MercoPress. South Atlantic News Agency

South America News

Headlines:
Surprise in Bolivia; Controversial pipeline; Chile fears deflation; How to recover credibility

Surprise in Bolivia

Evo Morales, leader of the strongest Indian and coke planter movement in Bolivia, finally managed second place, behind Gonzalo Sánchez de Lozada, in the Bolivian presidential election according to the final report from the National Electoral Board. Former president Sánchez de Lozada and his party, Movimiento Nacionalista Revolucionario, MNR obtained 22,46% of the vote followed by Mr. Morales and his Movimiento al Socialismo, MAS, with 20,94%, and Manfred Reyes Villa, Cochabamba's popular mayor backed by Nueva Fuerza Republicana, NFR, 20,92%. However it will Congress who finally decides by August 6th., who will be Bolivia's next president. The winning candidate needs the support of 66 Deputies and 14 Senators to be nominated. According to the final electoral results, seats stand as follows: Senate: MNR 11; MAS 8; MIR 5; NFR 2 and ADN 1. Deputies: MNR 36; MAS 27; MIR 26; NFR 25; ADN 4 and others 12. Mr. Morales luck seems to have changed when the United States Ambassador in Bolivia warned that a MAS victory would mean the end of economic aid to eradicate coke crops.

Controversial pipeline

With the second largest natural gas reserves in South America, Bolivia could sell a billion US dollars to Mexico and the US west coast if it can manage to agree on the building of a pipeline to the sea through Chilean territory. However the building of the pipeline has become a historic and political challenge because Chile and Bolivia have an ongoing territorial dispute dating back to 1879 when Bolivia lost its coast line during the "fertilizer" war. In the late 19th., century and with the support of strong international commercial interests Bolivia and Peru tried to capture from Chile the rich deposits of guano and urea in the north of the country. This led to war and a quick victory by Chilean forces that ended with the occupation of Peru's capital Lima, for a few years, and the annexation of Peruvian territory and the sea outlet of Bolivia. The New York Times wrote this week about the situation recalling that building a pipeline in Chilean territory has much resistance both in Chile and Bolivia. "If the Bolivian government gives us 600 million US dollars, we could build the pipeline in Peruvian territory", indicated Mr. Edward Miller president of British Gas Bolivia, one of the three companies involved in the project. "But if the project is entirely private and it's our money, Peru is not an option", added Mr. Miller since costs would be considerably higher. The three companies involved are Pacific LNG, a subsidiary of Repsol-YPF, British Gas and Panamerican Energy, which have plans for the pipeline and a liquefying plant in the port from where tankers would transport the natural gas to California and Mexico. The west coast client is Sempra Energy willing to sign a 20 years purchase contract to distribute in North America. However if the Bolivians can't reach an agreement, "other suppliers such as Russia, Venezuela, Indonesia, Australia are most interested and could end with the contract", warns The New York Times article. Those opposing the pipe line in Chile demand a Bolivian recognition of Chilean sovereignty over the area lost in the 1879 war, while in Bolivia nationalists argue "it's nonsense to have to rent territory that naturally belongs to us". More pragmatic Mr. Miller from British Gas cautioned that to impede a project that promises a brilliant future for Bolivia because of a dispute going back to 1879 "it's not a good reason or common sense".

Chile fears deflation

Chile's Central Bank president Carlos Massad anticipated a possible reduction in the country's basic interest rate in an effort to stimulate domestic demand which has been affected by regional uncertainties, particularly in Argentina and Brazil. Talking in the Central Bank presidents world summit in Switzerland, Mr. Massad recalled that the Chilean peso has depreciated 10% against the US dollar in the last three months with no impact on inflation. Inflation in June actually was negative, - 0,1%. "We have record low interest rates (4%) but this means we can't achieve new records. Monetary policy is long term, decisions taken now have an impact 12 to 24 months later, and the depressed, almost flat home demand is a good reason", said Mr. Massad. Chile's Central Bank president added that regional turbulence affected the Chilean currency, that depreciated 7% in June, but avoided answering about the evolution of the Chilean peso in the coming months. "I think that once Argentina stabilizes and we know more about Brazil's future economic policies, we will have good news for Chile". Although domestic demand in Chile remains flat other economic statistics offer a brighter picture. According to the latest Central Bank report, Chile's foreign debt stands at 39,6 billion US dollars, with a 1,1 billion US dollars increase in the first five months of the current year. Of the total debt, 32 billion correspond to the private sector and over 6 billion to the public sector; 32 billion mature in the long and medium term, while the rest is short term. In the private sector, companies and individuals owe 27,6 billion US dollars, banks 2,1 billion and other agencies 2,4 billion US dollars. Regarding the trade balance, Chile has an accumulated surplus to mid June of 1,8 billion US dollars, with exports reaching 8,7 billion and imports 6,9 billion.

How to recover credibility

A poll taken among Buenos Aires main public opinion makers indicates that seven out of ten leaders believe that political reform is "absolutely essential" if the Argentine government is to recover the people's trust, while 22% attach the same importance to the recent call of early elections. The poll was taken among 120 public opinion leaders from the business, financial, services and media communities plus several political and economic think tanks, and published this week in La Nación. In spite of the importance given to political reform only 54% of those polled believe in a genuine commitment from political leaders and the Argentine Congress to make it effective. Political reform is considered essential by 79% of the business community; by 73% of the finance and services sectors while the media and think tanks figure with 61% and 57%. For 42% of opinion leaders, early elections are "important but not essential", while 34% consider them "not so important" for the government to recover credibility. As to which sector or group is most resistant to reforms the list is headed by the trade union organizations, (72%), followed by Congress (71%), Justice (68%), opposition parties (60%) and provincial governors (51%). Mistrust in governors regarding their promised commitment to cut expenditure reaches 80%, while only 13% of opinion leaders believe they will keep their word. As far as presidential candidates are concerned the former Economy Minister of the De la Rúa administration, Mr. Ricardo López Murphy is favorite, (25,9%) followed by Santa Fe governor Carlos Reutemann (15,7%) and Deputy Elisa Carrió, (5,6%). Other candidates include several Senators and current governors with a mere 1,9% for former president and candidate Carlos Menem. Is spite of the poor showing Mr. Menem is regarded as a "storm pilot" who could ensure a mix of economic growth with social peace. But pragmatism dictates that Mr. Reutemann will be Argentina's next president according to 42% of those interviewed, followed by Elisa Carrió with 19,3%, and López Murphy a distant 1,8%. According to 36% of opinion leaders Mr. Reutemann would ensure governance, and Mr. López Murphy (39%) economic growth. Mr. López Murphy is believed to have international support (52%), while Mr. Reutemann strength is in social and political peace (31%).