NotiSur - 02/15/02 - Argentina, Colombia Via NY Transfer News Collective * All the News that Doesn't Fit [Reminder: This is a private reading copy for your personal use only. It may not be redistributed under the terms of our subscription with LADB. Thanks -- NY Transfer] ------------------------------------------------------------ L A T I N A M E R I C A D A T A B A S E NotiSur - South American Political & Economic Affairs ISSN 1060-4189 Volume 12, Number 6 February 15, 2002 ------------------------------------------------------------ Copyright 2002, Latin America Data Base (LADB), Latin American Institute, University of New Mexico Director: Rebecca Reynolds Bannister Editor: Patricia Hynds Staff writers: Carlos Navarro, Robert Sandels LADB ARCHIVES: Back issues are referenced to provide historical background relevant to the articles in this newsletter. These can be accessed with a subscription to the LADB searchable on-line archives at http://ladb.unm.edu/ by clicking on Search Archive. For subscription information, e-mail info@ladb.unm.edu or call 1-800-472-0888. In This Issue: ARGENTINA: PRESIDENT EDUARDO DUHALDE LETS PESO FLOAT * Government adjusts following court decision * After a decade, the peso floats * IMF holds back on more aid COLOMBIA: U.S. TO INCREASE INVOLVEMENT IN GUERRILLA WAR AND PROTECT OCCIDENTAL OIL PIPELINE * Bush administration budget ups funding to Colombia * High-level US delegation visits Colombia * Increased funding will encounter opposition * Administration launches media campaign ____________________________________________________________ ********************* ARGENTINA ********************* ARGENTINA: PRESIDENT EDUARDO DUHALDE LETS PESO FLOAT Forced by a Corte Suprema de Justicia (CSJ) ruling that banking restrictions are illegal, the government of Argentine President Eduardo Duhalde let the peso float freely for the first time in more than a decade, and long lines formed at exchange houses. The CSJ decision brought to a head a conflict among the branches of government, and Congress is holding hearings that could oust all CSJ justices. Duhalde had not planned to allow the peso to float freely for several months, but the Feb. 1 CSJ ruling forced his hand. The banking restrictions (corralito) had been put in place Dec. 1 by then President Fernando de la Rua, who resigned on Dec 20 (see NotiSur, 2001-12-14, 2002-01-11). In a decision that took both the government and society by surprise, the court voted 5-0 in favor of plaintiffs who demanded their savings. It said the executive decree authorizing the limits was "irrational," and virtually "annihilated" constitutional rights to private property. Duhalde held an emergency meeting with his Cabinet chief to analyze the implications of the ruling, and he postponed the scheduled Feb. 2 address by Economy Minister Jorge Remes Lenicov to unveil new economic measures. Duhalde said the CSJ decision was tantamount to blackmail by justices who have faced mounting pressure to quit amid allegations of corruption and cronyism. He noted that the justices signed the ruling only hours after lawmakers in the Chamber of Deputies had set up an impeachment committee to investigate 28 complaints against them. "Regrettably, the decision they've taken is extremely serious," said Duhalde. It "strikes a very strong blow at any chance of an orderly exit from the financial crisis." "The ruling is an act of absolute irresponsibility," said Sergio Acevedo, chair of the impeachment committee (Comision de Juicio Politico) and member of the governing Partido Justicialista-peronista (PJ). "The justices who endorsed it seek nothing more than to drag down the three branches of government and deepen the political and social crisis that afflicts the country." The congressional investigation could lead to the removal of all nine justices. Since early January, thousands of Argentines have demonstrated in front of the court to demand that the justices be removed. Each protest march ended in front of the home of one of the justices. The CSJ is strongly associated with ex-President Carlos Saul Menem (1989-1999), who is Duhalde's sworn political enemy. Shortly after his election in 1990, Menem maneuvered to increase the number of justices on the CSJ from five to nine, and in the process reconfigured the court so that it had an "automatic majority" of Menem supporters. In July 2001, Menem was placed under house arrest in connection with the illegal sales of arms and munitions to Croatia and Ecuador during his presidency. But in a widely criticized move, the court freed him in November, ruling that there was insufficient evidence of a gunrunning and "illicit- enrichment" conspiracy (see NotiSur, 2001-11-30). On Feb. 4, the committee began the hearings on the 28 charges against the justices that include corruption, extortion, bribery, and dereliction of duty. The same day, the government decreed a six-month suspension of all lawsuits against the corralito. Government adjusts following court decision The government ordered banks and foreign-exchange houses closed Feb. 4 as it adjusted its planned economic measures. Late Feb. 3, Remes Lenicov said Argentina would fully float the peso and partially lift the corralito. Remes Lenicov said he would present an "austerity" budget for 2002 to Congress in the coming days, and he called on Argentines to accept more sacrifice to end a bitter, four-year recession. "Argentina is broke," Remes Lenicov said. "There will be one foreign-exchange market for all import and export operations," Remes Lenicov said in the televised speech. "It's clear that floating the currency...will improve the competitiveness of the Argentine economy." The International Monetary Fund (IMF) had harshly criticized the two-tiered exchange rate adopted by the Duhalde administration last month, saying such a system is inherently unworkable and vulnerable to corruption. It signaled that the dual rate must be eliminated for Argentina to receive emergency bailout aid. The government's decision to abandon it was a major concession to the IMF. Remes Lenicov also said all financial debts and assets would be converted from dollars into pesos, but at differing rates that could mean big losses for banks while making the change less painful for debtors and account holders. Economist Claudio Lozano, with the Central de Trabajadores Argentinos (CTA), said the government had yielded to pressure from various sectors: the IMF, exporters, large businesses, and the banks who all wanted the free-floating peso. State-issued bonds will cover the loss in converting dollar-denominated debt to pesos, resulting in "a transfer of income from society as a whole toward the most powerful sectors," said Lozano. "In other words, the state is nationalizing the private-sector debt, and we will all pay for it." Duhalde presented the 2002 budget on Feb. 5, at the same time announcing elections in 2003. Duhalde urged the nation's 36 million people to remain calm while he tries to mend the economy. The budget contains some US$3.5 billion in cuts, with more than half expected to come from the suspension of debt payments. The budget, now being debated in Congress, maintains the 13% cut in public-sector wages and pensions imposed last year; increases spending only on emergency help for the poor; and forecasts a fiscal deficit of 3 billion pesos, down from 10 billion pesos (then US$10 billion) last year. The government said it expected the economy to contract by as much as 5% this year. Inflation will rise to 15%, a figure most Wall Street analysts say could quadruple by the end of the year. Duhalde set presidential elections for Sept. 14, 2003. Calling himself the "transition president," he reaffirmed his intention to serve out de la Rua's term. Argentine presidents serve four-year terms, but Congress appointed Duhalde on Jan. 2 to finish the remainder of de la Rua's term after he resigned. On Feb. 8, Duhalde said he had reached an agreement with provincial governors to cut some US$500 million by reducing the size of national, provincial, and municipal governments. The plan calls for a 25% reduction in the number of seats in those bodies along with a similar cut in the number of staff. To further trim government expenditures, Duhalde is proposing to eliminate mid-term congressional elections. "The plan's savings will be used for social programs," Duhalde said in a nationally televised address. After a decade, the peso floats On Feb. 11, Argentines were allowed to withdraw the full amount of their monthly paychecks from special salary accounts. They could also withdraw US$1,200 a month in pesos from savings accounts, up from a limit of US$1,000. They can leave up to US$30,000 of their savings in dollar-denominated bonds. Details on the interest rates and maturity of the bonds have not yet been determined. The remaining deposits have been converted to peso-denominated certificates of deposit that are due starting next year. Although the measures increased the amount of cash in circulation, the Central Bank imposed a number of restrictions on currency trading, including a ban on unlicensed and independent sellers. It said currency trades can only be made in cash, not with checks or debit cards. And Argentines must show their identity cards when exchanging cash, a move expected to keep away the many Argentines who owe money for taxes. By the end of the first day, the peso was selling at about 2.03 per dollar for large transactions, giving a psychological boost to the government. Media reports said the majority of people changing money were selling dollars--to pay overdue bills--rather than dumping pesos. The peso's depreciation the first few days was noteworthy, particularly when compared to the one-to-one parity with the dollar in place from 1991 until Jan. 1 of this year. But the drop was far less than predicted by some economists, who warned the dollar would surpass three pesos. Still, the peso is worth less than half what it was before the devaluation. How the peso reacts in the coming weeks and months will be a crucial test for whether the Duhalde administration can steer the country through the social and financial crisis that has pushed unemployment up to 22%. A major worry is that a falling peso will set off inflation by raising the price of imported goods, and inflation will prompt a flight from the peso. In a sign that an inflationary cycle could be on the horizon, union leader Rodolfo Daer said that, because workers' wages have been "pulverized" by the devaluation of the peso, unions may start pressing for pay adjustments that keep up with rising prices. IMF holds back on more aid Another key factor in Argentina's future economic health will be whether the IMF will come through with a major loan the Duhalde administration is seeking. The government was frustrated at the IMF's silence following presentation of the latest recovery plans. "There should have been a stronger reply" from the IMF, said Remes Lenicov on Feb. 6. He complained of a "chicken and egg" situation where foreign lenders demand a solid economic plan before sending aid, but the plan itself depends upon aid guarantees. IMF officials have been saying privately that the fund is not going to release money in the short term because it is still not satisfied with measures the government has taken. The US Treasury, key to IMF help, also said Argentina still had more to do such as shoring up troubled banks bearing much of the cost of the currency devaluation. John Taylor, the US Treasury's undersecretary for international affairs, urged Argentina to push ahead with talks on debt restructuring and reforms of its tax and budget systems. Treasury Secretary Paul O'Neill said the US stood ready to help Argentina as much as possible, but suggested that official loans were not the answer. "What we did not consider was an endless flow of money from the rest of the world's taxpayers," he said. In Ottawa on Feb. 9, world finance ministers signaled they would not support fresh aid for Argentina until its government developed a realistic way to contain social unrest and stem financial panic. Several G-8 ministers said Duhalde's government had not yet adequately addressed budgetary problems or come up with viable plans for restructuring its foreign debt and its banking system. "We've been very supportive of the steps Argentina has taken," said Canadian Finance Minister Paul Martin, who chaired the two-day meeting of financial ministers and central bankers. "But we believe it's very important that Argentina work closely with the IMF in order to bring about a plan that will be sustainable." Remes Lenicov left for Washington Feb. 10 to meet with top IMF and US government officials, and Duhalde called IMF managing director Horst Koehler to promise that Argentina would adopt a "sustainable" economic plan, as the fund has called for. Remes Lenicov returned Feb. 13, saying he was encouraged, but with no money. [Sources: Spanish news service EFE, 02/01/02; The Miami Herald, 02/04/02; Reuters, 02/01/02, 02/02/02, 02/04-06/02; La Opinion (Los Angeles), 02/03/03, 02/07/02; The Economist (London), 02/08/02; Notimex, 02/07/02, 02/10/02; Inter Press Service, 02/01/02, 02/06/02, 02/11/02; The New York Times, 02/02/02, 02/09/02, 02/11/02; The Washington Post, 02/09/02, 02/11/02; Financial Times (London), 02/12/02; Associated Press, 02/01/02, 02/02/02, 02/04-06/02, 02/08/02, 02/11/02, 02/13/02] ********************* COLOMBIA ********************* COLOMBIA: U.S. TO INCREASE INVOLVEMENT IN GUERRILLA WAR AND PROTECT OCCIDENTAL OIL PIPELINE In a major public policy shift, the administration of President George W. Bush is calling for US military aid to be used against Colombian guerrillas. To sell that change and the increased funding for Colombia in the budget for fiscal 2003 to Congress and the US public, the administration has begun a public relations campaign to include the Colombian guerrillas as targets of the "global war on terrorism." On Jan. 15, just hours after a breakthrough salvaged the peace process in Colombia (see NotiSur, 2002-01-18), The Washington Post reported that the Bush administration was considering a change in policy that would allow US military aid to be used against the guerrillas. The same day, John P. Walters, director of the Office of National Drug Control Policy (ONDCP) arrived in Colombia for a three-day visit to "review" US anti-drug cooperation with Colombia. "I can't discuss all of the planning. We're doing a review of policy," Walters told reporters in Bogota. "We remain focused on supporting democratic institutions in Colombia. We remain focused on reducing violence where we can make a contribution to doing that, and, most of all, reducing drug trafficking that contributes to the funding of violence, and anti-government activity." For some time, Colombian President Andres Pastrana has been asking Washington to expand its help to include participation in the war against the guerrillas. In a Jan. 22 interview with The Associated Press, Pastrana said that "the world changed on Sept. 11. The common enemy is terrorism." He called for US troops to train Colombian soldiers to protect oil pipelines and other infrastructure from rebel attacks. He added that he hoped the recent breakthrough in peace talks would lead to a full cease-fire by April. Bush administration budget ups funding to Colombia On Feb. 4, the Bush administration sent to Congress the fiscal year 2003 budget, which included a 14% increase in spending in the Andean region. Of the US$731 million proposed for the regional effort, US$439 million was for Colombia. The budget also requests US$98 million in new Pentagon training and equipment for the Colombian military. Administration officials said it was the first step in a wider initiative to move US involvement in Colombia beyond counternarcotics assistance. The US$98 million would come from foreign military financing funds, most often used to provide US military aid to US allies in the Middle East. Since Sept. 11, additional money from the account has been authorized for anti-terrorism activities in Uzbekistan, Turkey, and the Philippines. In Colombia, most of the money would be used to train troops and provide at least 12 new transport helicopters for a 2,000- to 4,000-member "Critical Infrastructure Brigade" in the Colombian army. The brigade's initial task would be to protect the 600-km Cano Limon-Covenas pipeline, belonging to Los Angeles-based Occidental Petroleum, which transports oil from fields in northeastern Colombia to the Caribbean coast. The St. Petersburg Times reported that military sources said the White House proposed the new pipeline protection, which initially met objections from Pentagon officials because of the difficulty in defending fixed installations. But when they were told that the plan was part of an attempt to expand the military's role in Colombia, they were won over. The request for more funding came the same week that CIA Director George Tenet, in a Senate appearance Feb. 6, listed Colombia guerrilla group Fuerzas Armadas Revolucionarias de Colombia (FARC) as a terrorist threat to the US alongside Islamic extremist groups. The US Congress originally approved US$1.3 billion in mainly military aid for Plan Colombia, the US-designed anti- drug trafficking plan. A year of intensive crop spraying and attempts to wean campesinos from growing crops used in the drug trade have produced few positive results. Preliminary indications are that the cultivation of coca has not decreased. Alternative-development programs have progressed more slowly than anticipated. Troops trained and equipped by the US have made little headway in efforts to reclaim guerrilla-occupied coca-growing zones in the south. And human rights abuses have not diminished. High-level US delegation visits Colombia On Feb. 3, a high-level US delegation, led by Undersecretary of State for Political Affairs Marc Grossman, visited Colombia. The delegation also included Assistant Secretary of State for Western Hemisphere Affairs Otto Reich, the State Department's top anti-drug official Rand Beers, and acting head of US military operations in Latin America, Maj. Gen. Gary Speer. At a press conference in Bogota Feb. 5, Grossman outlined the administration's plan to protect Occidental's pipeline. Pipeline protection is crucial, Grossman said, because oil is Colombia's largest money-making export and provides much-needed income for a war-torn country. "We are committed to help Colombians create a Colombia that is a peaceful, prosperous, drug-free and terror-free democracy," said Grossman. He said helping protect Cano-Limon was part of Washington's commitment to help Colombians create a "terror-free democracy." The pipeline has been the target of rebels who see Occidental as an exploiter of Colombian resources. Colombia's state-owned oil company, Ecopetrol, said the pipeline was bombed 170 times last year, costing Colombia and the company more than US$500 million. Since 1986, when the first attack was recorded, more than 2.6 million barrels of oil have been spilled. In Colombia's El Tiempo newspaper Feb. 10, US Ambassador Anne Patterson said decisions on future US military aid would hinge on the success of the initiative to train a brigade to protect the pipeline. She said more than 300 infrastructure sites in Colombia are of strategic importance to the US, and securing Latin American oil supplies was more important now with growing tension in the Middle East. "It is true that this is not an anti-narcotics issue, but it is something we have to do," said Patterson. "It is important for the future of the country [Colombia], for our petroleum supplies, and for the confidence of our investors." Increased funding will encounter opposition The proposed aid package will have to overcome concerns about deepening US involvement and what some see as a worsening human rights situation in Colombia. Sen. Paul Wellstone (D-MN) said lawmakers should scrutinize any attempt to expand military assistance. "This was not what was debated in Congress when Plan Colombia was passed. We are getting deeper into this conflict," said Wellstone, who opposed the previous Colombian-aid proposals. "For the first time, the administration is proposing to cross the line from counternarcotics to counterinsurgency," said Sen. Patrick J. Leahy (D-VT) who chairs the foreign operations subcommittee. "This is no longer about stopping drugs, it's about fighting the guerrillas." The pipeline proposal also has some asking why US taxpayers should provide security for a large private company that has a questionable record in Colombia. Environmentalists and human rights groups have targeted Occidental since 1995 when the indigenous U'Wa people, whose land is threatened by the oil company's operations, vowed to commit mass suicide (see NotiSur, 2000-04-14). "If they wanted to take on the guerrillas, they could have done it in many parts of Colombia. But they chose to do it where the pipeline is. Isn't that curious?" said Adam Isacson, Colombia coordinator for the Center for International Policy, a Washington-based research and advocacy group. Isacson points out that Occidental has spent millions of dollars lobbying politicians on Colombia policy in recent years, as well as making large campaign contributions. Supporters of the aid say, however, that Occidental deserves special consideration since it is under attack by guerrilla groups the US lists as terrorist organizations. Environmental and human rights groups have denounced the detrimental effects of Plan Colombia and opposed any new spending. On Jan. 15, the US environmental law firm Earthjustice called on the UN Human Rights Commission to pressure the US and Colombia to stop aerial spraying of herbicides as part of Plan Colombia. The group said since the spraying began, there have been thousands of reports of serious health problems, destruction of food crops and livestock, contaminated surface water, damage to surrounding wilderness areas, and deforestation resulting from campesinos' need to clear forests and plant crops on uncontaminated lands. In a joint report released Feb. 5, Human Rights Watch (HRW), Amnesty International (AI), and the Washington Office on Latin America (WOLA) accused the Pastrana government of failing to meet Congress' human rights conditions for continued funding. The report said the Colombian military maintains close operational ties with paramilitary forces responsible for widespread civilian massacres. Current congressional restrictions on counternarcotics funding require that US aid be suspended at the end of February unless the administration certifies that Colombia has made progress in severing those ties and in promoting the civilian investigation, suspension, and prosecution of military officers credibly accused of human rights abuses. The report concludes that "Colombia's government has not, to date, satisfied these conditions" and that the military's human rights record, if anything, has gotten worse. In Colombia, the FARC said the policy shift in Washington proves that the US wants to intervene militarily. "From the beginning, we said that Plan Colombia was a counterinsurgency plan," said FARC commander Simon Trinidad. "No one believed the story that it was a plan against drug trafficking. Now the mask has been taken off." Instead of increasing aid to the Colombian military, Trinidad said US military personnel should be withdrawn from Colombia. "They are here to pursue a war against our own people, and they have taught the military the doctrine of...state terrorism," he said. Administration launches media campaign Building on public support for anti-terrorism efforts since Sept. 11, the Bush administration began an anti-drug media campaign in February linking illegal drug use with acts of terror. Full-page ads in major US newspapers Feb. 11 followed television ads, costing US$3.2 million, during the Super Bowl. In one newspaper ad, a youth says, "Last weekend I washed my car, hung out with a few friends, and helped murder a family in Colombia," sending a message linking buying drugs to terrorism and linking both to Colombia. "We are trying to capitalize on the desire people have to make a contribution in the war against terrorism and the desire to be more responsible themselves," said ONDCP director Walters. "If people want to know what they can do, there is a pretty clear message here, as the president said, when you stop using drugs you join America's battle on terrorism." But Matthew Briggs, assistant director of the Drug Policy Alliance, which works for new drug laws, said it was disturbing that the government spent so much money blaming Americans for terrorism when more than half of Americans in need of drug treatment did not have access to it. "It's a politically motivated, cynical expenditure of money," he said. President Bush continued the message on Feb. 12, saying that the September attacks were made possible through the sale of illegal substances like heroin and other drugs. "The drug trade supports terrorist networks," Bush said. "When people purchase drugs, they put money in the hands of those who want to hurt America, hurt our allies." [Sources: Spanish news service EFE, 01/15/02, 01/16/02; Notimex, 01/15/02, 02/03/02, 02/04/02; El Nuevo Herald (Miami), 02/04/02; The Washington Post, 01/15/02, 02/06/02; The New York Times, 02/06/02; WorkingForChange, La Opinion (Los Angeles), 02/08/02; Reuters, 01/16/02, 02/02-05/02, 02/10/02; The St. Petersburg Times, 02/11/02; Associated Press, 01/23/02, 02/05/02, 02/06/02, 02/13/02; Chicago Tribune, 02/13/02] ================================================================= NY Transfer News Collective * A Service of Blythe Systems Since 1985 - Information for the Rest of Us 339 Lafayette St., New York, NY 10012 http://www.blythe.org e-mail: nyt@blythe.org ================================================================= pvtsa-02.15.02-14:44:29-3317