2007 Wrap Up and a peek at 2008

As this will be our last newsletter of 2007, we wanted to review briefly some of the year’s highlights and then take a peek into 2008.

Highlighted themes in 2007 include Chavez’s reach for more power and the resulting international friction between himself and Lula in Brazil. Bolivia has struggled with a Constituent Assembly. Truth telling in Colombia has unveiled a host of close ties between politicians and paramilitaries, but nothing yet has touched President Uribe.

Ecuador is flirting with China and the idea of a new port in Manta, where the US currently operates a military Forward Operating Location. And Kirchner succeeded in placing his wife in the president’s seat in Argentina.

Political violence in Guatemala underlines the strengthening grip of organized crime on that country’s political class. And ongoing violence in Mexico, as well as violence across the border into the United States, has prompted the discussion and now debate over the Merida Initiative.

In 2008, many of these ongoing themes will evolve and likely come to a head. We’re most interested in observing how the Merida Initiative is actually implemented. Will private contractors such as Blackwater USA or Dyncorp actually be used? Could increased pressure on drug trafficking organizations in Mexico lead to a spill over effect into Central America?

The last thing Guatemala needs is more Mexican criminals. Already, President-elect Colom has his hands full. His first 100 days will undoubtedly be marked by attempts from Guatemalan organized crime to show him – overtly or covertly – just how much they control wide swaths of his country.

We’re also interested to see how the humanitarian exchange process plays out in Colombia. Might Betancourt see freedom? We hear that Uribe invited Lula to mediate a humanitarian exchange process during President Cristina Fernández de Kirchner’s inauguration. For Lula it would be an opportunity to show the region and the world that he can succeed where Chavez has failed – a perfect maneuver for what appears to be an indirect approach to usurp Chavez from his regional leadership role.It is one he has purchased, not earned.

What will happen when the Venezuelan Bolivar drops two zeros (or three for that matter) in January? This slight change in the Venezuelan currency is certainly more cosmetic than economically sensible, as is the recently adjusted Venezuelan hour. It doesn’t make much sense to move the clock by half an hour, does it? Inside Venezuela a galvanized opposition has some momentum. In 2008, we will see how and where this momentum is used. May we see Chavez’s political core crumble? Not likely, but it will be interesting to see if the military takes a more active role in checking the president.

Can Morales hold his country together? The recent declaration of autonomy from the low-lands provinces seems serious enough, but Morales has – as of this printing – not sent in any troops to force order or obedience. He took the time to travel to the MercoSur meeting, so he cannot be too worried about the apparent mess at home.

Lula recently visited with promise of more Petrobras investment. He also told Morales to have “patience, patience, and more patience” with the opposition. Sometimes all it takes are a few words. Lula will likely work to bring Bolivia back into the Brazilian sphere of influence, further asserting his regional leadership role over Chavez.

Meanwhile, inside Brazil, we will be watching two important issues. First, the aviation crisis is still not resolved. How will Lula manage to keep Brazil’s skies safe? Might there be another accident? We’ve seen on many occasions reports of near misses in Brazilian media that some how doesn’t make it to the international scene. Just as important is Lula’s recent loss in the Brazilian Congress over the CPMF tax – one that taxes the movement of money through Brazilian banks. The bottom line is Lula’s administration will have roughly US$ 20 billion less to spend on social programs to pass along to state and municipal budgets in 2008.

Internationally this loss could hurt Brazil’s investment grade, we’re told by the Financial Times and sources in Brasilia, but what does it mean for the Brazilian economy in the long run?

Overall, 2008 promises to be another interesting year in Latin America. For now, and through the end of 2007, we will simply observe...

Crime, politics, and three bullets in the head

Salvatore Mancuso, a paramilitary chief in Colombia, famously claimed control over a third of the Colombian Congress after the 2002 legislative elections. The truth behind this statement continues to unfold even today as more and more Colombian politicians on the national level fall to the so-called para-politico scandal. Colombian paramilitaries across the country were able to extended their reach to national politicians because prior to 2002 they completely controlled politics on a state and municipal level in many of Colombia’s departments.

Violence leading up to elections is the best evidence of the fact that organized crime has a hand in political matters, and while the recent municipal elections in Colombia were not as violent as those of the past, it remains a fact that former paramilitary leaders still control some municipalities in Colombia.

Observing this pattern across the region, there is a striking similarity between Colombia and Mexico.

Mexico is ruled by three political parties. The PAN, represented by the president, Felipe Calderón, has a strong presence in the Congress. The PRD occupies the second-most seats on the national level and sits as the main opposition party. And then there’s the PRI – a political party that holds relatively little sway on the national level but controls nearly all of the Mexican states from the governor down to literally hundreds of municipalities.

These states include: Sonora, Chihuahua, Coahuila, Nayarit, Nuevo Leon, Tamaulipas, Sinaloa, Durango, Veracruz, , Quintana Roo, and Yucatan among others. The states listed here, however, are arguably those most afflicted by Mexican organized crime.

Focusing on Tamaulipas, considered the head quarters of the Mexican drug trafficking organization known as the Gulf Cartel, we see that violence surrounding elections denotes a heavy presence of organized crime in local and state-level politics.

On 29 November, men in a Suburban, a Jeep Cherokee, and a pickup opened fire on the recently elected president of the border-town municipality of Rio Bravo, Antonio Guajardo Anzaldúa, who was exiting his offices with a federal police escort. After the rain of bullets, one of the attackers calmly opened the door of his pickup, walked over to Guajardo, and shot him three times in the head.

Later that day, a main Tamaulipas-state newspaper received a call from the Gulf Cartel, warning that when reporting the news of Guajardo’s death the reporters should be careful with that they print, according to Mexico’s El Proceso magazine.

Guajardo was a member of the Workers’ Party, part of the coalition formed by the PRD. He was a relatively unimportant politician in the grand scheme of Mexican politics, but he had information on PRI politicians in Tamaulipas that he insisted on using to denounce the presence of organized crime in state and municipal politics.

During his campaign, Guajardo focused on blowing the whistle on any and all PRI politicians or political appointees who had connections to the Gulf Cartel in Tamaulipas. He denounced the state’s governor, Eugenio Hernández Flores, as an accomplice of the Gulf Cartel. He denounced Servando López Moreno, who won the elections in the border municipality of Miguel Alemán. López, according to Guajardo, had already appointed Juan Felipe Hinojosa, father of a well known crime boss Carlos Hinjosa, as the municipality’s treasurer. And the list goes on, too long to share with you here.

Guajardo’s death and the following cover up underline the close relationship between organized crime and PRI politicians in Tamaulipas. But what about other states and other municipalities where organized crime likely controls politics as much as it does in Tamaulipas?

Consider that the PRI controls governorships and municipalities in just about every state where organized crime is a principle problem and you’ll get a sense of the possible depths of corruption Calderón must tackle as he fights to remove organized crime from his country.

Eventually we may see the day when an organized criminal boss declares that he controls a third of the Mexican Congress. It would be a stretch to make such assumptions now, but if that day comes, many will remember when Salvatore Mancuso said the same thing in Colombia in 2002 and then proved it by telling the truth and crushing the careers of various politicians in 2007.

Digging into Blackwater USA

Hugo Chavez has lost the referendum to vote his reform package into law. And some news has surfaced that a group out of Serbia might have had something to do with the “no” vote, but more on that next week. We’re also looking in why the RC-26B aircraft is not part of the Merida Initiative package and why it should play a central role.

But for now, we're digging into Blackwater USA...

When two US government inspectors were asked by a US Border Patrol Agent if they were US citizens, they replied, “yes.” It was all they needed to enter the country at a land crossing between US and Mexico. No government issued form of identification was requested. The Border Patrol Agent never even got up from his seat, located some 10 feet away.

The agent obviously didn’t know that the two investigators were working for the Government Accountability Office on a report requested by the House of Representatives Committee on Homeland Security. The report, entitled, “Despite Progress, Weaknesses in Traveler Inspections Exist at Our Nation’s Ports of Entry,” found that both the Department of Homeland Security and the Border Patrol had some serious issues to overcome, including communication between field offices and headquarters, and training.

Training is an expensive process the US government would rather outsource. It has been well documented that contracts awarded by the Department of Defense (DOD) have focused on training Iraqi policemen and others in the Middle East, but what about training US agents inside the United States?

Such considerations have been on the books for Blackwater USA since at least 2005, when the company’s president at the time, Gary Jackson, testified before the House of Representatives Committee on Homeland Security in May of that year. “Just as the private sector has responded in moving mail and packages around the world more efficiently, so too can Blackwater respond to the customs’ and Border Patrol’s emerging and compelling training needs,” Jackson told Committee members.

Since early 2007, Blackwater has worked hard to lobby the right politicians in San Diego County for a license to operate a new training facility located in Potrero, California. A number of news stories have outlined the battle between Blackwater and local residents, numbering around 850 in the rural border town community, who don’t want the so-called “mercenary training camp” installed in their backyard.

What’s more, the training camp would be located less than ten miles from the US-Mexico border. The selection of the site, according to Blackwater, has nothing to do with the company’s interest in increased involvement in border patrol and the United States’ efforts to combat narco-trafficking on the US-Mexico border.

But this base’s location become more interesting given the results of a recent DOD bidding process for a US$15 billion dollar contract to combat narcoterrorism.

On 14 September, Blackwater USA, along with four other government contractors received slices of a multi-billion dollar contract awarded by the Pentagons’ Counter-Narcoterrorism Technology Program Office. Presumably, Blackwater will help with the development of surveillance technology used to stop “narcoterrorists” crossing into the United States from Mexico.

These facts, when considered together with the news that military contractors will be used to train Mexican law enforcement officials as part of the Merida Initiative, or Plan Mexico, draws a narrow bead on Blackwater as a likely candidate for a bidding process that will award the contract to train Mexicans how to fly the surveillance helicopters used to patrol the Mexican side of the border.

If this is the case, we should consider two more questions. First, how will the Mexican government react to Blackwater's presence so close to their border and on Mexican soil to train Mexican law enforcement officials. Second, in the long run, how involved will companies such as Blackwater become in protecting the US-Mexico border? As we've seen in Iraq, mission creep is tough to avoid.

Making Millions from Behind Bars

When Brazilian authorities extradited Luiz Fernando da Costa (A.K.A. Fernandinho Beira-Mar) from Colombia in early 2001, he was already a well known criminal in Brazil. He had escaped from prison twice, orchestrated a number of assassinations from his prison cell, formed a business relationship with the First Capital Command, had managed to strengthen his Rio de Janeiro-based organized criminal group, known as the Red Command, to the point of unprecedented success, and perhaps most importantly for him, had secured a cocaine-for-guns bartering agreement with the FARC in Colombia.

He was living among the FARC as a fugitive from Brazilian law in 2001 seeking treatment for a gunshot wound when the Colombian military captured him and his girlfriend, Jacqueline Alcantara de Moares, after learning from Fernando’s pilot where they were located deep in the Colombian Amazon. The two lovers were immediately separated. And when Fernando entered the Brazilian justice system, the media portrayed him as Brazil’s top drug trafficker, while the police and politicians called him a small fish in a big pond.

Last week, the Brazilian Federal Police concluded an 18-moth investigation called Operation Felix designed specifically to detect and dismantle Fernando’s drug trafficking network. By the time the Feds had finished their blitz of arrests and seizures during the week of 19 November, they had arrested Jacqueline, now Fernando’s wife, and seized hundreds of thousands of US dollars, and thousands more Brazilian reales, apart from a car wash, a gas distribution depot, and an Internet café.

During the investigation, the Feds learned that Fernando, through lawyers, his brother in law, and his wife, had grown his international smuggling network from 2001 from prison. The network includes operations in Rio de Janeiro, Sao Paulo, the southern Brazilian state of Paraná, which borders with Paraguay, and the state of Mato Grosso do Sul, which borders Bolivia.

Fernando had operated a ranch in Paraguay, complete with a runway, from where he received cocaine shipments likely from Bolivia, a second country where the Federal Police think he has long-standing contacts. Fernando’s relationship with the FARC never ended, as evidence from messages seized at Jacqueline’s house in a Rio de Janeiro suburb proved.

The Federal Police now admit that Fernando, along with his wife, commanded a network of organized criminal groups across Brazil, providing them with cocaine and other supplies, while taking a cut off the top. His wife alone earned some US$250,000 a month from the Rio branch of their enterprise, focused mainly on supplying the Red Command – perhaps others - with drugs and guns. This is not much money by Colombian or Mexican standards, but an exceptional amount of money considering the man behind the business has been literally behind bars since 2001.

This case is another reason why Latin America needs a regional police force. Ameripol is already in place, but we’re not sure if it will have any effect, as information and intelligence sharing is tricky business.

Meanwhile, news out of Venezuela indicates that the military there is not at all happy with Chavez’s proposed Constitutional reforms, to be voted upon by popular referendum on 2 December. According to the Miami Herald, one of Chavez’s reforms would have nurfed the National Guard, placing more importance on the so-called “Territorial Guard”. Many viewed this move as one that would put more power in the hands of the men and women most loyal to Chavez.

High-level officers, unhappy with this change, circulated emails, while in Fort Tiuna, the country’s largest barracks based in Caracas, anti-reform pamphlets were passed among the rank and file. This particular proposal was made public on 15 August. And Chavez removed it from the list on 25 August – an interesting indication of the influence the military still has on the Venezuelan president.

Finally, seven people fell to the death in Salvador de Bahia while attending a soccer game there. The section of stadium seating where these unfortunate fans were jumping and screaming for their team fell away (see photo of the missing section and ambulance on the street below). Such infrastructure problems continue to plague Brazil, especially in the aviation sector. But the death of soccer fans due to poorly maintained stadium seating is an embarrassing incident in a country that has recently accepted the vote to host the World Cup in 2014.

REUTERS/Welton-agencia O Globo

Cross-border intel and assassins, and challenges in Guatemala

An interesting piece from the San Diego Tribune reports that a Mexican intelligence officer will soon begin working with US agents based at the Immigration and Customs Enforcement (ICE) bureau in San Diego. Of course, such an arrangement raises questions of corruption and the dangers of leaks when sharing intelligence.

“You’ve got to go down that road cautiously, but at the same time we’ve got to go full speed ahead,” the San Diego ICE bureau chief told the Tribune.

I would expect that if this pilot program prospers, there will be more Mexican intelligence officials working across the border with ICE investigation units in Phoenix, El Paso, Dallas, Houston, Laredo, and Brownsville.

In Dallas a young man names Rosalio Reta killed for the first time at 13. Four years later, he’s killed some 30 people, all for the enforcement arm of Mexico’s Gulf Cartel known as Los Zetas. Operating as a state-side assassin for Los Zetas, Reta is just one of many young men US authorities believe to be closely associated with Mexican organized crime.

Reta turned himself into the DEA. Calling an agent from prison in Mexico, Reta confessed to two homicides in Texas, hoping to be extradited. Such was his fear of Zeta reprisal for having made a mistake that allowed his target to live and land him in a Mexican jail.

Meanwhile, as Guatemalan president-elect Alvaro Colom prepares to take power in January, the outgoing Public Minister, who oversees public security, held a press conference to announce that 14,000 unserved arrest warrants have accumulated over the past three years. But the Guatemalan National Police only has 35 men assigned to the task of serving these warrants. It was a small bomb for Guatemalan public security, one that underscores, beyond any speculation about organized crime or street gangs, how far the new president has to go before he can make up for his predecessor’s lack of attention on basic public security matters.

Meanwhile, in neighboring Belize, authorities are beginning to report the presence of Mara Salvatrucha, the same street gang whose presence and activities in Guatemala, Honduras, and El Salvador is considered a threat to national security.

This gang’s presence in El Salvador, for example, contributes to recently reported statistics that place the murder rate between January and September 2007 at ten people a day. The total number is 2,677. And this is good news, as this number is 281 less than the number of those murdered during the same time period last year.

Tons of money, Org. Crime victory, and a blow to Chavez

At the end of last week, Mexican authorities seized the largest cocaine shipment in the country’s history – 21.3 metric tons (23.5 tons) according to the Attorney General’s office. The cocaine has an estimated street value of USD 2.7 billion, based on calculations that use the US government’s average price of USD 118.70 for a gram of cocaine sold inside the United States. I’ve seen more conservative figures, closer to USD 1.4 billion, but with a little quick math it’s easy to see how much Mexican drug trafficking organizations stand to earn a year.

(picture from Mexico's office of the Attorney General)

If 21.3 metric tons of cocaine is worth USD 2.7 billion inside the United States, then the 290 metric tons the US Government Accountability Office (GAO) estimates as the annual flow of cocaine from Mexico to the United States would be worth near USD 35 billion.

Now compare those earnings to the USD 1.4 billion that the US government wants to spend to help Mexico combat drug trafficking organizations that at the end of October were brazen enough to try and import 21 metric tons of cocaine into Mexico. Something doesn’t add up.

While Mexican authorities were counting sacks of cocaine, Guatemalan authorities were counting votes. Left of center candidate Alvaro Colom won the presidential run-off election, defeating his opponent and former military intelligence office Otto Perez. Two facts emerged from these results: a relatively low number of Guatemalans voted in the run-off elections and by choosing Colom, those that voted indicated they do not support the mano dura or “iron fist” policies promoted by Perez.

In Honduras and El Salvador, these policies have lead to increased levels of violence. Cops arrest individuals with tattoos because they assume they’re pandilleros, or street gang members. The police crackdown creates a response from the pandilleros, who in turn convince cops that death squads are the best way to exterminate the street gangs. The net result is extrajudicial killings and bold, gang-style murders. Neither are pretty.

So Guatemalans chose to avoid that trap and go with a man who is more focused on economics and reform, but who many believe has made deals with organized crime. That’s bad news, especially in Guatemala. According to the GAO, some 70 percent of the cocaine that enters Mexico passes through Guatemala. But it gets worse. Reports say Colom has "vowed" to use the Guatemalan army to combat drug trafficking organizations. We'll see if he comes through on that promise.

Part of the USD 1.4 billion counter-narcotics package will go to Central America. But if US authorities think they’ll get real help from the Colom administration, they may run into some serious challenges. Time will tell.

Meanwhile, former Venezuelan Defense Minister and General Raul Baudel broke camp with long-time friend and Venezuelan president Hugo Chavez this week when he told the nation to vote against Chavez’s proposed constitutional reforms, passed by the National Assembly on 2 November.

Baudel is now on a nation-wide campaign to give Venezuelan’s an insider’s argument for why the nation should not hand over authoritarian control to Hugo Chavez, who, by the way, is quite upset. Apart from Baudel’s significant defection, Chavez must deal with thousands of students who for over a year now have continued to build an increasingly vocal segment of the opposition.

The students remain a thorn in Chavez’s side, but Buadel’s participation in the opposition could turn into something altogether more interesting and significant as we march closer to the 2 December nation-wide referendum to approve or reject Chavez’s reforms package. Approval would be tantamount to the last nail in the coffin for Venezuelan democracy. Rejection would be a major blow to Chavez’s political position. Again, time will tell…

Spies, sovereignty, and drug trafficking

Media coverage of the Merida Initiative (Plan Mexico) continues as strong as ever. The IHT completed an interesting piece on the money laundering component, suggesting that Mexican organized crime launders up to USD 10 billion in US banks every year. The Washington Post did a piece on gun smuggling, which was not well received in some circles. I also did a piece on the same topic, here.

Most cannot deny that as many as 2,000 guns were smuggled from the US to Mexico a day during the six-year administration of former Mexican president Vicente Fox, but many will disagree over how the US plays a role in this very important aspect of the US-Mexico drug trade. Adam Isacson has completed an interesting comparison of the proposed Mexico aid package with Plan Colombia. The Mexican package, by many accounts, is a great start but could use more money and less focus on the military solution.

One thing is for sure. The front-line of what Washington calls the “War on Drugs” has moved from Colombia to the US-Mexico border. The enforcement arm of the Gulf Cartel, Los Zetas, paid a man in Laredo, Texas some USD 15,000 to kill an American citizen in 2006, for example. Members of Los Zetas are rumored to have taken control of the I-35 interstate corridor, maintaining a presence of many three-man cells that carry out orders from car theft to distribution and, at times, assassination.

Their presence in Texas and other US states was, in part, what prompted the Bush administration to meet with Mexican president Felipe Calderon in Merida, Mexico last year to discuss a bilateral policy to combat drug trafficking – hence the “Merida Initiative”.

Meanwhile, both the United States and Colombia have for some time now operated spies on Mexican soil both with and without the permission of the Mexican Justice department.

One FBI agent, Samuel Martinez, managed to infiltrate Mexican organized criminal rings and remain there for years. He worked this beat for 26 years in total. The DEA has also placed undercover agents, and as one anonymous DEA official told a Mexican daily, sometimes they can’t tell the Mexican government everything because the agent must react to the situation at hand, which sometimes means entering Mexico unannounced. His priority is to maintain his cover, not respect Mexican sovereignty – an understandable position I think.

When Colombian Attorney General, Marioo Iguarán, told CNN en Español that Colombian spies have entered Mexico as undercover agents without alerting Mexican officials, it prompted a strong denial from the Mexican Attorney General and Minister of Foreign Affairs. To be clear, in most cases, Mexican officials are alerted. But sometimes they cannot be.

Iguaran pointed out a very relevant fact: drug trafficking organizations are now more international than ever. Years ago, there were clear lines between the Colombians, Mexicans, and those in between in the Caribbean or Central America. But as the drug trade has been democratized to a level where many smaller organizations work with a number of specialists from smugglers and money launderers to distributors, producers and chemical importers, the international nature of the drug trade has placed a very real strain on sovereignty. Moving forward with any transnational plan to combat drug trafficking organizations must take into account that at times sovereignty must be ignored, otherwise the traffickers have already won.

A Drop in the Bucket

I have decided to increase the publication of this newsletter into a weekly affair. I hope you do not mind. I will share with you some clips from the Internet, including my own publications, but I’d also like to share with you more of the information I receive from interviews with government officials, businessmen, analysts, and others from around the region.

In this edition:

We continue work on our third report on Mexican organized crime. Some of the information we have learned, however, I’d like to share with you here given the current media flack surrounding the Merida Initiative, also known as Plan Mexico.

Lambasted by media on both sides of the border, at a glance it would seem this plan to spend some USD 1.4 billion over three years to combat drug trafficking through Mexico is a step in the right direction. It is certainly more than the current USD 40 million that the US spends on anti-narcotic support in Mexico.

Mexican observers, however, have pointed out that USD 1.4 billion is about the same amount the US military spends on fuel over one month in Iraq. By comparison, Mexico figures relatively unimportant.

Mexican press has also pointed out that when compared to the assumed earning of Mexican drug trafficking organizations (DTOs), the money for the Merida Initiative falls short. Mexican DTOs earn some USD 30 billion a year, compared to the some USD 500 million this plan intends to spend on equipment, support, and training. One Mexican daily figures Mexican DTOs have 21 times the spending power of “Plan Mexico”.

Training is another issue. Some observers suggested that private military contractor, Dyncorp, had been selected to carry out much of the training of Mexican anti-narcotic police. But a recent conversation I had with a Mexican security official suggests that BlackWater might actually get the job. It will likely come down to lobbying in Washington. Either way, it seems clear the US is interested in using private contractors in Mexico.

On the Mexican side of the border, such an announcement comes across as an insult. Already sour about the Vietnam-era helicopters the US handed over for anti-narcotic recon missions that are now useless due to a lack of maintenance support from the US, Mexican officials are worried about receiving old equipment from the Colombian front of the so-called “war on drugs”. Now they are faced with the probability of US officials telling them that if they want the help, they will take it from private contractors.

Given the current media coverage of the BlackWater incident in Iraq that left many civilians dead, such a proposition is a bitter pill.

Another issue is trust. While Mexican officials from public security, defense, national police, and other areas clamor over who will get to play with what toys, US officials look across the landscape of Mexican leaders and see very few they trust. Apart from Mexican president Felipe Calderon, who seems to have a good rapport with US officials, the other is the attorney general, Eduardo Medina Mora, who in the past has served as the Secretary of Public Security.

Finally, and in the best interests of keeping this piece short, I would add my own worry about the US government’s commitment. Spending USD 500 million a year for three years is a drop in the bucket. Mexico will need much more support over a longer period of time to pull itself from the vice grip of organized time. I understand the limitations of Bush’s ability to move anything forward in Washington and applaud his efforts to move forward this plan, but it seems to me too little too late. I hope the next US president is wise enough to realize that Mexico and the border lands deserve much more attention than what USD 500 million dollars a year will buy.

Next week, I’d like to share with you the spy games going on behind the scenes between Venezuela, Colombia, and Mexico.

Correa is not Chavez, Hostage Talks, and a new report

I’d like to announce that we’re working on part three of our ongoing series on organized crime in Mexico. Parts I and II are available on my website here. This time around we’ll focus on the pressure cracks that have begun to form between the organized criminal factions in Mexico that so far can be divided into four large groups. Two groups, specifically the Gulf Cartel and Sinaloa Federation, have begun to show some signs of stress.

Fractures due to ongoing pressure from the Calderon administration may manifest themselves into smaller drug trafficking organizations. These considerations as well as organizational charts and maps, and a discussion of the reasons why organized crime may team up with insurgents in Mexico will all be included in our upcoming report. I expect to publish it via my website by the end of November.

In other news, Ecuador has moved forward with a constituent assembly that with representatives from around the country will meet and debate the governing law of the country, to be enshrined in a new constitution. The president, Rafael Correa, holds a majority position in the assembly and is likely to push through progressive changes that, like in Bolivia, many Ecuadorians hope will grant more rights and status to the country’s poor and disenfranchised parts of society.

This policy, however, has proven unpopular with the right wing parties in Ecuador as well as international press that tends to lump Correa together with Bolivian president Evo Morales and Venezuelan president Hugo Chavez. While all three are happy to hug and smile for the cameras, they are quite different. Correa is clearly not Chavez.

Meanwhile, Chavez continues to outpace change in Venezuela. His constant push to force Venezuela through the reformations necessary to mold Venezuela into his own vision of the ideal country has created a serious strain on institutional capacity there. Government offices are simply not well equipped to maintain the president’s rhetorical pace. As they fall behind, corruption and incompetence fill the gap. It seems that even with billions you can’t buy a revolution. Even Castro is telling Chavez to slow down and administer the administration.

Yet Chavez continues to push his agenda on the international stage. His current foray into Colombian affairs, trying to negotiate a humanitarian exchange between the Revolutionary Armed Forces of Colombia and the Uribe administration may create some positive outcome for FARC hostages, but it’s unlikely Uribe will budge on any peace agreement. Meanwhile, Chavez continues to lose precious time at home, where many Venezuelans have begun to openly question the direction of this “revolution”.

Hitting the highlights after a long absence

This is number 6/2007. My apologies for the long absence. We are back. I will endeavor to produce this newsletter once a month at the very least. Since March, I have been working with a European company, Riskline, covering political risk and security in the region. We also have a developing blog. It has been time consuming but rewarding work! My own website, where you may find commentary and analysis on politics, security, and energy in the region, has been updated (mostly) as of this posting.

In this edition:

So many items are worth mention. I will try to cover the highlights here and get into more detail in future posts.

The Brazilian president's response to the worst aircraft accident in Brazilian history was dismal at best. The country suffers from a significant lack of infrastructure development, and the bureaucracy that supervises commercial aviation in Brazil is complicated and stuffed with political appointees. Many have little to no experience with matters of aviation security.

In Argentina, a couple recent scandals, one involving US$ 800,000 illegally brought to Argentina by a Venezuelan businessman on a private jet chartered by the Argentine national energy company, have tainted president Nestor Kirchner's popularity a little. But they seem to have not affected his wife's campaign for president. Elections are set for October. All expect Kirchner's wife to win, which means little by way of a chance in governance or economic policy - not a good sign for the country's long term growth and stability.

In Ecuador and Bolivia, presidents Rafael Correa and Evo Morales continue to push forward with a Constituent Assembly to rewrite the country's constitution, re-founding it to reflect the needs of the poor. In Bolivia, the process has been met with widespread protests, some for others against the government. Lately, Evo's left flank has become rankled over their perception of his soft stance on reform, a trend that might force Morales into the middle of protests from the both ends of the Bolivian political spectrum. In Ecuador, Correa remains popular but he has only just begun the process.

Venezuela's Hugo Chavez continues to push forward with Socialist reforms at home while purchasing support abroad. He has encountered significant resistance in trying to reform Venezuela's political system under one party, and a string of corruption scandals pointing at Venezuelan energy company PDVSA have begun to attract negative attention at the domestic level. The latest scandal involving the Venezuelan businessman in Argentina has also chilled relations between the two countries. To save face, Kirchner is demanding that Chavez investigate the corruption on his end, but that would force Chavez to face the ugly truth about corruption in his country. It's a stand off, but Kirchner will grow quiet soon. After all, it was Chavez who was just in Argentina to buy yet another US$ 500 million in Argentine government bonds.

In Guatemala, presidential and congressional elections set for September have grown ugly. Over 50 people have been killed in a string of events that points to the close involvement of organized crime in the Guatemalan political field. Financial support of municipal and departmental candidates will ensure a leap forward for organized crime in terms of controlling Guatemalan politicians. The future for this Central American country does not look good. I suspect it will become a much more violent place in the very near future.

Meanwhile, presidents George W. Bush and Felipe Calderon of Mexico are expected to announce the latest developments of a closely guarded plan for the two countries to cooperate in the latest front for Washington's War on Drugs. It has become hard to ignore the violence along the US-Mexico border. And since Calderon has come into office (December 2006), he has proven his determination to take the fight to his country's criminals, a posture that has earned him some respect in Washington. There are many challenges ahead for a US-Mexico plan, but both sides are seriously talking and Mexican security is on President Bush's agenda - something that never happened during the administration of Vicente Fox.

Fighter Planes, Robberies in Rio, and Million Dollar Cars

This is number 5/2007. Our Mexico report, entitled "Calderon's Plan for Mexico", is ready. Research on Russian and Iranian influence in Latin America continues, albeit slowly.

In this edition:

Hugo Chavez continues to force forward his revolution. Apart from the 28 May closure of Venezuela's oldest independent media outlet, he has threatened to nationalize the country's banks and largest steel producer, and has accused both of corruption. The steel producer, Sidor, is controlled by Luxembourg-based Ternium SA. One of Chavez's closest supporters, Luis Tascon, accused PDVSA of corruptive practices on 10 May, citing a US$ 70 million dollar contract that was "given" to a Colombian company that neither bid on the contract nor has the financial or engineering resources to complete the job.

Meanwhile, rumors coming out of the Venezuelan's oil sector state that any attempt to stop or slowdown production activities at either Cerro Negro, recently ceded by ExxonMobil, or Petrosuata and Hamaca, soon to be ceded by ConocoPhillips, will be considered as sabotage by the Venezuelan government. Apparently Chavez's forceful takeover and ownership of oil production in Venezuela could very well lead to reduced oil production there. Few are surprised.

What is also not surprising is that sales of Rolls Royce luxury vehicles in Venezuela have soared. The model that costs US$1 million has sold 200 units and counting in 2007. The company thought it would only sell seven.

In Bolivia, there is talk of purchasing a fleet of 12 to 20 AT-29 SuperTucano jet prop fighter/attack plans from Brazilian company Embraer. This is the same model airplane the US would not allow Embraer to sell Venezuela. If allowed to move forward, the 100 million dollar sale would be financed by Brazilian development bank BNDES. Delivery of the planes could be as soon as the end of this year. Some question this sale as Bolivia has not until recently expressed a desire in these aircraft.

Brazilian oil giant, Petrobras, exported at least 12 million liters of ethanol to the United States in May and is considering purchasing holding tanks closer to the point in entry inside the United States. The wholesale price of Brazilian ethanol has dropped by 13.8 percent in recent weeks, in part pushing Petrobras to increase production.

Finally, intelligence coming from the Brazil-Bolivian border indicates a spike in the transfer of cocaine from Bolivia to Brazil in the coming months. A representative from the US State Department warned Rio de Janeiro state governor Sergio Cabral of this eventuality.

Meeting with the US ambassador to Brazil during dinner, Cabral noted that his team was working hard to secure Rio ahead of the upcoming Pan American games. What the ambassador didn't tell Cabral was that one day before their dinner date dozens of employees, who work at the US Consulate in downtown Rio, watched as two men robbed a third during the lunch rush hour. Before they made good their escape, a fourth attacked the gunmen, killing one with his own firearm. He then assaulted the other and detained him until police arrived some 15 minutes later.

Ethanol Gains Traction

This is number 4/2007. I have been on the road for most of the month of April. Work on our Mexico report and the upcoming Iran & Russia report is moving forward slowly but will pick up pace through May. After spending some time in Washington, DC, it's become clear ethanol has gained traction where other ideas and policies out of Latin America have not.

In this edition:

Brazil has breeched the gap with Washington through Ethanol. According to some people I met with in DC, the head US diplomat for Latin America, Tom Shannon, has been pushing the formation of a policy bridge between Brazil and US vis-a-vis ethanol for some time. But it took more than a series of tours to Latin American and hollow agreements.

When Brazilian president Lula visited Bush at Camp David, it marked a clear division between Lula's administration and the Brazilian foreign policy camp, led by Celso Amorim and based in Itamaraty. The follow through and real policy implementation team is now the Inter-American Ethanol Alliance, led by Jeb Bush. What at first looked like a hoax has begun to look more like a win-win ethanol alliance.

Brazil, however, has not stopped with the United States. A memorandum of understanding was signed in mid-April between Petrobras and PetroEcuador. The two countries will work to produce and distribute biofuels and ethanol in Ecuador. A similar project is underway in Peru. On 18 April, the Peruvian Council of Ministers approved legislation that will make the use of biofuels obligatory in Peru. To that end, the Peruvian Agrimisa consortium will begin in June the cultivation of 23,000 hectares of sugarcane in the department of Piura to produce sugar and ethanol. It will be a US$ 80 million investment.

Brazil has also reached out to Japan. On 22 February, Marubeni Corporation, Japan's fifth largest trading company, has invested US$ 40 million in a biodiesel join venture with Brazilian grain trader Agrenco Group.

Mexico, like Venezuela, has pulled away from an ethanol initiative. Both countries are major oil producers, and both compete with Brazil for regional leadership. Venezuela has resumed ethanol imports from Brazil, however, but Mexico has announced that it will not focus on ethanol in the short term.

Rather, president Calderon has chosen to focus on a development initiative, Plan Puebla-Panama, that will incorporate Central America and Colombia. This sub-regional initiative has strong support from Colombian president Uribe, something it didn't have when Calderon's predecessor, Vicente Fox, first announced this plan years ago.

Iranian Embassies, Coca Tea, and a Failed Tour

This is number 3/2007. We are nearly finished with a report on Mexico's drug wars, updating a piece I published on October on the possibility of a Mexican Mega Cartel. A report on Iranian and Russian influence in South America will be the last for some time. We hope to receive your feedback on the usefulness of these reports over the coming weeks.

In this edition:

Upon publishing version 2/2007, where I mentioned the possibilities of heavy crude refineries in China, I received messages from three independent sources, one of them with Brazilian energy company Petrobras, saying this was indeed the case. We should watch closely Chinese maneuvering to buy more Venezuelan oil.

Meanwhile, Iran has announced it will open embassies in Chile, Colombia, Ecuador, and Uruguay with a representative office in Bolivia. At first glance this line may appear troubling. Iran, however, would like to assure you that Latin America holds opportunity for Iranian businesses. Embassies are the first point of contact for any country to tighten ties with another. I wonder about what Iran intends to do in these Latino states once the embassies are established. Stay tuned.

Two coca leaf factories are currently under construction in Bolivia. With Venezuelan funding, these coca factories will begin producing coca leaf products, such as coca tea, by September or October of this year. There is little market for coca leaf products in Venezuela. The United States is the real market for a product like coca tea. But it is the last country that will import legal coca products. The irony is that by de-vilifying the coca leaf, and importing coca tea the US government could bring Bolivia closer, using Venezuelan-funded factories to revolutionize the relationship between Washington and Evo Morales.

Chavez has gone on the offensive since arresting a father and son team in the National Guard for plotting to kill him. The Venezuelan leader will now hunt for possible threats to his life. Chavez benefits from revealing plans to assassinate him however real or fabricated. They play into his strategy of constantly reminding his followers of the struggle associated with the revolution. Yet real attempts on his life are likely to increase in the coming months. Political risk is alive and well in Venezuela.

Finally, the results are in. US President George W Bush's tour of Latin America was a failure. He signed no major deals, made no promises, and was forced to swallow the harsh words of thousands of protestors. His press secretary, former Fox journalist Tony Snow, made no announcement to the press pool traveling with the president until 17 hours before the end of the tour. Even Guatemala, long a client state of the United States, turned the screws on the immigration issue - not at all fearful of a reprisal for bad behavior. Bush's tour served to solidify one fact: Washington lost Latin America under his watch.

Heavy Crude, Countering Chavez, and Plan Afghanistan

This is number 2/2007. Our Mara Salvatrucha report is complete. We are pleased to say we were able to include never before published information gathered from transcripts of witness testimony. We will now begin work on Mexico's drug wars, updating a piece I published on October on the possibility of a Mexican Mega Cartel. Please note, some of you did not receive the 1/2007 edition due to a technical error. Please use the blog link below to review that material.

In this edition:

Venezuela has signed a US$3.5 billion oil deal with Japan. Japanese companies Mitsui and Marubeni have signed a contract with Venezuelan energy company PDVSA to import crude over the next 15 years. It is the largest energy deal with an Asian company that I have seen.

As many are aware, Venezuela's heavy crude is not a market favorite, but I've recently learned that this crude is precisely what the market may consume in the future. According to sources in India, state-run Indian Oil Corp. has begun placing orders for heavy crude, to be refined at an Indian refinery. If India is convinced heavy crude is the wave of the future, then I must wonder about China. Sources in Petrobras here in Brazil tell me China talks of building heavy crude refineries. The potential effect is two-fold. One, the United States will soon be one of three major markets able to refine heavy crude. And two, the price for heavy crude will stay high. This has obvious implications for the future of Chavez's regime in Venezuela, the world's leading source of heavy crude oil.

Meanwhile, there is no Latin American leader well positioned to counter Chavez. His ideas roam free across Latino lands, and while we must wait until the next round of presidential elections to see how the region has taken to his 21st Century Socialism, it's clear to me and many of us down here that Bolivarianism will continue to take root as Washington's influence in this region continues to fade.

This year will be one of engagement, according to Tom Shannon, the State Department's top diplomat for Latin America. His recent visit to Brazil, however, appears to have been derailed by the revelations of the former Brazilian ambassador to the United States who claims Brazilian foreign policy is still very much influenced by old-school Socialists. Too bad the US has identified Brazil as the country to counter Chavez. We'll see what the future holds. I've been told by contacts in the Whitehouse that President Bush is "obsessed" with Iraq. So we'll see just how much the US will engage in Latin America.

Meanwhile, William Wood, the former US ambassador to Colombia, will soon become the US ambassador to Afghanistan. One country is the world's leading supplier of cocaine, the other heroin. I'm very concerned that failed US policy in Colombia will be repeated in Afghanistan. There is widespread concern that the so-called Drug War will have a negative impact on Afghanistan's future.

By most accounts USAID, the US government's agency that disperses development aid and implements development policy is in need of some serious attention. I have documented USAID's dismal work in Bolivia. It's work in Colombia has had limited success. A contact who has returned from a development post in Afghanistan recently wrote:

"At the end of December I finished up 15 months in Gardez, Paktya, in SE Afghanistan, overseeing USAID-funded reconstruction projects. I don't think I went in with any starry-eyed notions about the US-led effort there, but seeing first-hand the degree to which it is misguided and insincere was astounding nonetheless."

He continues: "I think there's a depth of cynicism in many of these efforts that is hard to fathom-- the Drug War is one of the clearest examples, I guess. The facts are arrayed against it so clearly-- it's ruled by an orthodox faith that allows for very little questioning, but more that that there's a tremendous inertia of interests-- the machinery of the Drug War already in place that needs it to survive, the various entities raking in the profits from the government contracts, etc. I really wonder how many people in leadership positions who espouse the Drug War religion are actual believers."

Gang Busters, Unmanned aircraft, and Ruling by Decree

This is number 1/2007. Our Mara Salvatrucha report is nearly complete. We are waiting on a court reporter in Maryland to send over the transcripts of witness testimony that, so far, have not been released to the public. The results for January's monthly survey are in. Once we publish the Mara Salvatrucha report, we will begin work on Mexico's drug wars. You can still find our December report on the FARC's international network here.

In this edition:

The Mara Salvatrucha, the United States' most violent street gang according to the FBI, has received much attention from the press this year. A trend towards greater organization suggests the gang may soon become much more than thugs. And the government's use of racketeering charges to prove organization has for the first time etched in public records evidence of the gang's increased levels of sophistication.

Meanwhile, a continuing resolution passed by the outgoing Congress late last year has catalyzed a hiring freeze at the Drug Enforcement Administration. The DEA has suffered budget cuts, and its operations on the US/Mexico border appear to be on the road towards friction, not cooperation, with the Bureau of Immigration and Customs Enforcement as well as the FBI. These are trying times for the DEA because Washington has put the drug war on hold while it chases after terrorists and democracy in the Middle East.

Mexico, however, has raced forward with its war on drugs. President Felipe Calderon has taken the fight to Mexican organized crime. He's sent troops to Michoacan, Baja California (Tijuana), and other states. Calderon has also begun using extradition to the United States as a tool. Already he's extradited the leader of the Gulf Cartel and as of the last week of January has some 9,000 troops hunting for El Chapo, the leader of the Sinaloa Federation. I'm waiting to see how the criminals fight back...

...Iran will soon open an embassy in Nicaragua. After a three day tour, guided by Venezuelan president Hugo Chavez, Iranian president Mahmoud Ahmadinejad, extended his Latin American contact network to Nicaragua, Ecuador, and Bolivia through meeting the presidents of all three nations. As Iran's presence in Latin America grows, so does unease in Washington.

Chavez will continue to push Washington with rhetoric all year, but an interesting bit of news - beyond the usual Bush-bashing - surfaced recently. The Venezuelan military has quietly said it will work with Iran to develop unmanned aircraft. This announcement could be misinformation; it could also be a test balloon to gauge US response. Either way, closer military ties between Iran and Venezuela do not bode well for Washington. Nor do Venezuela's plans to purchase anti-aircraft missiles from Russia.

We'll certainly hear more from Chavez, who as of 31 January is in position to rule by decree. The region's response to Chavez's constant tinkering (to put it nicely) with Venezuelan democracy is deplorable and indicative of the fact that it is unlikely anyone in the region or Washington can stop him.