BORDER WAR BETWEEN
ECUADOR AND PERU
THE ANDES, FEBRUARY 10, 1995
pproximately 130 casual-
ties-the numbers are dis-
puted-have been reported so far
in the armed conflict between
Ecuador and Peru which erupted
over long-disputed territory on
January 26. Conflict has periodi-
cally broken out on the anniver-
sary of the signing of the 1942
Rio Protocol border pact, which
ended the last war between the
two countries in which Peru
claimed victory. This year, the
dispute over control of some 340
square kilometers of oil-rich jun-
gle which straddles the border
near the Cenepa River intensified
because the internal politics of
both countries are currently fav-
orable to the expression of belli-
cose national pride. The conflict
has helped Peruvian president
Alberto Fujimori hold on to his
leading position in the polls in
the run-up to this April’s presi-
dential elections, while the initial
movement of troops was ordered
by Ecuador’s Sixto Durin-Ballen,
a weak president without a Con-
gressional majority, whose popu-
larity has been on the decline as
a result of the effects of his neo-
liberal adjustment policies.
In mid-February, negotiations
to resolve the dispute were held
in Rio de Janeiro between the
vice foreign ministers of both
nations and representatives of
Argentina, Brazil, Chile and the
United States-the four guaran-
tors of the Rio Protocol. Peru-
vian Vice Foreign Minister
Eduardo Ponce presented a pro-
posal in hopes of reaching a last-
ing compromise between
Ecuador’s demand for access to
the Amazon via the Cenepa river
and Peru’s right to preserve its
territorial integrity. Ponce’s plan
was a response to a gesture by
Durn-Ballen, who broke with
35 years of political tradition by
recognizing most of the Rio Pro-
tocol terms, contesting only the
80 kilometers of border that
were never physically marked.
-Giovanni E. Reyes and
InterPress Service
MEXICO “RESCUED”
AT THE BRINK
WASHINGTON, D.C.; MEXICO CITY,
FEBRUARY, 1995
n January 31, President Bill
Clinton announced a plan–
which did not require legislative
approval-to use $20 billion
from the U.S. Exchange Equal-
ization Fund to help counter the
dramatic fall-out of the sudden,
sharp devaluation of the Mexi-
can peso that took place in the
last week of December. The
Administration also pressured
the International Monetary Fund
(IMF) to loan Mexico $17.5 bil-
lion, $10 billion more than the
multilateral institution had
pledged on January 26.
The funds from the Exchange
Equalization Fund and the
increased commitments from the
IMF and the European-based
Bank for International Settle-
ments (BIS) amount to a total
pool of credit guarantees of $50
billion. The announcement of
Clinton’s plan helped calm the
financial markets in the United
States and Mexico, which had
fallen sharply because of the
uncertainty about whether the
U.S. legislature would ultimately
approve the assistance package.
The peso devaluation came in
two stages. The first stage,
announced on December 20,
lasted only one day. On that
date, then-finance minister Jaime
Serra Puche announced that the
Zedillo Administration would
discontinue the Salinas Adminis-
tration’s policy of supporting the
Mexican currency at a level of
3.46 pesos per dollar. Under
Salinas, whenever the peso
approached that level, the Banco
de M6xico-the central bank-
would buy pesos in order to
prop up the Mexican currency.
The Zedillo Administration
decided to raise the intervention
level to 4.00 per dollar. The
decision came after the Central
Bank was forced to spend an
estimated $4 billion of its
reserves to support the peso dur-
ing a two-day period on Decem-
ber 19 and 20.
The move backfired, however,
since the devaluation caused
massive speculative selling of
the peso on the foreign-
exchange markets. In response,
on December 21, the Zedillo
Administration was forced into
the second stage, announcing
plans to abandon the policy of
intervening in the market to sup-
port the peso and allowing the
Mexican currency to float freely
against the dollar for 60 days.
Along with this decision, busi-
ness and labor representatives
agreed not to seek price or wage
increases during the 60-day peri-
od. This agreement, however,
was superseded by an emer-
gency economic plan announced
on January 3, which was itself in
shambles by early February.
One of the most significant
problems President Ernesto
Zedillo will have to begin to
address is a huge growth in
Mexico’s foreign debt, which is
due to reach an estimated $164
billion. This total-which does
not yet include the loans from
the Clinton package-represents
both the largest debt in Mexican
history and the highest debt in
Latin America. According to
some estimates, the total debt-
of which the public sector is
expected to incur $108 billion-
represents about 50% of Mexi-
co’s GDP for 1995.
In addition to payments of
principal and interest on the inter-
national loans, the government
has also been forced to raise
interest for short-term securities
even beyond their previously
high rates in order to keep them
attractive to private investors,
especially foreigners. The decline
in the value of the Mexican peso
since the currency crisis exploded
has caused monumental losses
for foreign investors. Wall Street
investment experts, for example,
estimate that U.S. investors in
stocks and bonds may have lost
between $8 and $10 billion
between mid-December and the
end of January.
According to economists at
DRI/McGraw-Hill interviewed
by the New York limes, U.S.
investors represent $45 billion to
$50 billion of the $73 billion in
total foreign investment now in
Mexico. Of the U.S. holdings,
roughly $15 billion is in direct
investment in factories, machin-
ery and buildings, which are
largely immune to devaluation,
particularly if their goal is to
make goods for export from
Mexico. The remaining $30 bil-
lion to $35 billion, however, is
in stocks, government bonds and
other forms of interest-bearing
peso securities, the value of
which is directly affected by
devaluation.
The largest losses since mid-
December were reported by U.S.
investors in Mexican stocks,
since they suffered not only
from the peso’s devaluation, but
also from falling stock prices.
Their total holdings were esti-
mated at roughly $20 billion as
of December 1, but the value of
those investments plunged to
just $13.5 billion by December
26. In addition, the remaining
$12 billion to $15 billion in peso
notes and bonds held by U.S.
investors registered an estimated
loss of about $3 billion as a
direct result of the devaluation.
Investors in stocks and bonds
in other “emerging markets”
immediately began selling off
their holdings out of fear that the
currency crisis in Mexico would
trigger similar problems else-
where. Indeed, should a wave of
devaluations hit the South Amer-
ican countries, investors would
also suffer monumental losses as
they did in Mexico, because
most of the foreign investment
that has poured into other
nations in the region in the last
four years is also concentrated in
Continued on page 44
CONTINUED FROM PAGE 2
“portfolio holdings” in stocks and
bonds, which would drop in value
with devaluation. Of the $115.4
billion in new foreign investment
that entered the region in 1992 and
1993, for example, only 27% was
in direct investments, with the
remainder in stocks and bonds.
-SourceMex
MEXICANS BLUDGEONED
BY THE CRISIS
OAXACA, JANUARY 30, 1995
The inhabitants of this provin-
cial capital of some 300,000, like
all but the richest of Mexicans
elsewhere, are being bludgeoned
by the latest economic crises and
the Zedillo government’s efforts to
restore investor confidence. The
austerity measures of the current
Program for the Economic Emer-
gency, like the pact of the previous
Salinas Administration, are much
more effective than are the con-
trols on inflation. So, once again,
the greatest sacrifice is being
demanded from those who can
least afford it.
In this city, where the cost of liv-
ing was already one of the highest
in the republic, prices have gone up
an average of 25% to 30% in
just one month following the mid-
December devaluation of the peso.
The minimum wage, however, was
allowed to rise only 7%. In wage
zone C, which includes Oaxaca, it
is now less than 14 pesos per day,
which at roughly 5 pesos to the
dollar equals $2.80.
Oaxaqueiios are now paying
13% of the daily minimum wage
(DMW)-1.80 pesos-for a small
taco at a street stand, 18% of the
DMW-2.50 pesos-for a liter of
ultrapasteurized milk, and 21% of
the DMW-3 pesos-for a local
daily newspaper. A men’s guaya-
bera shirt, on sale, costs a week’s
minimum wage, 250.24 pesos.
The middle classes are also hurt-
ing, and right where their status
lies. Construction materials rose an
average of 25%, and home mort-
gages went up 15% to 48% per
year. Interest on bank credit cards
is up 30% to between 50% and
60% per year. For those who wish
to drown their despair, however,
the picture is not overly bleak.
With 14 pesos-a day’s minimum
wage-one can buy a bottle of rea-
sonably drinkable Mexican caber-
net sauvignon.
-Ronald Waterbury
U.S. TROOPS TRAIN IN
GUATEMALA
GUATEMALA CITY, FEBRUARY 6, 1995
The U.S. Defense Department is
going ahead with its annual Strong
Roads program in Guatemala,
despite a recent surge of interna-
tional condemnation of human
rights violations by the
Guatemalan army. Between Janu-
ary and June 1995, some 3,700
U.S. Army reservists and National
Guard troops will work with the
Guatemalan army building roads,
hospitals and schools as part of
their annual training.
The 88th U.S. Army Reserve
Command from Ft. Snelling, Min-
nesota is leading this year’s Strong
Roads program, dubbed “Task
Force Timber Wolf.” Rotating
groups of approximately 300 U.S.
soldiers will spend two weeks each
in the southern Guatemalan
provinces of Jutiapa and Jalapa.
Guatemala’s Strong Roads project
is part of the Defense Department’s
multimillion-dollar Humanitarian
and Civic Assistance Program tar-
geting Latin America and other
strategic areas.
Critics of Strong Roads, such as
the Network in Solidarity With the
People of Guatemala (NISGUA),
say the project lends credibility to
an army that has killed or “disap-
peared” tens of thousands of peo-
ple. The United States has long
acknowledged that the Guatemalan
army violates human rights. The
Bush Administration cut off mili-
tary aid to Guatemala in 1990 after
members of the Guatemalan secu-
rity forces were implicated in the
rape and torture of nun Dianna
Ortiz and the murder of rancher
Michael Devine, both U.S. citi-
zens. And according to the State
Department’s annual report for
1994, human rights violations in
the country increased substantially
last year. But the U.S. Embassy in
Guatemala says Strong Roads is
providing a positive model for the
Guatemalan army as it prepares for
the postwar era.
Grassroots organizers in
Guatemala say they welcome help
in reconstructing their country, but
say that help should come in the
form of civilian, not military pro-
jects. The current peace talks
between the Guatemalan National
Revolutionary Unity (URNG) and
the government have highlighted
the issue of the military’s involve-
ment in civilian affairs. The Civil
Sectors Assembly, a civilian advi-
sory body which includes both
far-right politicians and widows
of those killed by the army, told
the United Nations, “The army
should not take part in develop-
ment projects or any other activi-
ties outside the defense of national
sovereignty.” -Laura Proctor
BOUTROS-GHALI WARNS
OF CONTINUED IMPUNITY
IN HAITI
PORT-AU-PRINCE, FEBRUARY 3, 1995
As the United Nations gets
ready to deploy 7,000 troops to
Haiti on March 31 to replace the
U.S.-led force, the Haitian public
has grown increasingly frustrated
at the impunity enjoyed by ex-mil-
itary personnel and members of
paramilitary organizations, none of
whom have been brought to justice
for the serious human rights abuses
they committed during the military
dictatorship.
In a January 17 report to the
United Nations, Boutros Boutros-
Ghali remarked that the Haitian
situation is still volatile, aggravat-
ed by angry discharged Haitian
soldiers and by the continued
activities of paramilitary groups.
The UN Secretary General wrote
that while “politically motivated
violence and human rights abuses”
are down, “there are reports of
violent attacks by former section
chiefs, attaches or alleged FRAPH
members…, murders are reported
almost daily,” and bands of former
attachs or FRAPH members have
“sought to intimidate…local popu-
lar organizations.” The violence,
he wrote, is “committed by gangs
armed with high-caliber firearms,
which indicates a probable link to
former paramilitary networks.”
Boutros-Ghali urged the U.S.-led
forces to step up efforts to disarm
the civilian population, especially
the paramilitary forces, before the
turnover.
No investigations have been
launched yet into the 1993 murder
of prominent Aristide supporter
Antoine Izmery or the more recent
attacks on Aristide supporters in Le
Borgne, Raboteau or Cit6 Soleil,
despite well-documented investiga-
tions by local and international
human rights organizations, includ-
ing the OAS/UN International
Civilian Mission.
Meanwhile, the U.S. government
continues to dominate the “restruc-
turing” of the justice system and
selection of candidates for the new
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National police. un January 2u at
the Embassy, the United States
“graduated” two dozen judges
from a U.S-run course. In the last
week of January, U.S. officials
oversaw the examination of over
2,000 police candidates, in many
places with no Justice Ministry
presence. On the basis of their
scores from these exams designed
in Washington, D.C., about 300
men and women were chosen to
enter the U.S.-run police academy.
-Haiti Info and NotiSur
Sources:
Giovanno E. Reyes is a graduate student
in Latin American history at the University
of Pittsburgh.
InterPress Service is an international news
service based in Italy. Its dispatches can
be read on-line in the Peacenet confer-
ences: ips.espanol and ips.english.
SourceMex and NotiSur are available on-
line from Latin American Data Base,
Latin American Institute, University of
New Mexico, Albuquerque, NM 87131;
(800) 472-0888.
Ronald Waterbury, who teaches anthropol-
ogy at Queens College, CUNY, is currently
on research leave in Oaxaca, Mexico.
Laura Proctor works for the news agency
CERIGUA in Guatemala City.
The Haitian Information Bureau (HIB)
publishes Haiti Info, a bi-weekly news
bulletin, in Port-au-Prince. For subscrip-
tion information: HIB, do Lynx Air, Box
407139, Ft. Lauderdale, FL 33340;
(e-mail: hib@igc.apc.org).
