In this issue:

Chile's Economy Is Tanking; Social Unrest Wells Up

Venezuelan Government Implements Another Round of Austerity

Tensions in Venezuela Mount—U.S. Wants OAS Intervention; Venezuelan Govt Invites Carter To Mediate

Mexican Farmers Demand Fox Remember the Word 'Protectionism'

Argentina Finally Does What IMF Demands, Overturns 'Economic Subversion' Law

U.S. State Department Worried About Eliza Carrio

Brazil To Begin Commercial-Scale Production of Enriched Uranium

From the Vol.1,No.14 issue of Electronic Intelligence Weekly

IBERO-AMERICAN NEWS DIGEST

Chile's Economy Is Tanking; Social Unrest Wells Up

Chile's economy is tanking, provoking social unrest and big problems for Socialist President Ricardo Lagos. A Washington-based Ibero-American military source who is very knowledgeable about Chile, reported that student demonstrators "almost killed Lagos" during May 23 demonstrations to protest new austerity measures—which include cutbacks in university budgets and plans to increase tuition, as well as to impose tax hikes on tobacco, alcohol, and fuel.

Wall Street continues to natter on about the great "health" and "stability" of the Chilean economy, ignoring an 8.3% unemployment rate which translates into 491,000 jobless. Even official sources admit that during the "miracle" years of Friedmanite economic policy, poverty increased substantially, and it has been growing steadily ever since.

President Lagos addressed the Congress with much fanfare on May 23 to announce new social and health-care programs, to convince people he is doing something about poverty. But the fact that these programs are to be financed by tax hikes, has caused anger inside the government and among the opposition. While Lagos spoke, thousands of students demonstrated nearby, trying to reach the Congress, and were violently repressed by police. Nonetheless, hooded demonstrators managed to attack and loot a local McDonald's, smashing windows, destroying cash registers, and tossing equipment onto the street.

In a recent visit to the port city of Iquique, close to the Peruvian border in the north, Lagos also came under attack from that city's Mayor, for failing to address the extremely arid region's desperate need for infrastructure. One plan mooted from the Chilean side over the past year, is to persuade Bolivia to provide the northern region with fresh water, in exchange for granting Bolivia some access to the Pacific (which it lost after the 1879-81 War of the Pacific). But the Iquique Mayor insists that what the region needs is physical integration with neighboring countries, and a coherent develoment plan.

Meanwhile, Chile's neighbors are alarmed at the fact that Chile is purchasing F-15 fighter jets; another source of alarm derives from Chile's recently signed "mutual defense" treaty with Great Britain, according to the Ibero-American military source cited above. Chile has always served as a frontman in the region for British interests, this source said, and given the conditions of instability in Ibero-America today, neighboring countries view its defense pact with London as extremely worrisome.

Venezuelan Government Implements Another Round of Austerity

The Venezuelan government has implemented another austerity "paquetazo", its second in 2002. For the first time in his three years in office, President Hugo Chavez did not personally announce a major inititive of his government, but had four ministers (Economics, Planning, Production & Trade, and Education) call a press conference May 30 to do the job, reported in Clarin and throughout the Venezuelan media.

The measures include upping the VAT tax by 1% (from 14.5% to 15.5%); adding a quarter-point increase in tax on all banking activities (Venezuelans will now pay a 1% tax on the total value of any check they write or cash); eliminating subsidies on low-octane fuels; increasing electricity rates; and imposing a 10-15% cut in government spending. The ministers urged the National Assembly—which has to approve the package—to quickly take up pension privatization.

The ministers claimed that these measures, combined with plans to seek $3.5 billion in international loans (with, they hope, IMF approval), can close the government's deficit of almost $9 billion. Of that, $6 billion is needed to meet amortization payments due on the debt.

But this imposition of greater austerity will only worsen the country's precipitious economic collapse. GNP in the first quarter of 2002 was 4.2% less than in the same period of 2001, and 6.5% less than in the fourth quarter of 2001. Oil revenues were 30% less in 2002 than the first quarter of 2001, but the drop in the oil price accounted for only part of the GNP fall. Manufacturing was down by 3.7%; sales volume fell by 3.5%; and construction fell by 9.2%, due principally to a 6.3% reduction in public projects.

With the currency, the bolivar, down 38% so far this year (it hit a new low of 1,151 to the dollar on May 30), international reserves at only $9.4 billion, the lowest level since 1996, and a further collapse of economic activity ensured by this new austerity, Venezuela is heading into debt crisis and insolvency.

Tensions in Venezuela Mount—U.S. Wants OAS Intervention; Venezuelan Govt Invites Carter To Mediate

U.S. State Department Policy Planning Chief Richard Haas travelled to Venezuela May 23, for an eyewitness reading of the Venezuelan political crisis. He met with President Hugo Chavez for two and one-half hours, as well as with the Vice President and with various opposition leaders, apparently concentrating his energies on getting all parties to agree to international mediation, whether by the United Nations, the Organization of American States, a group of countries, or a "prominent" world figure or two.

No specific agreement was reached, he reported in a press conference before leaving. Five days later, the U.S. Ambassador to the OAS, Roger Noriega, admitted in an address to the Permanent Council of the OAS, that the "deep political polarization" in Venezuela is, if anything, worse than it was during the April 11-13 coup and counter-coup (when President Chavez was ousted suddenly and then, just as suddenly, returned to power). The OAS is ready to jump in, he said.

No reality-oriented basis has been presented for resolving the crisis, however, and the situation is degenerating.

With 6-700 military officers, including 60% of the generals and admirals, facing trials or early "retirement" from the Armed Forces between now and the July 5 Independence Day ceremonies, the Institutional Military Front has announced it will organize a public vigil for June 1, and marches for June 8 and 20. Their war cry is that military promotions be based on merit, not political allegiance—the same cry of "meritocracy" which motivated the strike at the state oil company that led into the April 11-13 crisis.

Thus, uniformed military officers may soon be marching in the streets, while armed bands are built up within each camp. Chavez's "Bolivarian Popular Liberation Front" is circulating leaflets threatening to unleash "the mother of all retaliations" to bring "desolation and pestilence" down upon the heads of the middle and upper classes, while more calls for the creation of armed "citizens' militias against the Communist Dictatorship" circulate among the opposition.

Most recently, the Venezuelan government has invited former U.S. President Jimmy Carter to help facilitate talks with the opposition. Foreign Minister Jose Vicente Rangel wrote to Carter (who recently travelled to Cuba) inviting him to come to Caracas, but added that "we're not considering intervention; we're looking for a process to facilitate talks."

The invitation to Carter is the Chavez government's answer to U.S. attempts to have the OAS intervene in Venezuela as a mediator. Meantime, the situation on the ground in Venezuela remains extremely volatile, polarized, and potentially violent.

Mexican Farmers Demand Fox Remember the Word 'Protectionism'

Mexican agriculture associations are up in arms over the recently signed U.S. farm bill, which, they charge, will "finish off" Mexican agriculture, unless the Mexican government takes action to defend them. Exemplary of the ferment was a half-page ad placed by Regional Union of Fruit Producers of Chihuahua, in the daily Reforma on May 31. These farmers charged that they "see with desperation" that the Mexican government of Vicente Fox is rigorously enforcing international treaties which the United States hasn't the slightest intention of respecting. "Disloyal competition" by U.S. producers, inundating the Mexican market, means Mexican farms will go bankrupt and disappear, they warn. We need electricity, fertilizers, financing, subsidies, and "the complete suspension of implementation of NAFTA," while the impact of the U.S. farm subsidies is evaluated, says the ad. President Fox needs to "add the term protectionism back into his daily political work," given that it has been "erased" by his government, but is being systematically applied by Mexico's competitors. We producers "want to continue to be an active part of the national economy," the ad says. "Permit us to contribute to the enrichment of our country.... Permit us to work with and for Mexico."

Argentina Finally Does What IMF Demands, Overturns 'Economic Subversion' Law

Argentina's Senate finally did what the International Monetary Fund wanted, and overturned the country's "economic subversion" law—but just barely, and under wild circumstances, as reported in La Nacion and Clarin.

After seven and one-half hours of debate, voting on the Duhalde government's proposal to overturn the economic subversion law as demanded by the IMF was tied, 34 to 34. In an environment of enormous tension and down-to-the-wire deal-making, the government achieved victory only by incredible party maneuvers: One opposition Senator who wasn't expected to attend, showed up at the last minute, and threw everything into disarray. Then, through a deal with the Governor of Rio Negro, the Senator from that province, a Radical, suddenly left the room on the Governor's orders, depriving the opposition of a key vote. Once that had happened, the Senate's Provisional President (a Peronist) voted to break the tie. According to Senate rules, the Senate President has a "double vote"—one representing his party, and one as Senate President, and that is how the Peronists won.

Afterward, President Duhalde himself was overheard saying, "If the law hadn't been overturned, the truth is that I could not have stayed for one minute more in the government."

There was a great deal of anger among "rebel" Peronists who voted against the government, such as Jorge Busti of Entre Rios, who asserted that the economic subversion law "hadn't been an obstacle for 27 years to foreign investments," so what's all the blather about Argentina now having "juridical security" by overturning the law? Rioja Senator Jorge Yoma stated that "the overturning of the law was done so that foreign capital can now more easily leave the country."

Meanwhile, Eliza Carrio of Argentina's ARI Party called the overturning of the law "social genocide," an act representing a "self-amnesty to those who looted the country." By acceding to the IMF's demands, she charged, Argentina's political class "has committed suicide," and under conditions of "legal vacuum and a total absence of rules," the country will now enter into a "postwar period, without a war."

Deputy Carrio had headed up the Congressional commission which investigated a series of financial crimes in Argentina, including money-laundering and illegal capital flight, and her findings had been presented to the U.S. Senate's Permanent Subcommittee on Investigations in spring 2001, so she knows whereof she speaks. "The [overturning] of the economic subversion law was on the Fund's agenda, at the request of bankers who might be tried, and its overturning means the final impunity for capital flight and money laundering not associated with the drug trade," she charged. In statements to a program broadcast on CVN cable TV May 30, Carrio warned that now, with the Senate's action, "not only will several cases [prosecuting bankers] fall apart, but there will be other cases for the investigation of which, no law will exist."

Those who abetted the vote should be prosecuted as "traitors to the nation," according to a lawsuit brought before the courts in Buenos Aires, arguing that the May 30 Senate vote was illegal. This lawsuit and one other filed at the same time assert that, according to Article 57 of the Constitution, the Senate President—in this case Juan Carlos Maqueda—has only one vote, and only as a tie-breaker, rather than the two Maqueda in fact cast in the May 30 session.

Lawyer Juan Carlos Iglesias, who filed one of the suits, charges that "the large centers of world power" insisted "that we dedicate ourselves to abolishing laws for our national defense and protection, and prosecution of federal crimes—of which Argentina itself became a final victim." He is demanding that Maqueda and Radical Party Senator Amanda Isidori (who left the May 30 session as part of a deal to give the government the victory), be prosecuted as "traitors to the nation" and for "violation of the duties of public officials."

U.S. State Department Worried About Eliza Carrio

According to the May 29 issue of Clarin, the U.S. State Department is very worred about Argentine political leader Eliza Carrio, head of the ARI Party. Carrio made known that she had recently received an invitation from the State Department, which she turned down, to travel to Washington to meet with Bush Administration officials and U.S. businessmen. Carrio's popularity—she's getting 21% in Presidential preference polls—is an issue of concern in the Bush Administration, which wants to know more about her political ideas and platform, should she run for President. The U.S. embassy in Buenos Aires claims that the legislator's views are "contrary to U.S. interests," and State worries what would happen were she elected President. It has been reported, but is as yet unconfirmed, that Carrio recently again positively referenced Lyndon LaRouche's economic proposals during a radio interview.

Carrio rejected the U.S. invitation and commented that "the tours of Presidential candidates in the U.S. strike me as pathetic." She said she'd travelled to Washington many times, "but never so that I could be shown off as a candidate." A top aide to Secretary of State Colin Powell visited to Argentina a month ago to communicate that Washington didn't favor early elections (before December 2003), because, so the report went, the outcome would be too "unpredictable." But at a recent meeting between President Duhalde and Peronist governors, an agreement was reportedly made to move elections up to March 2003, which could heighten Washington's concern.

Brazil To Begin Commercial-Scale Production of Enriched Uranium

According to Folha de Sao Paulo and Estado de Sao Paulo, Brazil will begin commercial-scale production of enriched uranium in July, only the seventh country worldwide which has this capability. The production method employed, using advanced centrifuge technology, was developed by Brazil's naval research center at Aramar, Sao Paulo, in conjunction with Sao Paulo University's Energy Research Institute (Ipen). The technology is a spin-off of the Navy's ongoing work in building a nuclear submarine with national technology. The state company, Nuclear Industries of Brazil, will run the enrichment plant, in Resende, Rio de Janeiro. Large-scale enrichment was the only part of the full nuclear fuel cycle which Brazil had not previously controlled domestically.

Initially, the plant will supply 10% of the 120 tons a year needed to fuel Brazil's domestic nuclear plants, Angra I and II, with the goal of becoming self-sufficient within five years. This represents a significant savings, as the cost of enrichment represents 35% of the total cost of producing its nuclear fuel. Given Brazil's rich uranium deposits, the longer-term aim is to produce enough to export to the international market.

The usual interests are raising a stink about the Navy role in the enrichment plant (implying that this constitutes the "militarization of nuclear energy"), and charging that Rio de Janeiro's water supply might be threatened. But as the President of the Ipen, Claudio Rodrigues, remarked, "People will be happy knowing that this technology is reaching the productive sector."

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