Former president Michelle Bachelet waited more than three years to confirm that she would seek to run for the presidency again, despite being the constant source of speculation. When, this week, she finally revealed her intention to seek another term in November, it was totally overshadowed by the president of the Partido Comunista (PCCh), Guillermo Teillier, who for the first time admitted that he had authorised a failed attempt to assassinate General Augusto Pinochet in 1986. Teillier was roundly condemned by Democracia Cristiana (DC), the largest faction in the opposition coalition Concertación. The DC and the PCCh pose a serious challenge for Bachelet. The DC, the least left-wing party in the Concertación, opposes a shared congressional slate with the PCCh, which is favoured by Bachelet.

During a long interview at the weekend with El Semanal, Teillier, leader and military chief of the PCCh in the 1980s, argued that the armed struggle waged by the far-left urban guerrilla movement Frente Patriótico Manuel Rodríguez (FPMR), a splinter of the PCCh with which he served as a go-between, was crucial in defeating the Pinochet dictatorship. He condemned violence but insisted that when faced with it “there is no other way to respond”.

Teillier’s remark caused serious ructions. The president of the DC, Ignacio Walker, denounced the PCCh’s strategy in the 1980s as “a profound error” and accused Teillier of having “no sense of self-criticism”. Walker said the armed struggle upheld by the PCCh did no more than “serve as the pretext for the Pinochet dictatorship to carry out greater repressive actions”. He said it was the 1988 plebiscite, “a political, social and electoral mobilisation”, which defeated Pinochet and which the PCCh had opposed “from the beginning to the end”. He also added that it was “incomprehensible that people who lived through the brutal repression of Pinochet did not repudiate with the same force repression from left-wing dictatorships”. A common foreign policy stance between the Concertación and the PCCh over Cuba is a cause of friction.

The PCCh entered the mainstream of Chilean politics when it sealed a selective alliance with the Concertaciόn in the 2009 congressional elections, in which Teillier won a seat. It also competed with the Concertaciόn in last October’s municipals, and won 6.4% of the national vote in councillor elections, slightly more than the Partido Radical Social Demόcrata (PRSD), the smallest party in the coalition, managed to win.

Teillier is due to meet parties within the Concertación, as well as Bachelet, this week. He is expected to confirm the PCCh’s support for Bachelet in exchange for participation in her eventual government. This is a very sensitive issue and Walker has made it clear that Bachelet risks alienating the DC if she strikes any such deal with the PCCh. Bachelet should comfortably defeat the DC candidate, Claudio Orrego, in a primary election within the Concertaciόn in June but winning the party’s allegiance afterwards will be tougher. She has the backing of the Partido Socialista (PS) and the Partido por la Democracia (PPD) but Walker is adamant that the public is opposed to the Concertaciόn lurching leftwards: the DC won more mayoral seats and council seats than the more radical parties in the coalition last October.

Bachelet, however, is not blind to the advantages of forging an alliance with the PCCh, which recently welcomed young and popular former student leaders like Camila Vallejo into its ranks to stand for election. Vallejo shot to prominence by leading student protests against the government of President Sebastián Piñera demanding education reform: Bachelet made clear this week that the first bill she would send to congress would be one to end “for-profit education and increase free education” as part of a drive to reduce inequality. “We cannot continue with small adjustments or reforms,” she said.

The government has leapt gleefully on the Concertaciόn’s travails. “And this is the party with which the Concertación wants to govern?” the government spokesperson Cecilia Pérez asked rhetorically. “A party that defends armed conflict…(and) recognises some dictatorships but not others”.

DC comes under fire

Guillermo Teillier indirectly accused the Democracia Cristiana (DC) of hypocrisy, arguing that many in the Concertaciόn had supported the action of the FPMR while outwardly denying it. He said he could relate conversations from the time, but was constrained by obligations, that “would embarrass many people”. The president of the centre-right Renovación Nacional (RN), Carlos Larraín, directly accused the DC of cynicism, happily harvesting support from the PCCh in last October’s municipal elections and now raising differences between the parties because it did not want to concede space to the PCCh in government. Larraín thanked Teillier sincerely, however, for “making his bloody role explicit”.

Right reacts

“I find it incredible to read in our papers that a party president, a deputy of the Republic, is boasting about having ordered attacks that led to the death of five people (Pinochet’s bodyguards),” the presidential candidate for the right-wing Unión Demócrata Independiente (UDI), Laurence Golborne, said in response to the remarks by Guillermo Teillier. “Violence, from wherever it comes, must be condemned”. Golborne was attending the commemoration of the murder of Jaime Guzmán on 1 April 1991. Guzmán, founder of the UDI and the ideologue of the Pinochet dictatorship, was killed by members of the FPMR, which did not lay down its arms with the restoration of elected rule in 1990.

Latin America and the Caribbean is the most violent region of the world. This emerges from the third successive listing by the Mexico-based Consejo Ciudadano para la Seguridad Pública y Justicia Penal (CCSPJP) of homicide rates across the world. The highest rates are not only concentrated mainly in Latin America and the Caribbean but also in a handful of countries within the region. One finding well worth highlighting, though, is that the picture is not static: many countries have lowered their rates, and some have dropped off the list entirely.

Of the 50 cities with the highest homicide rates in the world, 41 are in Latin America and the Caribbean. Of these, 35 are in four countries: Brazil (15), Mexico (9), Colombia (6), and Venezuela (5). Eight cities in these four countries are among the 10 with the highest homicide rates in the region: three in Mexico, two each in Brazil and Venezuela, and one in Colombia. They are not, however, at the very top of the list; this place is occupied by the Honduran city of San Pedro Sula, which also has the distinction of having recorded the highest homicide rate in the world for two years running (169 per 100,000 inhabitants in 2012). Also among the top 10 is the Honduran capital, Tegucigalpa, with a rate of 102 per 100,000).

The picture that emerges from the CCSPJP data is not all bad news. To start with, of the 40 Latin American countries that figured on the 2011 list, four did not appear in 2012: the Mexican cities of Durango, Veracruz, and Mazatlán (Sinaloa) and Panama city. This was offset with the appearance of seven cities that were not on the 2011 list: the Brazilian capital, Brasília and João Pessoa (Paraíba); the Venezuelan cities of Maracaibo (Zulia) and Valencia (Carabobo); Santa Marta (Magdalena) in Colombia, Ciudad Victoria (Tamaulipas) in Mexico, and Port-au-Prince in Haiti.

Then there is the fact that in 16 of the Latin American and Caribbean cities included in the 2012 list the homicide rates were lower than in 2011, some of them considerably lower. Eight of the cities were Brazilian: Maceió (-48.8%), Belém (-37%), Macapá (-28.9%), Manaus (-12.4%), Belo Horizonte (-13.6%), Vitória (-10.9%), Recife (-7.6 %), and Cuiabá (-5.7%). Four were Mexican: Ciudad Juárez (-62.1%), Chihuahua (-46.8%), Monterrey (-22.3%), and Culiacán (-15.4%). Two were Colombian: Medellín (-27.4%) and Barranquilla (-17.7%), and another two were Central American: Guatemala city (-8.2%) and San Salvador (-44.6%).

This adds up to a substantial, albeit uneven, improvement — which must be put into perspective: for its list the CCSPJP looks at cities with populations of at least 300,000 in countries with national homicide rates of more than 20 per 100,000 inhabitants.

In the case of Latin America and the Caribbean, the lowest homicide rate in the 2012 list was 29.4 per 100,000 (Barranquilla, Colombia). This is more than 3½ times higher than the threshold at which rates begin to be considered epidemic.

■ The CCSPJP has been criticised in Honduras for having used for its 2012 table the official figure of homicides in San Pedro Sula in 2011. It did so openly because of the difficulty of obtaining reliable data from official sources for this last year, which it attributes to a deliberate government decision.

The CCSPJP notes that the government was able to publish detailed data on the number of homicides of women across the country in 2012. It also notes that the official figure for 2011 was higher than the CCSPJP’s calculation for that year, and assumes that there has at least been no decline, since that would have been highlighted by the authorities.

Costa Rica has an extraordinary number of legislative officials, in comparison with more developed nations with roughly the same size population. A report published on 11 March by the United Nations Development Programme (UNDP) found that Costa Rica’s legislative assembly employed 683 members of staff as of April 2012, whereas parliaments such as Norway employ just 445 staff, Croatia, 250; United Arab Emirates, 97 and Singapore, 43. On average, every member of the legislative assembly has 8.05 advisors and two administrative staff. The disproportionate size of the government has an impact on the legislative process, where bills can become stuck in the plenary for decades.

A week before the publication of the UN report, President Laura Chinchilla had unveiled a series of proposals to improve the functioning of government. She presented congress with four bills proposing substantial reforms to public institutions, the legislative assembly, and the 1949 constitution itself. The bills are the result of a series of recommendations made by a six-member panel of experts appointed by the president in June 2012. Of the panel’s 97 recommendations, the government plans to pursue 41, though it may struggle to pass measures which alter the constitution as the ruling Partido Liberación Nacional lack the two-thirds majority needed to do so.

One of the bills seeks to reform the country’s constitution to change the way lawmakers are elected by adopting a system of electoral districts, rather than the current system of provincial lists. At present all 57 legislative deputies are elected on a proportional basis by provinces, the bill would alter this to a system in which 42 are elected from new electoral districts and 15 from a national list.

The president also wishes to reduce the amount of time deputies can speak in congress, limiting speeches to 5 minutes (from its current 15 minutes). The reforms would also establish time frames for laws to be voted on. The indigenous autonomy law has currently been in congress for 28 years. Another amendment would allow parliament the right to issue a vote of no confidence in ministers.

Proposed changes to the constitutional jurisdiction act would amend the powers of the constitutional court, the highest judicial body of the country, to create special courts in actions of habeas corpus and amparo (a specific Latin American constitutional remedy which protects all rights other than physical liberty). Another bill proposes removing the boards of most of the country’s public service institutions, such as those responsible for electricity, water, home loans and fuel sales, with the government to appoint a chief executive for each institution in a bid to make them more efficient.

Some opposition legislators have grumbled about the president’s decision to lump all the reform proposals together. In an example of the sluggishness of the government machinery, the process of debating the proposals had yet to begin a week after Chinchilla’s announcement. The president has threatened to put the proposals to a referendum if they are not approved by May.

• Free trade agreements

On 6 March Costa Rica and Colombia completed negotiations over a free trade deal (FTA). Of the 96 products under discussion, 70% will be tariff-free immediately, including biscuits, and some medical items, while a further 26% will lose their tariffs gradually, over a period of three to fifteen years. The final 4%, which includes oil, beer, meat and paper, were excluded from the final deal. Data from Costa Rica’s foreign ministry shows that Costa Rica exported US$48m worth of products to Colombia in 2011, while importing US$455m worth. Days earlier, congress gave the green light to the FTA negotiated with Singapore. Costa Rica currently exports around 70 products to the Asian country; trade between the two was worth US$69.7m in 2011. Costa Rica’s assembly has yet to vote on the FTA it negotiated with Peru or the “Association Agreement” it signed with the European Union.

• More production, fewer jobs

A study released on 11 March by the Costa Rican Chamber of Industries of 200 local firms found that 65.7% expect to increase production in 2013, while only 6.3% expect to produce less. Despite the optimistic outlooks, the study shows a decrease in job creation compared to the previous year. The results indicate that 60.7% expect to maintain their payroll as is, while 28.3% plan to increase it and 6.3% are considering layoffs.

On 3 March President Dilma Rousseff accused the political opposition of being “merchants of pessimism” and said it had “placed all its bets on the failure of country”. The president, who was speaking at the national convention of her main coalition ally, Partido do Movimento Democrático Brasileiro (PMDB), denied that Brazil was in economic trouble and insisted that recent measures would produce a recovery this year after real annual GDP growth of just 0.9% in 2012. The leading opposition presidential aspirant for 2014, Aécio Neves, in turn accused Rousseff of early campaigning for the 2014 race. In an official note Neves said that Rousseff’s “obsession” with the opposition was “curious” and recommended that she “come down from the platform” and “face the real challenges” of the country. “Brazil at this moment needs much more of a president and less of a candidate”, he said, noting the “piffling” 2012 GDP result.

The normally controversial finance minister Guido Mantega was on his best behaviour in New York in early March, where he began an international road show seeking upwards of US$230bn in infrastructure investment. Mantega and his entourage are wooing investors in the US, Europe and Asia, and in support of that effort President Rousseff is also firmly on message back home, pledging clear rules of the game and a stable operating environment for investors. Having belatedly realised that private investors were scared off by the rolling and unpredictable policy changes of the past two years, the Rousseff administration is on a major charm offensive to win them back. Brazil bears have been unable to resist a bit of schadenfreude.

Brazil grew just 0.9% annually last year, with investment falling for a sixth consecutive quarter. At just 18.7% of GDP, the rate of gross fixed capital investment is one of the lowest in the region. In the open export-led Andean economies of Peru and Chile, for instance, investment is running at 24%-25% of GDP. In Brazil’s main trade partner China, it is a whopping 48%.

Critics of the government run since 2003 by the left-wing Partido dos Trabalhadores (PT) warn that the country’s long economic run since 2004-2005 on the back of a lengthy commodities-fuelled consumer boom has finally ended, and that the Rousseff administration’s penchant for micro-managing (in a well-intended effort to maintain growth) has had the unintended effect of deterring private investment, with the industrial sector tanking as a result.

The Rousseff team now seems to have come round to the idea that it might be better to let the private sector get on with it, and instead of hyperactively intervening with abrupt (and often schizophrenic) changes to monetary, exchange rate, tax and trade policies, to work to facilitate investment-led growth by tackling the main structural obstacles holding that back, like the exorbitant ‘Custo Brasil’.

It is also the case that under Mantega the finance ministry has had real trouble with the basic stuff - like communications - to the point that The Economist newspaper late last year called on Rousseff to sack him, a call she pointedly ignored. According to the conservative daily O Estado, the finance ministry recently brought in a new private communications team to ‘re-brand’ and rebuild the ministry’s frayed relations with the business sector and the financial community, both in Brazil and abroad.

The shiny new ‘Brazil is open for business’ message and the ‘crusade’ against the Custo Brasil comes ahead of Rousseff’s bid for re-election in October 2014, ahead of which she and the PT desperately need to deliver stronger - and more sustainable - growth. And that means rebalancing the economy.

At an event on 27 February to mark 10 years since the PT’s creation of the council for economic and social development (Conselhão), Rousseff made a clear gesture to the markets in reaffirming her government’s commitment to the three pillars of Brazil’s macroeconomic policy stance - monetary stability, a floating exchange rate and fiscal stability. She also admitted frankly that there are limits to State action. Moreover, the president insisted that inflation was not out of control in Brazil, noting that stable inflation is a policy priority in itself. In the past week Mantega and the central bank president Alexandre Tombini have sent the strongest signals yet that interest rates may go up in response to stubborn inflation – that will also be music to the ears of financial investors.

Tackling the Custo Brasil is no easy task, as evidenced by the continued port workers’ strike against the government’s new public-private reform plans for the sector. And it is unclear where the government’s micro-managing boundaries lie. For instance, Mantega held out for as long as possible against the urgent demands of the state oil company Petrobras for an increase in pump prices, relenting only after Petrobras posted very weak results in 2012, registering its first loss in 13 years.

Petrobras

Following two increases totalling about 10% in 2012, Petrobras has twice lifted wholesale prices since January 2013, most recently as we went to press on 6 March, when the company said it would increase the price of diesel shipped from its refineries by 5%, with the calculation to exclude federal taxes. (It lifted refinery prices for gasoline and diesel by 6.6% and 5.4%, respectively, on January 31). Petrobras lost about US$11bn in 2012 on fuel subsidies, according to estimates by sector analysts.

Mantega’s motivation in seeking to hold down fuel price rises is clear, given the inflation pressures; but with little market appetite for any new debt issues the cash-strapped Petrobras has now followed its regional counterparts in running into the arms of China. Energy Minister Edison Lobão said in early March that Petrobras was seeking help from the Chinese state oil company Sinopec to finish building its new refineries Premium I, in Maranhão, and Premium II, in Ceará. Lobão admitted to journalists that the refinery works in Maranhão were delayed due to “a certain financial difficulty”. Maria das Graças Foster, the Petrobras president, went to China to personally oversee the negotiations.

Lobão also said that the pending round of concession auctions for the ‘pre-salt’ deepwater oil sector would take place from May. That may be wishful thinking; the Supreme Court plenary in early March threw out a previous ruling by one of its magistrates, Luiz Fux, that effectively prevented the congress from going ahead with an urgent motion to throw out Rousseff’s veto over parts of the new regulatory framework for the distribution of oil royalties. The president in December vetoed sections of the new framework - which adjusts the way oil royalties are distributed between producing and non producing states - on constitutional and legal grounds, as they retroactively amended existing contracts. As we went to press the congress seemed set on defying the president, in which case the oil and gas auctions, which require the new royalties framework to be in place, may have to be postponed.

Trying to avoid a Selic rise

With inflation continuing its upward march, both Finance Minister Mantega and the central bank governor, Alexandre Tombini, have indicated that a rise in interest rates may be inevitable. In the meantime, however, the government is trying all it can to avoid pushing the Selic up from its record low of 7.25%. There are now some slight signs that the pressure on consumer prices may be starting to ease.

In early March, a government official briefed the local press about plans to cut federal taxes on diesel and ethanol in an attempt to rein in consumer prices. The tax cuts, initially scheduled for July, may be brought forward if inflation nears the 6.5% upper limit of the central bank’s target over the next two months. The cut in fuel taxes is primarily targeted at easing public transport costs, which rose 0.75% in January. Bringing the measure forward would also help offset some of the pain for consumers of the latest wholesale prices rises announced by Petrobras. In early February President Rousseff announced plans to reduce taxes on food to help tame inflation; massive cuts in electricity rates for homes and businesses also came into effect in February.

There are some signs the attempts to control inflation are starting to work. The inflation index in São Paulo dropped sharply in February, with both food prices and housing costs down. The index is followed closely outside of Brazil’s largest city for indications of the inflation trend. The Real is also a little stronger against the dollar. It was trading at R$1.96/US$ on 6 March.

What of Abreu e Lima?

Venezuela’s state oil company Petróleos de Venezuela (Pdvsa) has yet to fulfil its end of the bargain in the joint Abreu e Lima oil refinery with Brazil’s state oil giant Petrobras. Located in Brazil’s north-eastern state of Pernambuco, in its original vision, as imagined by President Hugo Chávez and his Brazilian ally, former president Lula, the refinery would help to promote the two countries’ industrial integration process by having the capacity to process Venezuela’s heavy crude.

Under a deal struck between Chávez and Lula in 2008, Petrobras would provide the facility and Pdvsa the cash, in a 60%-40% joint venture deal. In the end, Petrobras was saddled with both building the refinery and shouldering the estimated US$15bn cost. Having effectively written off Pdvsa’s participation, it is now unclear whether the refinery will include any heavy crude processing capacity at all. In the initial scheme, about half of the planned 230,000 b/d refining capacity was to be used for heavy crude.

Petrobras’s chief financial officer, Almir Barbassa, told the oil daily Platts in October 2012 that the refinery would begin operations in 2014, a year behind schedule. He said that the refinery would be “60% complete” upon start-up, indicating the strained cash flow at Petrobras as it tries to develop its new deepwater offshore oil fields. Barbassa also made clear that Petrobras’s three other planned new refineries are aimed at meeting Brazil’s growing demand for middle distillates. The oil coming out of Brazil’s new offshore sector is light, sweet crude; and so the country has no real need for heavy refining capacity, which is both expensive and more time consuming.

Cuba’s President Raúl Castro confirmed on 24 February that he would only remain in power for five more years, stepping aside in February 2018. If he is true to his word, then the Castro dynasty will have held sway for 59 years in Cuba. Castro said his decision was consistent with the commitment by the Partido Comunista de Cuba (PCC) in a party conference in January 2012 to introduce two-term limits for elected officials. By 2018, if not before, he will also have reached his biological limit, being nearly 87. During the next five years he will endeavour to entrench a Chinese-style economic opening while preserving the closed political system of a one-party state.

Castro said he would amend the constitution to provide not just a limit of 10 years on public office but also a maximum age for its holders. He said this marked “a defining step in the configuration of the future direction of the country, by means of a gradual and ordered transfer of the principal posts (of government) to the new generations”. After being ‘elected’ to the top job, he said this would be his last term, irrespective of when the constitution is “perfected”.

Castro said it was essential “to act in advance to ensure sufficient cadres are trained to take the top positions in the future…so that the replacement of leaders becomes a natural and systematic process”. He did not explain why it was appropriate to restrict future leaders of Cuba to two terms but it had not been in the country’s interests in the past to allow youth to come through to replenish the Revolution. Rather than an attempt to exert control over the Revolution from beyond the grave, however, the reform, Castro argued, would ensure “the preservation of the nation’s continuity and stability without any interruptions”, possibly an acknowledgement of the huge uncertainty in Venezuela surrounding the political future of President Hugo Chávez (see below).

Castro sought to make the case that present leaders of the Revolution had provided the altruistic model for inter-generational transfer of power. He claimed that the decision by José Ramόn Machado Ventura to offer up his post as first vice-president of the council of state “in the interest of promoting the new generation” constituted “a sign of his genuine revolutionary fibre, with no room for vanity or personal interest, still less clinging onto any post. This is the essence of the founding generation of this Revolution. This is how Fidel acted five years ago, setting the supreme example. This we trust is how the new generations will also be.” Machado Ventura’s ‘selfless’ impulse was taken at the age of 82; Fidel’s shining example for the younger generation came after 49 years at the helm - when he was too ill to remain in power.

Machado Ventura was replaced by Miguel Díaz-Canel Bermúdez, 52, as the new first vice-president of the council of state and council of ministers, making him, nominally, the second most powerful figure in government. “Díaz-Canel is not an upstart or improvised: his working trajectory stretches back almost 30 years,” Castro explained. Born in the central province of Villa Clara, Díaz-Canel graduated in electronic engineering and became a professor at the provincial Universidad Central. He was elected to the PCC central committee in 1991 and after a decade as the head of the provincial committee in Villa Clara he became the youngest member ever of the politburo in 2003. He then served as first secretary of the PCC in the eastern province of Holguín until 2009 when he became higher education minister, a position he held for three years before picking up one of the five vice-presidencies of the council of ministers.

The promotion of Díaz-Canel at the expense of a member of the gerontocracy was a small gesture to the younger generation, although whether he is really being groomed as a successor or is just an efficient apparatchik (in the mould of Chávez’s vice-presidents, such as Elías Jaua) remains to be seen. The Revolution has a track record of consuming its own children. Men who in their day were tipped to be potential successors, such as Felipe Pérez Roque and Carlos Lage, were cut down when perceived to be a threat. In Díaz-Canel’s favour is that he is reputed to be a good communicator and shrewd administrator, an archetypal Raulista who has served his dues and risen steadily through the ranks, rather than a charismatic ideologue like Pérez Roque and Lage, the so-called “Talibanes” suddenly parachuted to prominence by Fidel.

Deeper change

In addition to the infusion of young blood, Castro was also intent on highlighting the greater gender and racial equality on the newlook council of state. The national assembly designated 17 new members of the 31-strong entity, which represents the assembly between its two annual sessions and thus wields far more power. Of the 31, 13 are women and 12 Cubans of African descent or mestizos, Castro said, with the average age of the council now 57. There was a similar change in the composition of the new central committee of the PCC last year, with the quota of women among the 115 members rising from just 13% to 42% and the number of blacks and mestizos increasing to 31%.

The renewal of two-thirds of the national assembly also resulted in greater gender and racial equality with Esteban Lazo Hernández, 69, becoming the most senior black politician in the PCC after replacing Ricardo Alarcón, the long-serving president of the body. Lazo was elected to parliament in 1981 and in 1993 became a vice-president of the council of state, a position he has held since then, as well as a member of the politburo. Castro said he had risen “from his humble origin as a sugar cane cutter and worker in the sugar mill and rice dryer in Jovellanos (a city in the western province of Matanzas).”

The US State Department was unimpressed with the changes. “Absent the fundamental democratic reforms necessary to give people their free will and their ability to pick their own leaders, it won’t be a fundamental change for Cuba,” State Department Spokesman Patrick Ventrell said.

Chávez: uncertainty prevails

Venezuela’s President Hugo Chávez apparently held a five-hour meeting with senior officials on 22 February. “Does this mean the president is totally recovered? No but…(he) is governing,” Diosdado Cabello, the head of the national assembly, said. The opposition openly questioned why, if Chávez is able to exert himself for this length of time, he cannot take the short oath of office in front of supreme court (TSJ) magistrates. “It is up to the comandante, when he considers he can (do it),” Cabello said. In a piece entitled ‘Aló…¿Presidente?’, Teodoro Petkoff, the editor of the weekly Tal Cual, argued that Chávez’s invisibility cast doubt on the veracity of anything emanating from the government. He said that if Chávez were sworn in it would resolve the current constitutional anomaly, although the TSJ maintains that there is no anomaly and that the status quo conforms to the principle of “administrative continuity”.

Castro meets Medvedev

President Raúl Castro met the Russian prime minister Dimitri Medvedev on 21 February. They discussed strengthening ties in the spheres of investment, aeronautics, tourism, health, education, science and culture, signing 10 bilateral agreements. Among these was a new accord governing Cuba’s outstanding debt, amassed with the former Soviet Union, which is estimated to be between US$20bn and US$30bn. Russia currently only ranks ninth as a bilateral trading partner, with just US$224m in trade in 2011.

Nothing more has been heard from President Hugo Chávez since his surprise return to Venezuela early on 18 February, fuelling speculation that plans are afoot for him to swear in privately before the supreme court and then step aside, triggering snap elections in which Vice-President Nicolás Maduro would bid to replace him. Senior ministers continue to insist that the president remains in full control of his faculties and continues to run the country, now from a hospital bed in Caracas, rather than Havana, Cuba.

Chávez’s return after two long months in Cuba in almost total silence (because he literally could not talk, it has now transpired), will help restore some stability, even in the absence of any proper details of his medical condition.

The photos released of the president prior to his return evidenced that he is not at all a well man. Officials from the ruling Partido Socialista Unido de Venezuela (PSUV) were clear that the president’s immediate priorities remained medical, not political. In response to opposition calls for a resolution to what it says is the extra constitutional state of affairs in the country since Chávez’s failure (on 10 January) to swear in for the new term to which he was elected in October 2012, the state governor of Anzoátegui, Aristóbulo Istúriz, who sits on the PSUV leadership, said that Chávez would swear in “when he is well and healthy”, noting that the PSUV-controlled national assembly had given the president an indefinite period to get better. In a similar vein, Rodrigo Cabezas, a Venezuelan delegate to the Andean Parliament and also on the PSUV leadership, on 19 February stated, “The president has returned to continue his medical treatment, he has a time that is not political. His time now is not political”.

‘Sources’ from the supreme court (TSJ) quoted by the opposition daily El Universal on 19 February made clear that “there has been no change in the exceptional circumstances that motivated the constitutional chamber’s 9 January ruling, thanks to which the head of state and his ministers remain in their functions, despite the fact that the former could not meet the requirement to take office on 10 January”.

The opposition is on tenterhooks, knowing that the government has the element of surprise on its side. In the event that the president resigns or is declared permanently absent by the supreme court, snap elections should take place within 30 days. The Mesa de la Unidad Democrática (MUD) has said that it would forego primaries in favour of declaring Henrique Capriles Radonski, Chávez’s defeated rival in 2012, its consensus candidate.

A poll of 1,230 people between 30 January – 9 February by Hinterlaces indicated voter support of 50% for Maduro compared with 36% for Capriles. Capriles has previously accused the head of Hinterlaces, Oscar Schemel, of pro-government bias but there is little doubt that Maduro would defeat Capriles on the back of a surge of emotional support for Chávez’s nominated heir.

• The Bolívar – strong in name only

On 8 February the government announced another devaluation, the fifth since currency controls were introduced in 2003, taking the official exchange rate to BF6.3/US$, from BF4.3/US$ previously. Government coffers will be replenished to the tune of US$13bn (almost 4.0% of GDP), helping plug a fiscal deficit estimated to be running at anywhere between 12% and 15% of GDP. The dollar value of domestic debt will also fall to about US$29bn, from US$43bn. Likewise state oil company, Petróleos de Venezuela (Pdvsa), which accounts for nine of every 10 dollars entering the country, will be able to pay down some of its debt (est. at US$40bn in 2012, up 15% annually) and free up funds for productive investment. Venezuelans will have to endure another inflation spike in coming months and salaries will be eroded by 8.0% in real inflation-adjusted terms until the government adjusts the minimum wage.

• Dollar demand soars

The black market currency rate was BF22.87/US$ on 19 February, as dollar demand continued to soar in the wake of the devaluation. Vice-President Nicolás Maduro signalled fresh measures against “speculators” the same day, without elaborating, but tighter controls on imports are expected. Venezuela imports about 80% of its food. On the same day the national assembly approved changes to the oil royalty framework so as to assign more oil export windfall earnings directly to the central bank, which controls the supply of dollars to the local market.

Globally, most emerging markets stocks and bonds performed well in January. Investors regained their appetite for risk. This was thanks in part to the last-minute deal between President Barack Obama’s administration and the Republican leadership in the US Congress over the ‘fiscal cliff’. It was also partly due to the announcement of a new and very aggressive easing in fiscal and monetary policy in Japan. Meanwhile, economic data suggested that the worst of the recession in the euro area is past.

Latin American financial markets benefited from the improvement in investor risk appetite. In US dollar terms, MSCI’s Latin America index gained by 3.7% during January. Virtually all the currencies that have been trending upwards in the last quarter or so have continued to appreciate.

In the Regional Policy Review and Regional Economic Review sections, we explain how much of the latest news flow from the region has been positive. With some important exceptions, investors have responded favourably to one or more of the following: orthodox and neo-liberal policies; benefits from export commodity prices that are, in real terms, elevated; improving domestic demand and; a relatively benign inflationary environment.

Across the region, currencies have been appreciating against the US dollar in six countries – Mexico, Colombia, Peru, Chile, Uruguay and Paraguay. The softness of the Argentine peso and the Brazilian real (notwithstanding that the latter firmed in January) stand out in contrast. This has happened at a time that bond spreads – useful measures of risk premia – have been contracting across the region.  Performance from most of the larger regional stock markets in Latin America has been pedestrian.

The most important message from regional financial markets is that investors are not convinced about the economic story in Brazil and have been discomfited by the lack of consistency in the authorities’ policies vis-à-vis the Real over recent months. The comments of those Brazilian companies included in the Latin Century – and others – in relation to operating conditions in the current reporting season will be instructive. Investors in Venezuela have responded favourably to the possibility of a change in government. Strained discussions between Argentina’s government and its creditors have had a predictable impact on bond prices. In the smaller countries, highlights include the widening of bond spreads in Jamaica over the last year, and the compression of spreads in the Dominican Republic.

A resurgence of violence in Mapuche territories that began in late December and continued into January provoked the government into placing the need to combat ‘terrorism’ at the top of its agenda — without appearing to have a clear idea of the kind of challenge it is facing or the extent to which it is willing to take repression. Against this backdrop Mapuche leaders announced that their aim is self-determination. After first dismissing this, President Sebastián Piñera granted priority to giving explicit constitutional standing to all ‘originary peoples’.

On 4 January a particularly shocking act of violence in the Mapuche heartland of Araucanía triggered an irate, if somewhat erratic response from the government in Santiago. A prominent, long-established farmer, 75-year-old Werner Luchsinger, and his wife were burnt alive when about 20 hooded persons raided his farm in Vilcún (in the province of Cautín in Araucanía) and set fire to the main house. Authorities were able to hear a blow-by-blow narration of events as Mrs Luchsinger called for help; by the time the fire brigade and police arrived it was too late.

President Sebastián Piñera cancelled all appointments and flew down to the area with interior minister Andrés Chadwick for what was described as a first-hand appraisal. He then convened an emergency meeting of his political and security cabinet, after which Chadwick convoked a session of heads of all intelligence agencies to try and put together a comprehensive picture of what sort of a situation was unfolding down south.

The Luchsinger murders were not the first episode in the recent surge of violence. In December there were two raids on rural estates, one of them resulting in the death of the caretaker, but not in Araucanía itself: they took place in Cañete, in the Arauco province of Biobío, the region that lies continuously to the north — historically the northernmost boundary of Mapuche territory [SSR-12-12]. On 2 January a truck was halted by hooded persons on a highway near Victoria (Malleco, Araucanía) who after forcing down the driver and passengers, set it alight. That same day in Nueva Imperial (Cautín, Araucanía) pro-Mapuche demonstrators clashed with Carabineros, the paramilitary police.

Already after the December incidents Chadwick had said, ‘We know that we must confront a powerful adversary [and] face complex political actions, and we know that they have communicational support.’ But he also said, ‘We believe  that there are about 120 persons who spread fear.’ Against them, he said, he would not rule out using the antiterrorist law.

As the new year began Chadwick added, ‘One has the impression that the groups responsible for the violent acts have external financing — though I don’t have any creditable precedents, I believe this given their mobility and organisational capability.’ He added that these groups evidently enjoy support from abroad, ‘particularly from Argentina’.

The day after the Luchsinger incident the Volterra forestry estate near Contulmo in the Arauco province of Bíobío suffered an arson attack which resulted in the destruction of machinery belonging to a contractor. As Piñera was discussing matters with his cabinet, another arson attack was taking place in the Lautaro province of Araucanía: the target was a house on an estate owned by Agro Dieflor. Damage was reported, but no casualties.

On 7 January the minister of the presidency, Cristián Larroulet, proclaimed that the Luchsinger murders ‘marked a before and after’ in the situation in Araucanía. ‘We are,’ he said, ‘in the presence of an organised terrorist group, with terrorist methods, with international connections that provide training and contacts with the Farc.’ This was followed by Chadwick’s announcement that the number of Carabineros deployed in Araucanía had ‘doubled’ to 403 [the latest contingent, 84 strong, had arrived on 4 January], an ‘antiterrorist unit’ had been created and the third-ranking Carabineros officer, General Carlos Carrasco, had been entrusted with commanding all ‘antiterrorist actions’ in Biobío, Araucanía and Los Ríos.

At this point Chadwick ruled out declaring a ‘constitutional state of exception’ on the grounds that the only one available was a ‘state of emergency’, which would only allow the executive to restrict the right to travel freely and the right of assembly. This is not quite so: it is the only one that the executive could impose completely on its own. The constitution provides for the imposition of a ‘state of siege’ granting sweeping powers, which the executive could declare on its own in exceptional cases, and referendum of later approval or disapproval by congress, or for which it could seek congressional approval, which would be deemed granted if congress failed to decide within 10 days.

On 9 January presidential spokeswoman Cecilia Pérez refused to rule out a ‘state of exception’. She said, ‘We’re not ruling out any measure in the next few days or weeks. We are assessing the scenarios of what is happening in Araucanía.’

Vigilantism & provocation

The situation was not improved when agriculture minister Luis Mayol chipped in remarking, ‘I pointed out six months ago that our rule of law considers, as do all legislations worldwide, legitimate self-defence. What does that mean? That equivalent means may be used when a person sees his life, that of his family or his goods threatened.’ In June 2012 he had said he ‘understood’ the announcement by farmers in Araucanía that they would buy weapons to defend themselves.

The media promptly picked up data from the Dirección General de Movilización Nacional showing that the registration of firearms by people in Araucanía had increased by 32.5% between 2010 and 2012. The commander of Carabineros in Araucanía, General Iván Bezmalinovic, said he was even more concerned about ‘the quantity of weapons we know are unregistered’.

This fed into an old claim by Mapuche leaders, revived in the heat of recent events, that many of the acts of violence in the region, in the words of Jorge Huenchullán, spokesman for the ‘autonomous’ Temucuicui community, had been staged by the authorities or by ‘groups who are not Mapuche; who are paramilitary, sons of farmers, retired policemen [...] in order to frame the Mapuche communities.’

One such group, known since 2002 only through its incendiary communiqués, is the self-styled Comando Hernán Trizano, which resurfaced in January with a statement that they had dynamite which they wouldn’t hesitate to use against Mapuche leaders. The recently murdered Werner Luchsinger’s cousin Jorge was accused in congress of having been one of the organisers of the Comando.

Isolation vs self-determination

By 14 January the government had embarked on an effort to isolate the ‘terrorists’ by presenting the Mapuche who hold elected office as the true representatives of their people. Chadwick and social development minister Joaquín Lavín held a first meeting with them in Temuco. Two days later the umbrella Mapuche organisation Aukiñ Wallmapu Ngulam (Council of All the Lands) held a summit on a hill outside Temuco attended by 300 leaders, with the government represented only by the provincial governors of Cautín and Malleco, and an official of the social development ministry. What the summiteers came up with cast the whole situation in an unsettling new light: a demand for self-determination.

Aucán Huilcamán, chief spokesman for the Council, announced, ‘This is an irrevocable process. Self-determination has been installed here as an issue, even if it is not on the agenda of the government and the parties. It has been announced and now comes only the state of materialising it.’

President Piñera responded on 17 January, ‘We are not willing to place at risk the unity of Chile.’ He added, ‘We are going to protect the rule of law. The application of the [antiterrorist] law is not against the Mapuche people but against those who opt for terrorism. We will fight them anywhere in Chile, regardless of ethnicity or colour.’

Indeed, the antiterrorist law had already been invoked on 11 January against one of three Mapuche arrested on suspicion of involvement in the Luchsinger incident (the other two were released on bail and the magistrate in charge of the case gave the prosecutors six months to come up with the evidence to sustain the terrorism charges).

On 21 January Piñera said he wanted to make two announcements. The first: ‘I have decided to grant maximum priority to the constitutional recognition of the originary peoples, and the creation of a council of our originary peoples that will be really representative of tradition and culture.’

The second is the decision to grant priority to ‘recognising that there has been an inexcusable lag in economic and social development; it is not by chance that the most backward regions in this respect have been Araucanía and Biobío’.

This came as Chadwick was sent back to Temuco for a second meeting with Mapuche community leaders to discuss solutions to the Mapuche demands.

Dressed in a floppy camouflage hat, the president of Argentina emerged from a leaf-strewn tunnel hidden beneath the forest floor in the most striking photo call of her tour of the Middle East and Asia. Visiting the Cu Cu tunnel complex in Vietnam, built by the Vietcong during the French occupation and expanded during the American invasion, Cristina Fernández expressed her admiration for the “wonderful struggle of the Vietnamese people in search of their independence”. A wistfulness for an old-fashioned imperialist struggle infused her remarks, as she continues to scour horizons both domestic and foreign in search of an enemy to fight.

At home

On the domestic front, the dragon that desperately needs slaying, as even Ms Fernández is beginning to acknowledge, is inflation. The ‘I’ word, rarely mentioned by the Casa Rosada, enjoyed a rare outing on 10 January, as a means of attacking her opponents. The president gave a speech calling for governors and city mayors to delay price rises for municipal services in an attempt to limit inflation. Whilst accepting the fact that price rises were sometimes necessary, Fernández said there should be only gradual adjustments. She singled out for particular criticism the opposition mayor of Buenos Aires, and possible 2015 presidential candidate, Mauricio Macri, for planning a steep increase in metro fares.

The week after the president’s speech, both official and unofficial inflation statistics were published. Individual econometric firms face stiff financial penalties for publishing their own, unofficial data. As a means of circumventing this effective prohibition, opposition legislators have devised a ‘congressional index’, derived from a survey of nine private economists compiled and published by parliamentarians. This put inflation for 2012 at 25.6%. Few, not even the government, gave serious credence to the official statistics, published the following day, which claimed it was 10.8%.

After years of manipulating the data in an attempt to keep salaries and consumer prices from soaring, and shave billions off the payments it makes on GDP-linked bonds, the Argentine government has begun this year’s round of wage negotiations with trade unions accepting the need for at least a 20% hike in salaries. Although the country’s largest trade union, the Confederación General de Trabajo (CGT), split last year into pro and anti-government camps, both sides are entering the discussions calling for a 25% pay increase. However, the government-aligned faction, led by Antonio Caló, has indicated that there may be room for manoeuvre if the government raises the income tax threshold by 20%. Hugo Moyano, the increasingly vociferous leader of the anti-government section of the CGT, has made it clear that he sees a 25% increase in wages as the absolute minimum if the government wishes to avoid major strikes.

Scioli incurs Fernández’s wrath

Daniel Scioli, the governor of Buenos Aires’ province, is a more tangible enemy of the president than runaway inflation. A possible presidential candidate for 2015, Scioli is from the more centrist section of the ruling Partido Justicialista, and increasingly distant from Fernández’s own left-wing brand of Peronism under the Frente para la Victoria. But given Fernández’s lingering hopes of being able to alter the constitution to allow her a third run at the job, Scioli now finds himself in the president’s sights.

Indeed, despite his refusal to break publicly with the president, Scioli has done little to ingratiate himself with Fernández, appearing alongside the opposition mayor of Buenos Aires, Mauricio Macri, at the opening of a waste plant in the first political set piece of the year. As thanks for such a provocative act of disloyalty, Fernández criticised the fact that Scioli continued to hold a bank account in US dollars. Strict currency controls are in place in Argentina, and last year the president asked her cabinet to ‘pesify’ their dollar savings.

Abroad

Argentina also risks international wrath over the manipulation of its official GDP and inflation statistics. At the first IMF conference of the year, Christine Lagarde confirmed that the fund’s executive board would be meeting to discuss the quality of Argentine official data on 1 February. In September, Lagarde warned that the country could face a “red card” for its dodgy statistics. In practice, this could mean the scrapping of its voting rights or even the suspension of its membership. Given Fernández’s predilection for the role of underdog, that may well suit her short-term political interests, though its long-term economic consequences may be severe.

‘Planetary threats’

The president’s political antennae have detected not just “internal and external threats, but underground and planetary” ones, according to a speech she gave to an adoring crowd celebrating the return of the Libertad, the Argentine frigate recently impounded in Ghana. In a ceremony that exhuberantly mixed the martial and the populist, Fernández vowed that her government would “keeping fighting always” as fireworks exploded and airforce jets emitted blue and white smoke swirls above the safely-returned ship. The president also attacked the “savage social predation” of “vulture funds” who continued to demand full repayment of Argentina’s debt.

The Libertad finally left Ghana following the intervention of the UN’s Tribunal for the Law of the Sea, but only after it had been held for 78 days. The Ghanian authorities were following a New York court’s judicial order, issued following a request by Elliott Capital, a private equity fund that holds up to US$1.6bn of Argentina’s debt, that the ship should be held as collateral for the money Argentina owes. Elliot Capital is one of the bondholders that refused to accept the terms of Argentina’s debt write-down in 2002. The firm has form on its attempts to seize Argenine assets. Previously, it tried to seize the presidential plane, Tango 1, when it was due to fly to the US. In order to avoid the risk of being left stranded on the tarmac, Fernández charted a plane for her latest tour round the Middle East and Asia. The next phase of the battle between Argentina and its hold-out creditors is due to take place on 27 February. In the meantime, the Libertad will be on display for holidaymakers in Mar del Plata until 15 February.

The Falklands, redux

Another famous Argentine ship will not be hosting visitors any time soon. Local authorities had planned to turn the Holy Trinity, the destroyer which landed the first Argentine troops during the Falklands War, into a museum. But photos in the Argentine media on 22 January show the ship badly listing to port and taking on a large amount of water; a result of a burst pipe. The navy stated that it had the situation under control and that it was working to restore buoyancy.

Although the sea-worthiness of the Argentine navy is unlikely to be tested any time soon, at least in regard to the Falklands/Malvinas, Fernández has returned repeatedly to the theme of the disputed islands since the start of the year. On 3 January she wrote an open letter to the UK Prime Minister, David Cameron, demanding talks over the islands’ sovereignty. Cameron asked Fernández to respect the results of a referendum on the islands, due on 11 March, which is expected to show that around 98% of the population want to remain under UK stewardship. Any change to the status quo seems extremely unlikely, but the little spat provided a welcome respite to both leaders’ domestic woes.

• Blue dollar blues

The ‘blue dollar’, the black market rate for a US dollar, hit an unprecedented AR$7.54 in late January. Currency controls, limiting the amount of dollars an individual can purchase, has led to a vibrant illegal market in the US currency, particularly during the holiday season. Legally, Argentines are only permitted to buy US$100 per day per person. While the official rate is under AR$5 to the dollar, the unofficial rate looks set to climb ever higher.

There are grounds for optimism regarding the future of Mexico-US relations under the new administrations of President Enrique Peña Nieto and Barack Obama. Peña Nieto’s swift appointment of Eduardo Medina Mora as the new ambassador to the US was widely considered a positive sign. The former attorney general reputedly has an excellent relationship with the US anti-narcotics establishment. Given the importance of the Latino vote to his electoral victory and the return of the gun control debate to the top of the US domestic agenda, there has been more substance to the pledges on immigration and security made by Obama, who already has met both Peña Nieto and Medina Mora ahead of his inauguration for a second term on 20 January.

The often tricky task of maintaining good bilateral relations has been a priority for US and Mexican presidents for the past three decades. The usual three big issues dominated the initial 27 November meeting between Obama and President-elect Peña Nieto: security, trade and immigration. Peña Nieto said he would work with US officials to create a “safe, modern, connected…legal border” between the two countries.

Neither made any reference to the controversial issue of reforming drug policy: along with President Juan Manuel Santos of Colombia and Guatemala’s President Otto Pérez Molina, Peña Nieto’s predecessor, Felipe Calderón (2006-2012) led calls for a major policy review last year (see sidebar).

Peña Nieto also sought to shift some of the intense focus away from the fight against drug-trafficking and organised crime and towards job creation and deeper economic, trade and energy cooperation within the North American Free Trade Agreement (Nafta). Bilateral trade is worth about US$500bn a year. The US is Mexico’s main trading partner and Mexico is the second export destination for the US and its third source of oil imports.

Peña Nieto’s efforts to shift the focus away from security echoes remarks made last month by Manlio Fabio Beltrones, the leader of the ruling Partido Revolucionario Institucional (PRI) in the lower chamber of congress. Beltrones told the visiting US Homeland Security Secretary Janet Napolitano on 14 December that the Mexican legislature was keen to “de-narcotise” relations with the US. He said Mexico wanted an emphasis on agreements designed to foster greater economic growth, security and a solution to migration issues. At the time however, Napolitano gave an interview with the leading daily, Reforma, in which she said that she did not envisage many changes in the Mérida Initiative, the security cooperation scheme launched by the US in 2008, under which Mexico has received US$750m worth of equipment.

The Latino vote (dominated by Mexicans) was decisive to Obama’s re-election [RM-12-12] and so he is under pressure to make good on immigration reform. His plan is expected in coming weeks, perhaps in the State of the Union address in early February. Officials cited by the New York Times (NYT) said the changes would be proposed in one comprehensive bill, resisting efforts by some Republicans to break the overhaul into smaller pieces. The NYT cited Senator Charles E. Schumer of New York (D), who chairs the senate subcommittee on immigration, refugees and border security, as saying that the bill would be comprehensive and would offer eventual citizenship for illegal immigrants willing to go through a lengthy process for their regularisation.

On 2 January, the Department of Homeland Security issued a ruling that speeds up the process of obtaining visas by undocumented immediate relatives of US citizens (spouses, children and parents). Under the ruling, individuals can now apply for a “provisional unlawful presence waiver” before they leave the US and attend immigrant visa interviews in their countries of origin. The process will be effective as of 4 March 2013. Under current law, immediate relatives of US citizens who are not eligible to adjust their status in the US to become lawful permanent residents must leave the US and obtain an immigrant visa abroad. First proposed in April last, the ruling is the government’s latest invocation of executive powers to revise immigration procedures, thereby sidestepping congress. In June last, Obama announced an executive action to defer deportation orders for about 800,000 young illegal immigrants that arrived in the US as children. That took effect on 15 August [RM-12-12].

A key appointment

Peña Nieto’s appointment of Medina Mora as the new envoy to Washington is seen as a positive. It was also a gesture to the opposition Partido Acción Nacional (PAN) from which Medina Mora (until now the ambassador to the UK) hails. A former head of Mexico’s intelligence service, Centro de Investigación y Seguridad Nacional (Cisen) in 2000-2005, Medina Mora, whose new post was ratified by Mexico’s legislature on 9 January, was Calderón's first attorney general (2007-2009) and was fully behind his “war” on organised crime. Medina Mora attracted some controversy as attorney general.

These were allegations that Medina Mora knew about the notorious ‘Fast & Furious’ sting operation run by the US Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), which allowed over 2,000 marked firearms to be smuggled into Mexico in 2009, but then lost track of them. Since it became public in 2010, the Fast & Furious operation has been one of the most sensitive issues in Mexico-US relations. On 4 November 2011 [RM-11-12] the US House of Representatives Committee on Oversight and Government Reform released a report stating that Medina Mora knew about the operation although he has repeatedly denied it. In his appearance before congress as part of his ratification process, Medina Mora again denied all knowledge of the operation.

Medina Mora’s first private meeting with Obama was on 14 January. In a White House daily press briefing after that meeting, Obama reiterated his commitment to migration reform. He also addressed another longstanding Mexican demand – tighter US gun control laws. This issue has come back to the fore in the US following the 14 December mass shooting of school children in Newtown, Connecticut, in which 26 died. Obama declared that the imposition of new restrictions to limit the public sale of military and assault weapons, as well as stricter background checks on individuals looking to buy firearms must be debated by the US Congress. Vice President Joe Biden - who represented the US at Peña Nieto’s 1 December inauguration - is coordinating the gun control proposals.

In his first local press conference on 10 January Medina Mora said the 14 December massacre had raised outrage to the point where previously unfeasible legal changes now might be possible. The previous Calderón administration made repeated calls for tighter gun control, particularly on the assault weapons that fuel the drug cartel-related violence south of the border. This is also a key demand of the prominent Mexican peace activist, Javier Sicilia, who last year toured the US calling for it to withdraw its support for Calderón’s ‘war’ on organised crime. The same day that Obama met Medina Mora, Sicilia turned up at the US embassy in Mexico to hand deliver letter addressed to President Obama, which he claimed had more than 50,000 signatures, calling on the US government to take measures to restrict the flow of weapons into Mexico.

Joint border inspection stations

The US and Mexican authorities are preparing to open a customs inspections station in Tijuana. The station, which is being built by the Mexican government, for the first time will allow US border officers to screen commercial shipments on Mexican soil before they reach the border. The new facility is aimed at reducing border waiting times for commercial trucks entering from Mexico through Otay Mesa which, after Laredo and El Paso, Texas, is the third-busiest commercial port of entry on the US-Mexico border. The inspection process Otay Mesa can take hours. Border officers from both countries will operate out of the same compound near the Otay Mesa border crossing.

The plan is to expedite the inspection of high-volume, low-risk commodities like strawberries, tomatoes, cucumbers and other produce approved under the US Customs and Border Protection’s National Agriculture Release Program.

According to the San Diego Union Tribune, the project has involved complex bilateral agreements including sign-offs from many agencies on both sides and input from the union that represents Customs and Border Protection workers. The two governments have addressed sensitive security questions, such as whether US and Mexican officers would carry weapons when working on foreign soil. Rudy Camacho, a former customs director in San Diego, noted that commercial pre-clearance facilities on the US-Mexico have been discussed for years “but the will wasn’t there.”

• Calderón and the drugs legalisation debate

Former President Felipe Calderón (2006-2012) has called for the US to find a solution to the pull US drug consumers exerted by the illegal drugs trade. In August 2011 he said that if the US is “determined or resigned to consume drugs, then let them find market alternatives that will cancel out the criminals’ stratospheric profits, or establish clear points of entry different from the Mexican border. This situation can no longer continue unchanged.” Commentators overwhelmingly understood ‘market alternatives’ as meaning ‘legalisation’. In line with his Colombian counterpart, President Juan Manuel Santos, Calderón was clear, however, that any policy changes must be agreed consensually.

• Other pre-clearance facilities

The Otay Mesa program is one of three pre-clearance pilot facilities set to open along the US-Mexico border. A second will be located in Texas, at Laredo International Airport, where Mexican customs officers would have authority to inspect Mexico-bound air shipments of components used in automotive and aeronautics manufacturing. The third proposed pre-clearance facility would see US customs officers working west of Ciudad Juárez at the massive, Taiwanese-owned Foxconn maquiladora campus near the port of entry at Santa Teresa, New Mexico.