart, Michelle Bachelet. Bachelet’s popularity has been gradually decreasing as the government appears to have lost track in some alliances. Joaquín Lavín, Bachelet’s adversary in the last presidential election, is to join the government in a portfolio yet to be announced. With this manoeuvre, Bachelet intended to tranquilise and “silence” the opposition, which has gained political momentum since the collapse of the public transportation system in Santiago early this year.

The whole plan actually backfired, after all. The bringing of Lavín into the government was enough to destroy the powerful and solid figure Bachelet had built as Minister of Defence during Ricardo Lago’s administration. This move has been perceived by society as an indication that Bachelet is in betrayal of Concertación’s social democratic progress goals and of her going into the trap of political collusion.

Unlike other Latin American countries, the solid Chilean economy hasn’t been enough to cushion the impact of the many political crises upon the government. While many find that Andrés Velasco’s work as Minister of Finance has been positive, his success isn’t attached to Bachelet.

The likeliness of an energetic collapse in the short- or mid-term may well bring yet more political turmoil for Bachelet. This scenario would certainly have an adverse effect on the economy as Chile’s industrial complex is highly dependant upon Bolivian natural gas imported via Argentina. The continued threats by Bolivia demanding that Argentina’s government stops reselling gas to Chile may prove successful anytime now. In this case, Chile would have to carve out a quick alternative to avoid that the ensuing drop in its industrial production will considerably harm the longstanding economic stability enjoyed by the country.

COLOMBIA

Never before in the recent history of Latin America has a president enjoyed such a strong respectability both internally and externally as Álvaro Uribe. Uribe is showing his other Latin American counterparts that confronting the guerrilla, modernising industry and keeping the economy in a healthy state can bring inconceivable advantages.

Surprisingly enough, Uribe hasn’t been able to impart his charisma to any candidate appointed by him. His party emerged largely victorious in the last electoral dispute for Colombian municipalities, but failed to win the municipality of Bogotá. In addition to being the capital and most important city in the country, Bogotá is the poster child for Uribe’s administrative triumph.

The defeat in the capital can be explained by a number of reasons. Although Uribe has been keen to punish involvement with paramilitary groups, the ties of many of his officials with such groups generated a rather negative impact. Uribe has managed to shield himself as his gestures refute accusations by adversaries that he too would have his ties with paramilitary forces. In addition, Uribe’s personal history (his father was assassinated by FARC guerrillas) defuses and prevents accusations of paramilitary connections from gaining much ground against him.

Despite the fiasco in the capital, the implications haven’t been significant. Uribe will continue strong and firm in his administration but contrary to the acclamations for a third term, the president has made it very clear that any such movement would be a mortal wound to the country’s democracy.

MERCOSUL

Approval of Venezuela’s entry in Mercosul by the Committee on Foreign Affairs of the Brazilian House of Representatives marked an important event in October. Arguments voiced by many pro-government representatives and businessmen with interests in Venezuela proved decisive for the approval.

Now the bill has to be approved in the Senate, a task that will not be easily accomplished. The government’s top priority now is the CPMF and the opposition in the Senate is well prepared to prevent Venezuela from entering the MERCOSUL.

The fact that the government doesn’t hold the majority of senatorial support and that José Sarney, one of president Lula’s key allies, has already taken a stance against Venezuela’s entry in the bloc will likely make things much worse.

thiago@arkoadvice.com.br
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One point that certainly is worth singling out is the career of Fernando Lugo in Paraguay. The ex-bishop could become the county’s next president after next year’s presidential election and align Paraguay politically closer to Venezuela.

Paraguay has always been a country quite susceptible to Brazilian political influence, but with the presidential candidacy of Fernando Lugo it could change its political direction like never before. Historically a country positioned on the political right or center-right, a victory for Fernando Lugo next year would distance Paraguay from Brazil and bring it closer to Hugo Chavez, the Venezuelan president. However, the matter of potentially more concern to Brazil is Lugo’s intentions towards Itaipu. Lugo judges the contract agreed between his country and Brazil, which gives Paraguay rights to half the energy produced by Itaipu, to be unfair and intends to alter the accord. Paraguay currently uses much less than half the energy, while Brazil uses the rest. The ex-bishop intends to trade the Paraguayan energy surplus to create income for the country. Should this happen. Brazil would suffer a great shortage of energy distribution in the south and southeast of the country. Alert to any Brazilian action, Lugo this month declared that he would not be surprised if Brazil were to intervene militarily at the Itaipu power plant to protect its side. There a very clear reasoning behind Lugo’s alarmist approach. In the same way that Chavez weekly repeats that the US wants to invade Venezuela, Lugo believes that raising the issue of Brazilian military intervention at Itaipu, will turn the world’s eyes on the situation and Brazil will be obliged to act with caution and negotiation. It is still too early to know what might happen, but a possible victory for Fernando Lugo in the Paraguayan elections would certainly have a destabilizing effect on Brazilian foreign policy and threaten our power grid.

In Bolivia, deadlocks involving the Constituent Assembly continued in September. Evo Morales sought negotiations with leaders from his party (MAS) and opposition leaders during the month. The Bolivian president’s low negotiation ability was crucial in the lack of any significant progress being made. Morales saw September as a black month for his government. Difficulties with allies and opposition were less important than popular discontent with his government, however. The big idea of the Constituent Assembly, which would centralize the power of the provinces in La Paz, and allow him indefinite reelection, seems a tragic idea today. The eyes of the MAS are opening and allies who were previously content with certain structural changes to legislation in the country are now demanding more radical changes. The opposition, which is strong and organized, but with little popular support, sees the fall in popularity of Morales as a great opportunity for spreading the anti-Morales movement in the country.

While legislative changes have been making life hard for Evo Morales, President Hugo Chavez in Venezuela made an important step towards approval of unlimited reelection. Not that there was any doubt that this would occur, since the whole National Assembly are members of the Venezuelan leader’s party. The constitutional changes have been approved at National Assembly ballots and now only one more ballot remains (the result of which will be no different) to allow a popular referendum (which research indicates will bring Chavez a strong victory). Shortly before announcing the possibility of a popular referendum on the reelection issue, Chavez, in a masterstroke, announced a reduction in the working day from eight to six hours. This will give the poorer layers of society, Chavez’s electoral base, and a goodwill gesture for their votes for unlimited reelection of the president.

The search for reelection is also topic of the month in Argentina. But this is not reelection of a person, but a surname. Cristina Kirchner’s victory is now being taken as read. The senator is already traveling the world and acting in the manner of a president of Argentina. Cristina Kirchner’s victory would in fact represent a greater victory for the current Argentine president, Nestor Kirchner. Behind the scenes, Nestor is consolidating his position as the most powerful person in the country. His government program is quite interesting: after the government of Cristina, he would be eligible to stand for reelection, and thus create a Kirchner Era of impressive duration.

Amidst the too and fro of accusations of corruption and poorly explained money scandals, Cristina has managed to maintain her leadership. Some of the key reasons for this are:

1. The economic period the country is going through (stability) is good enough for people who until recently were experiencing the worst economic crisis in their history. No scandal or political event would cause the people to threaten the economic stability Kirchner has achieved.
2. Despite there being a broad opposition with good candidates at the polls, it is completely disorganized and disunited. The political infighting among many opposition candidates only helps the government. Votes which, united, would be enough to defeat Cristina, are spilt between several candidates who exchange mutual accusations and always play the same tune against Cristina: corruption.
3. Cristina, wisely, tours the world. The electorate sees their candidate traveling the world, talking with Bush, Angela Merkel and Gordon Brown, and already associates her image with that of a leader of the country. At the same time, Cristina is not present at home to have to respond to the accusations of the lesser candidates.

The paradox between economic stability and political instability is not just restricted to the Argentineans. Alan Garcia is experiencing this paradox in Peru. The country has been widely praised by international bodies for the economic and monetary policies it has adopted. However, the arrival of the ex-president Alberto Fujimori in the country (to appear in court) has generated a climate of radicalism and confrontation between the ex-president’s supporters and opponents. It is undeniable that Fujimori’s presence in the country is prejudicial for Alan Garcia. The earthquake is also demanding considerable efforts from Garcia, leading to certain political matters being put to one side. The person benefiting from the situation is Ollanta Humala, Garcia’s main opponent in the country.

The good news Garcia is hoping to give soon is the signing of the Free Trade Agreement (TLC) with the US. The treaty was recently approved at a recent simulation in the US Congress. Meanwhile, pen still needs to be put to paper before it can be celebrated. Garcia believes that the accord will lead to an upsurge in Peruvian exports, together with arrival of foreign capital for investment in the country. Garcia hopes to attract investments in the country’s infrastructure, not just to modernize deteriorating public works, but also to allow reconstruction following the earthquake.

Relations between Brazil and Venezuela are going in two directions. While President Lula and President Chavez were all smiles at the meeting in Manuas, the Brazilian Congress is increasingly less enthusiastic towards approval of Venezuela’s entry into MERCOSUL. Chavez’s lack of sensitivity when making announcements has contributed to the establishment of ill will towards Venezuela in Congress. Lula, who needs to ask many favors and intense negotiation for absolving Renan Calheiros, seems less willing to do the same for Venezuelan entry into the bloc. If entry were favorable economically, it would further destabilize a naturally unstable bloc. Under opposition pressure, the chamber of Deputies Foreign Affairs Committee will only vote on Venezuelan entry on October 24. The frequent delays and new facts emerging daily should push voting on Venezuela’s entry further towards the end of the year. As Chavez says that waiting more than nine months would be unacceptable, I believe that Venezuelan participation in MERCOSUL is becoming increasingly distant.

October 2007, Thiago de Aragão [thiago@arkoadvice.com.br]

The European Commission is currently assessing the progress of its European Neighbourhood Policy launched two years ago, with much talk of an ‘ENP plus’ initiative being in the offing. A useful summary of what has already been achieved, with proposals for extending the scope of the ENP, has just been published by the Centre for European Policy Studies, and is available for free downloading from its website (www.ceps.eu).

So far, five-year action plans have been agreed with 12 of the neighbouring states, five to the east (Moldova, Ukraine, Georgia, Armenia and Azerbaijan), and seven to the south (Morocco, Tunisia, Palestine, Israel, Jordan, Lebanon and Egypt). The CEPS paper distinguishes between those states who are ‘willing’ and those who are merely ‘passive’ partners.

Perhaps the most enthusiastic of the ‘willing’ partners is Georgia, which claimed during the negotiation of its action plan that it could reach all its objectives within three years, rather than the five years envisaged. Experience so far suggests that President Mikheil Saakashvili and his ministers were too optimistic, but on any reckoning Georgia’s progress has been impressive.

It could perhaps have done even better if it were not for the distractions caused by the ‘frozen conflicts’ over the separatist territories of Abkhazia and South Ossetia, where rebel regimes maintain themselves in power thanks to Russian-supplied arms and a great deal of unofficial support.

The Russian attempt during the past year to put an economic squeeze on Georgia has, however, proved largely counter-productive, as Georgian Foreign Minister Gela Bezhuashvili made clear in his visit to Brussels earlier in the month. Although it has been estimated that the initial effect of the Russian sanctions has been to reduce the Georgian growth-rate by 1½-2 per cent, in the long run it has strengthened the economy by forcing it to diversity both its imports and exports.

The doubling of Russian gas prices has forced Georgia to seek alternative sources of supply, mainly from Azerbaijan, and already it is getting 80 per cent of its gas from non-Russian sources. More damaging to Georgia has been Russia’s illegal closing of its land border for trade with Georgia, in direct breech of its obligations to the WTO, to which its negotiations for membership are in an advanced stage.

This, too, has spurred Georgia to establish much closer trading relations with its other neighbours – Azerbaijan, Armenia and Turkey – and further afield with Ukraine and Kazakhstan. The Russian boycott of Georgian wine has led to renewed efforts to improve its quality, and a vigorous export drive which has had – according to Bezhuashvili – extremely encouraging results, particularly in Scandinavia.

The Georgians have detected a certain softening of Russian pressure and invective in recent months, and hope that this reflects a recognition that the policy is not working and should be quietly dropped. This is certainly the view of some within the Russian administration, but it is far from certain that it will prevail. The Russians’ irrational behaviour towards Estonia does not give great confidence that they are good judges of their own best interests.

One continuing concern of the Georgians is that Russia may attempt to use independence for Kosovo, if it goes ahead with or without the backing of the UN Security Council, as a precedent for South Ossetia and Abkhazia. They have taken steps to set up separate administrations for the areas of the two territories which they still control, so that it may not be claimed that the rebel governments are the sole source of authority in the territories.

There is no question that Saakashvili and his team are disappointed that the EU has not given them more robust support in his dispute with Russia, nor provided him with any assurance of eventual EU membership. One particular grievance is that the EU’s visa requirements for Georgians are more stringent than for Russian citizens.

He is anxiously awaiting the outcome of the Commission’s re-examination of the ENP, and in particular, the feasibility study which it is currently carrying out of a free trade agreement with Georgia. If the result of this study is positive, its rapid implementation would be the least that the EU should do to reward its most promising pupil.

Dick Leonard is author of The Economist Guide to the European Union

Date: Monday 18 June
Time: 6pm
Venue: Grand Committee Room, House of Commons, SW1

The Foreign Policy Centre, the Fabian Society and the Young Fabians jointly held a debate on the prospects for Middle East peace in the House of Commons.

Hilary Benn MP, International Development Secretary,was among the speakers, alongside expert voices on the conflict and how to end it.

The event launched the new Fabian freethinking paper How Peace Broke Out in the Middle East: A short history of the future by Tony Klug. The paper is generating an extraordinary and positive response from a wide range of commentators, academics and government and civil society voices.

Fears that the ‘big bang’ enlargement of the European Union from 15 to 25 (and later to 27) members – without the adoption of the constitutional treaty – would lead to gridlock in EU decision-making have proved unfounded, or at least greatly exaggerated. This is the overall conclusion of a major research report published earlier this month by the Centre for European Policy Studies (CEPS).

Entitled Old Rules, New Game: Decision-making in the Council of Ministers after the 2004 Enlargement, the study is written by Sara Hagemann and Julia De Clerck-Sachsse. Their research was based on an extensive analysis of voting records and Council minutes and on interviews with 52 EU officials, diplomats and outside experts.

The two authors have compared the legislative output of the Council of Ministers over two periods of 32 months – one immediately before enlargement, the other immediately after. Their overall conclusion is that there is no evidence of a significant reduction in efficiency in decision-making.

This does not mean that enlargement has had no significant impact on the way the EU operates. Six significant trends are identified.

1). Although there was an immediate general drop in the amount of legislation passed, the annual adoption rate had almost ‘recovered’ by the end of 2006.

2). The percentage of legislation passed under qualified majority voting has increased. The year 2006 had the highest percentage of legislation passed under co-decision.

3). The level of disagreement recorded officially in voting has not increased.

4). This disagreement now increasingly takes the form of governments making a formal statement of dissent rather than recording adverse votes which would prevent consensus.

5). Larger member states, which used to be the most likely to oppose legislation, have yielded this role to a group of medium-sized members.

6). Contrary to expectations, there is no difference in the frequency with which northern and southern states have opposed legislation.

What has definitely changed since 2004 is not the number of decisions which have been made, but the manner in which they have been arrived at. Meetings of ministers and officials now last significantly longer, and the atmosphere has become markedly more formal, as – with larger numbers involved – the participants get to know each other less well. There has also been an increase in the reading out of prepared statements setting out a government’s views rather than more spontaneous discussion.

Almost certainly more significant has been the increased role played by mediating bodies in efforts to achieve consensus. The brokering activities of – the Commission, the Council Secretariat, and, in particular, the Presidency, are now much more evident, as are those of senior figures in the European Parliament, who lobby their own governments.

The member states – both old and new – have modified their behaviour over recent years. The older ones are now less ready to press their national viewpoint when it is clearly in a minority, while the newer ones have become more assertive. By the end of 2006, there was, in this respect, no difference between the two categories.

Consciously or unconsciously, virtually all the actors seem to have resolved to act more circumspectly in order to prevent the gridlock which many had predicted.

If the situation has not noticeably deteriorated due to enlargement, and the non-adoption of the constitutional treaty (TCE). there has certainly been no improvement, and the positive advantages which the treaty offered have not, of course, materialized. The fields which have suffered most have been External Relations and Justice and Home Affairs, both of which are still governed to a considerable extent by unanimity.

The constitutional treaty proposed that 23 existing policy areas should be switched to qualified majority voting, as should 19 new areas opened up by the Treaty.

Together with the proposals for an EU Foreign Minister and permanent President of the Council of Ministers, and the change of voting weights from a triple- to a double-majority voting system, these are the key institutional or procedural improvements contained in the TCE. It is very much to be hoped that whatever document emerges from the current efforts of the German presidency will include these provisions.

Dick Leonard is author of The Economist Guide to the European Union.

Is Chancellor Angela Merkel going the wrong way about rescuing the EU’s constitutional treaty? A new Manifesto by the Euro Citizens’ Action Service (Ecas), issued in advance of next month’s celebrations in Berlin of the 50th anniversary of the Rome Treaty, strongly suggests that she may be.

Merkel’s tactic is to restrict discussion to behind the scenes negotiations with member states’ governments. In a series of meetings behind closed doors, their representatives have been invited by the German EU presidency to see whether they can cobble together a slimmed-down document which will preserve the central elements of the 2004 treaty, while excluding material deemed to be unnecessarily controversial

In particular, an effort is being made to appease voters in France and the Netherlands, while avoiding provocation of the British, Czech and Polish governments which are, at best, lukewarm about the whole project. It represents a bold attempt to square a circle, and a gamble on Nicolas Sarkozy rather than Ségolène Royal emerging victorious in the French presidential election.

Tony Venables, the Director of Ecas, does not mince his words in criticizing Merkel’s approach. The Treaty of Rome does not just belong to national governments, he says, but also to the citizens of Europe. There should of course, be negotiations between governments, but this is no reason to exclude public debate about the options.

The German presidency has a responsibility, in his view, to encourage national governments to promote wide-ranging public debate in their own countries as to the form and content of a replacement treaty or agreement. Otherwise, he argues, the successive steps which have been taken since the Maastricht treaty towards a Citizens’ Europe will be betrayed, and weight will be given to those who argue that the EU is an elite project, which ignores the views of its citizens.

The Manifesto lists ten points which should be highlighted in the March 20 Berlin declaration by the European Council. All of them are focused on the need to open up the EU more to citizen participation, to increase transparency in its decision-making, and to shift the balance between the economic provisions of the Rome Treaty, and those – more directly affecting citizens – which have been added in later treaties or which flow from decisions by the Court of Justice.

The former, Venables argues, are strongly worded and effectively enforced, while the latter tend to be less authoritatively worded, and their application has often been more patchy.

On its merits, there is a great deal to be said for the Ecas approach and it is undoubtedly the case that any treaty which emerged from the process it recommends would be intrinsically a better treaty, and one better attuned to public opinion.

It would, however, almost certainly be a more extensive treaty, and would therefore run a greater risk of being turned down by one or more member states. Moreover, the more ambitious it turns out to be, the more likely it is governments will succumb to the fatal temptation to submit it to referenda, an almost certain recipe for failure when as many as 27 states are concerned.

This is something which the German presidency is desperate to avoid. While countries such as Ireland and Denmark may be required by their own constitutions to hold referenda, their hope is that all the others will decide that parliamentary ratification would be sufficient.

The biggest threat is clearly in France, where Royal seems to have already fenced herself in to a public consultation if she wins the election. The other great danger comes from Britain, whose ill-fated decision to hold a referendum last time stampeded other governments (included France and Holland) to follow suit.

It will probably be up to Gordon Brown to decide next time round, and it is far from certain that he will not feel constrained to follow the ill-considered precedent set (but not acted on) by Jack Straw and Tony Blair in 2004.

More likely than not some countries will, in fact, decide to hold referenda. In which case, it would be better to follow Ecas’s advice, and ensure that whatever provisions the treaty contains have already been subjected to public debate.

Dick Leonard is author of The Economist Guide to the European Union.