www.msnbc.com By Jorge G. Castaneda NEWSWEEK INTERNATIONAL

Mexico and Chile are now key swing votes in the U.N. Their actions could change the shape of Latin American diplomacy

March 24 issue — In Chile and Mexico a vigorous debate is taking place. Many in Santiago and Mexico City are questioning whether these two countries should have joined the U.N. Security Council, only to find themselves between a rock and a hard place: support the United States on Iraq and betray their principles, or oppose the United States and pay the consequences.         BEHIND THIS DEBATE lies a broader, more complex dilemma: whether Latin America should actively participate in the construction of the new post-cold-war world order, characterized both by U.S. hegemony and by the rest of the world’s effort to limit and control it, knowing that this participation involves the acceptance of new responsibilities, the modification of basic principles and the ceding of important segments of sovereignty. Or whether the subcontinent should remain faithful to its traditions and convictions, knowing that this implies its “absence at the creation” of an order it will have to submit to in the end.         Most arguments used in Mexico and Chile against participation in the highest body of multilateral legitimacy are contradictory. A country cannot support multilateralism, the United Nations and international law on the one hand, and refuse to participate in the Council on the other; a nation cannot denounce U.S. unilateralism and then refuse to belong to the only mechanism that can, very rarely, place limits on that unilateralism. The arguments used against Chile’s or Mexico’s belonging to the Council (“We’re very vulnerable because of the border or the imminent approval of a free-trade agreement”; “We’re more committed than others to the principles of the U.N. Charter, in view of our nationalist and/or foreign-policy traditions”) can be applied to almost every country in the region.         Three countries—and, until recently, four (El Salvador, Panama, Ecuador and Argentina)—still use American currency; there is a strong and growing U.S. military presence in Colombia; Venezuela sells a considerable proportion of its oil to the United States; Costa Rica largely lives off U.S. retirees. And there is no shortage of countries in the region imbued with a strong nationalist tradition in foreign policy: from Peron’s Argentina to Vargas’s Brazil and, of course, Mexico, Chile and Cuba. If every Latin American country that is to some degree vulnerable to the United States and/or maintains a traditional foreign policy abstained from joining the Security Council, it would be left without Latin American membership.         Beyond this unpersuasive reasoning, a contradiction of even greater dimensions stands out. Latin America is one of the regions of the world whose interests would best be served by the existence of a new international order that is at once rigorous, broad and precise. When it comes to environmental law, indigenous people’s or migrants’ rights, human rights or international trade, the defense of democracy or workers’ rights, Latin American nations have more to gain and less to lose than almost any other region in the world from the creation of a regime of universal values.         But, at the same time, few parts of the world today demonstrate such commitment to a series of traditions and principles contrary to this universalist project. Nonintervention, the unrestricted defense of sovereignty, the reluctance to accept any explicit ceding of sovereignty, an emphatic rhetorical and ideological nationalism, are all constants in the stances and sentiments of most Latin American governments. Partly for historic reasons, occasionally due to internal political considerations, in other cases for geographic motives, the majority maintain a great deal of skepticism about the type of new order that can be constructed.         Identifying the opportunities offered by today’s situation and taking advantage of them is now up to two Latin American governments in particular. Not because either, Mexico or Chile, has the capacity to alone determine the direction of the new international system. Nor because both coincidentally hold a nonpermanent seat on the United Nations Security Council during 2003. But because these two nations—due to their economic and political clout, their geographic location, their diplomatic vocation and tradition and their vision of the world—are perhaps the only ones capable of championing forward-looking stances in the region. Nonetheless, they still face an uphill battle against the ideological resistance and baggage, which constantly undermine their ability to provide diplomatic leadership in Latin America. Part of the problem is that their national identities were forged by 19th and 20th centuries’ nationalism, which forms the backbone of their creation as nation-states. And this nationalism, instead of basing itself on the search to preserve and pursue national interests in an international context necessarily in flux, is anchored to Westphalian concepts of sovereignty that are by definition timeless.         Latin American elites have demonstrated a stubborn reluctance to engage in their countries’ separation from the past. Mexico and Chile, the countries and governments that, fortunately, represent Latin America in the Security Council, are without a doubt the most capable of breaking this inertia and assuming leadership: it’s not an easy task, but it has become increasingly indispensable and unavoidable.        

Castaneda stepped down as Mexican foreign minister in January 2003; he teaches International Relations at the National Autonomous Mexican University and at New York University.

www.latintrade.com March, 2003

Tough times, tight money and increasing competition are now pitting Latin America’s largest companies against each other and a handful of foreigners in a feud for strategic acquisitions in the region.

Latin American output shrank in 2002, the first time in 19 years. Private capital flows to the region plummeted almost 50% to US$25 billion, reports the Institute of International Finance in Washington, D.C. Completed mergers and acquisitions fell 24% to less than $38 billion, its lowest level in six years, according to Thomson Financial.

The limited number of done deals, however, masks the underlying movements of a select group of Latin America’s most powerful businesses. They’re busy grabbing up assets from both retreating multinational companies and beleaguered family-run empires.

TELECOM Mexican billionaire Carlos Slim is expanding his telecom interests across the Americas. He spun off his $3.2-billion Carso Global Telecom into holding company Telecom Américas, then invested $2.3 billion buying out big partners U.S. telecom SBC and Bell Canada International. The famed bottom-fisher hunts big game in Brazil and beyond. Spain’s multinational wireless company, Telefónica Móviles, continues to pressure Slim with strategic purchases in Mexico. Brasilcel, the merger of its Brazilian operations with Telecom Portugal, recently acquired Brasilia-based mobile operator Tele Centro Oeste for almost $1 billion. Still unclear: What will happen with Brazilian and Mexican long-distance companies Embratel and Avantel, holdings of financially troubled U.S. carrier WorldCom.

OIL Brazil’s state-run oil giant Petrobras is making a play to secure its position as a leading Latin American oil company. In October, Petrobras paid $1 billion for 59% of private energy group Perez Companc, which expects to spend another $2 billion over the next five years to beef up international production, mainly in Venezuela but also Peru, Bolivia and Ecuador. Earlier, Petrobras swapped a billion dollar’s worth of assets with Spanish-Argentine energy giant Repsol-YPF for a share of its Argentine retail gasoline and refining business. National strikes, meanwhile, have paralyzed Petróleos de Venezuela, the region’s largest oil company, where the government talks of selling the state-run company’s U.S. refining subsidiary Citgo.

BEVERAGES Brazil’s Ambev and Colombia’s Bavaria have staked out territory as the No. 1 and No. 2 brewers in South America. Ambev snatched Argentina’s Quilmes Industrial from minority shareholder Heineken. Similarly, Bavaria ripped Peruvian powerhouse Backus and Johnson from the clutches of Venezuela’s Empresas Polar. Heineken has pushed forward with acquisitions in Brazil and Central America, but the big prizes in the major countries seemed to have slipped away, for now. With its acquisition of Miller Brewing Co. in the United States, South African Breweries gained a foothold in Costa Rica and proceeded to expand its operations in Central America.

BANKS Bradesco President Marcio Cypriano and Banco Itaú CEO Roberto Setubal, chiefs at the No. 1 and No. 2 private banks in Brazil, continue to consolidate control over the country’s banking market. The two institutions spent almost $2 billion last year. Banco Santander Central Hispano (BSCH), BBVA and Citibank also took advantage of the down market to consolidate. BSCH and Banco Santiago merged in a $1.7 billion deal to consolidate control of Chile. BBVA increased its holdings in subsidiaries in Mexico, Argentina and Uruguay. Banacci, Citibank’s Mexican affiliate, bought full control of its pension fund subsidiary for $1.2 billion.

POWER The next big wave of mergers and acquisitions appears poised to happen in the power sector. Debts in dollars but earnings in local currencies meant that devaluations and slow growth nailed international Big Power. “The bottom line is that the only way they’re going to grow is with demand, and that depends on the [domestic] economy,” says Jason Todd, director of Latin American power ratings for Fitch Ratings in Chicago. What’s ahead for the Latin power kings? Here’s the play-by-play:

AES Corp. After bingeing on Latin American assets during the headier days of a rising stock market, global power giant AES reported a US$2.7 billion dollar hit in the fourth quarter of 2002. Among leading reasons for the pain: Brazil and Venezuela, where write-downs and currency losses added up fast. Projects in Argentina and Colombia defaulted as well. It’s quite a comeuppance for a company that acquired so much, so fast in the region. What’s ahead: Facing reality, AES renamed its Turnaround Office the Restructuring Office, which it says is now actively managing its assets in Chile, Argentina and Brazil. AES tells investors it is busy now trying to figure out which companies can be rescued and which must be “sold or abandoned.”

Duke Energy International North Carolina’s Duke Energy perhaps can breathe a sigh of relief: It’s foreign holding unit, Duke Energy International, reported only slight losses in 2002, down US$221 million, almost entirely from European dealings. Meanwhile, it has built up a portfolio from Guatemala to Buenos Aires, more than half at Companhia de Geração de Energia Elétrica Paranapanema in southwestern São Paulo state, Brazil. What’s ahead: While Duke overall took a slight hit on a slowing economy, the company reports $2.9 billion in available credit. Duke’s managers, however, say they’ll batten down the hatches and make sure each unit is producing according to demand.

Endesa By the end of 2002, facing skeptical investors and slipping domestic economies, Spanish utility Endesa began hedging its bets in Latin America. Chilean holding company Enersis, Endesa’s base of operations in the region, took $290 million in accounting charges on lost investments in Brazil and Argentina as short- and medium-term debts of $2.2 billion cast a cloud over the company. What’s ahead: Don’t look for $4.5 billion-revenues Endesa to bail, just regroup and look for new opportunities. Even as it cleans up the books in Chile, Enersis put $100 million into Brazil’s Companhia de Eletricidade do Rio de Janeiro, increasing its stake to almost 73%. And the Spanish power giant is looking closely at power-hungry Mexico.

PSEG Global New Jersey energy company PSEG Global holds interests in 1,900 megawatts and distribution assets in Brazil, Chile, Peru and Venezuela. There was no hiding from Argentina’s decline, though: In 2002, the company reported $541 million in charges, $370 million from lost investments in the collapsing Southern Cone economy. What’s ahead: PSEG settled out-of-court to sell its stakes in several Argentine distributors and generators to AES Corp. for $30 million, a fraction of its original asking price of $376 million (AES had invoked a “political risk” clause to avoid paying full price). In Peru, meanwhile, PSEG’s ambitions have been frustrated by privatization delays.

Top Financial Advisers Rank ‘02 Rank ‘01 Adviser Value Deals US$ millions    1 1 Citigroup/Salomon Smith Barney 9,244.10 16 2 2 JP Morgan 8,151.40 29 3 6 Credit Suisse First Boston 8,056.30 24 4 3 Goldman Sachs & Co 6,923.90 10 5 4 Merrill Lynch & Co 6,690.90 12 6 5 Morgan Stanley 3,875.20 9 7 9 UBS Warburg 1,968.10 6 8 17 Credit Lyonnais 1,681.70 3 9 7 Santander Central Hispano 1,583.90 14 10 19 Dresdner Kleinwort Wasserstein 1,573.00 3       Source: Thomson Financial    

Author: Mike Zellner & Greg Brown • Miami

www.forbes.com Reuters, 03.13.03, 12:33 PM ET By Susan Schneider NEW YORK, March 13 (Reuters) - Latin American sovereign bonds climbed on Thursday as signals the United States may extend its diplomatic drive to win support for a military strike on Iraq fueled a buying spree in U.S. equities and set a rosy tone for the broader region. Brazil's share of J.P. Morgan's Emerging Market Bond Index Plus added 1.28 percent in daily returns, as the country's benchmark C bond <BRAZILC=RR> notched 0.625 points higher to 78.25 bid. The bonds of Ecuador, Venezuela, Colombia and Peru also rose, giving the J.P. Morgan index a gain of 0.12 percent on the day. The climb in Latin American bonds came after White House spokesman Ari Fleischer said a vote on a United Nations resolution opening the door to an invasion of Iraq could spill over into next week. The United States is facing fierce resistance to the war in the U.N. Security Council and even possible no votes from the veto-wielding countries of France and Russia. "This morning there are stories out of the White House that diplomacy will go on until next week," said Paul Masco, head of emerging market trading at Salomon Smith Barney. "It looks like there are two things: war is not necessarily going to happen immediately and, secondly, if it does happen, it will happen with more of a coalition in place than we would have thought a few days ago," he said. So far, only the United States, Britain, Spain and Bulgaria support a resolution giving Iraq just a few days to disarm. The United States and Britain are pushing hard to sew up nine of the 15 Security Council votes, support that would likely enable the nations to argue they have a moral victory to undertake a war even if the resolution were vetoed. U.S. officials said on Wednesday they thought that three Africa votes on the council -- Guinea, Angola and Cameroon -- were leaning their way, but Guinea said on state radio it might abstain from the vote. Chile, Pakistan and Mexico are also undecided, while Russia, France, China, Germany and Syria oppose the resolution. Investors fear a U.S.-led conflict would wreak havoc on an already weak U.S. economy so they take heart from any suggestion that a conflict may be short-lived or postponed. The Dow Jones industrial average <.DJI> added nearly 2 percent in the wake of the White House news, while the Nasdaq Composite Index <.IXIC> gained 1.8 percent. The bonds of market heavyweight Brazil have largely resisted the geopolitical angst generated by the Iraqi war uncertainty as investors cheer new President Luiz Inacio Lula da Silva's push for structural reforms. The nation's debt has surged more than 16 percent so far this year, bolstered by Lula's avowed overhauls of the social security and tax systems. While some investors have questioned how far Brazilian bonds can rise without a resolution to the Iraqi standoff, the debt continues to benefit from investors on the hunt for higher yielding bonds, traders said. "There was a seller out of Russia that went into Brazil," helping buoy Brazil, said an emerging debt trader. "And I think people are more confident -- the market going up always brings buyer." Among other Latin American sovereign bond issuers, Ecuador jumped 3.34 percent in terms of daily returns, while Colombia added 0.39 percent. Venezuela gained 0.1 percent and Peru moved 0.8 percent higher on the day, according to the EMBI-Plus. (Reporting by Susan Schneider; editing by Caroline Valetkevitch; Reuters Messaging: susan.schneider.reuters.com@reuters.net, tel: +1 646 223 6319)

www.miami.com Posted on Sun, Mar. 09, 2003 BY ANDRES OPPENHEIMER aoppenheimer@herald.com

Latin America is becoming a major fundraising base for radical Islamic groups in the Middle East, which are getting between $300 million and $500 million a year from various criminal networks in the region, a top U.S. military commander told The Herald.

Gen. James T. Hill, commander of the U.S. Southern Command, which oversees U.S. military relations in Latin America, said much of this money comes from drug trafficking, arms dealing and other illegal activities. He said the funds are sent abroad from several Latin American areas with large Middle Eastern populations, such as the triple frontier between Argentina, Paraguay and Brazil, and Margarita island off the coast of Venezuela.

''The fastest-growing religion in Latin America today is Islam,'' Gen. Hill said during an interview at his office. ``We think that there are between 3 and 6 million people of Middle Eastern descent in Latin America. There are radical Islamic groups associated with that population that are using it to create lots of money for their organizations.''

Hill said that about ``$300 million to $500 million a year, easily, goes [from Latin America] to groups such as Hamas, Hezbollah, and Al Gamaat.''

Only in Paraguay, news reports in December said the government was investigating suspicious transfers of more than $100 million into Lebanon, he added.

While U.S. officials have long pointed at large flows of money from Middle Eastern population enclaves in Latin American to Islamic radical groups, they had been reluctant to provide specific estimates. Monday, at a conference on ''Building Regional Security'' organized by the University of Miami's North-South Center, Hill had put the figure at ''hundreds of millions of dollars,'' but did not elaborate further.

At the conference, attended by military officers from several Latin American countries, Hill had called for ''increased coordination'' among armed forces to fight narco-terrorism, conduct disaster relief operations, and to help stop the flow of money to international terrorist groups. Many Latin American countries are cautious about discussing security agreements with the United States, fearing they could lead to U.S. interventions in the region.

In an apparent response to such fears, Hill told The Herald that he sees no need to create a multinational military force against narco-terrorism. ''I don't see that happening,'' he said, adding that the 34-country Organization of American States has enough mechanisms to allow a collective fight against international criminal groups.

Asked whether Latin American governments are cooperating with U.S. authorities in the fight against Islamic terrorist groups, he said, ``To varying degrees, different governments are.''

He said Paraguay, in particular, has offered ''a lot of support'' over the past two years.

But Hill played down speculation that there may be al Qaeda terrorist cells or other radical Islamic groups' training bases in Latin America. He said he wouldn't be surprised if they existed, but there isn't enough evidence to say they do.

Emilio Viano, a terrorism expert at American University in Washington, said he is not surprised by Hill's assertions that hundreds of millions of dollars are going from Latin America to radical Islamic groups. But he added that in some cases, such as that of the ''triple frontier,'' increased international scrutiny after the Sept. 11 attacks has made it harder for terrorist groups to launder money there.

''Pressure is being put on Paraguay,'' Viano said. ``The activities have diminished there, but not disappeared.''

Some experts, however, are skeptical about the new estimates of Islamic groups' fundraising in Latin America.

Eduardo Gamarra, director of Florida International University's Latin American and Caribbean Center, called the estimates ``absolutely ridiculous.''

''A lot of figures have been bouncing around, but in the last year I've been looking at these particular issues, and most of what I found was speculation,'' he said.

Herald writer Larissa Ruiz Campo contributed to this report.

usinfo.state.gov www.whitehouse.gov 07 March 2003 White House Press Briefing Transcript

............

Following that phone call, the President spoke to Peruvian President Toledo. There was a substantive discussion with a close friend and ally. They both expressed concerns about threats to democracy in the Andean region, and the need to continue close cooperation in the fight against narco-terrorism.

They both stressed the need to support Organization of American States Secretary General Gaviria in finding constitutional, democratic, peaceful and electoral solutions to the crisis in Venezuela. And they agreed on the importance that Saddam Hussein disarm immediately. ............

Q: Thank you.

MR. FLEISCHER: Thank you.

(end transcript)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: usinfo.state.gov)