[Congressional Record Volume 144, Number 150 (Tuesday, October 20, 1998)]
[Extensions of Remarks]
[Pages E2248-E2250]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 LATIN AMERICA: CHALLENGES TO STABILITY

                                 ______
                                 

                          HON. ELTON GALLEGLY

                             of california

                    in the house of representatives

                       Tuesday, October 20, 1998

  Mr. GALLEGLY. Mr. Speaker, as 1998 draws to a close, four countries 
in the Western Hemisphere bear close observation. Events taking shape 
in those nations could have a substantial impact on the region's 
stability, the pace of democratization and the success of economic 
reform. These nations worth watching include: Brazil, Colombia, 
Venezuela and Paraguay.


                                 BRAZIL

  As the contagion of the ``Asian/Russian'' financial crisis spreads 
into Latin America, the next three months could be critical to the 
economic and political stability of the hemisphere. All eyes are 
currently focused on Brazil and its attempts to stave off the effects 
of the Asian flu. A major financial downturn in Brazil, the region's 
third largest economy and the world's ninth largest could spell 
economic trouble throughout the entire region, including within the 
United States.
  Brazil is by far the most important economy in South America. With a 
population of 157 million, Brazil's Gross Domestic Product (GDP) stood 
at approximately $806 billion in 1997. Brazil accounts for some 45 
percent of all Latin America's GDP. U.S. banks have some $34 billion in 
outstanding loans to Brazil and over $100 billion in Latin America. 
U.S. private investment in Brazil stands at $25 billion and trade 
between the U.S. and Brazil ranges around $16 billion. Since August, 
however, Brazil's stock market has plunged 40 percent and its cash 
reserves have plummeted $30 billion.This, in turn, has forced interest 
rates up to 50 percent and has resulted in a budget deficit of 7 
percent of GNP, twice what it was when Cardoso first took office. 
Deficit spending has led international and domestic short term 
investors to pull out of Brazil

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in record numbers. Finally, the nation's currency, the ``Real'', is 
considered overvalued but stable.
  In the midst of all this turmoil, Brazil held elections on October 
3rd for president and parliament. These elections marked a very 
significant transition for Brazil in that President Cardoso became the 
first civilian president since military rule both to take over from a 
civilian predecessor as well as to succeed himself in office. He won 
this election with roughly the same percentage of the vote as he did 
four years ago.
  President Cardoso, a former university professor, is the inflation-
taming engineer of the country's economic turnaround which has been 
faltering of late. The current economic crisis is due to effects from 
the Asian crisis, as well as from a still bloated state sector and a 
very generous pension system. The voters, however, chose not to blame 
him for the crisis, but rather the global economic circumstances. Mr. 
Cardoso has remained for the most part on message regarding Brazil's 
commitment to free market reforms and the IMF's and other lenders' 
demands for continued austerity and reform. His new economic plan calls 
for spending cuts of over $20 billion, some tax increases and a reform 
of the nation's pension system. The IMF has readied a $30 billion 
package of international credit.
  Unfortunately, Cardoso's tenactity may not be matched by the same 
attitude in his legislature; the President still must negotiate with a 
parliament that has many reasons to oppose further reforms and 
austerity. Nevertheless, his job may have been made slightly easier 
with the recent elections for parliament. While his five-party 
coalition actually lost a few seats overall, the President's hand was 
strengthened in that his own party increased its representation within 
the coalition, and the more moderate leftists increased their 
representation among the opposition. In short, Mr. Cardoso should have 
greater control over his coalition, and the left might be more willing 
to cooperate. The wild cards are the fact that almost half of the new 
parliament, to be seated in February, will be freshman whose loyalties 
are not known, the role the powerful governors will play in securing 
local support for reform, and the fact that the most important 
measures, pension and civil service reform, require constitutional 
reform and thus three-fifths votes. To that end, the President is 
considering a proposal to hold a constituent assembly next year to 
permit changes to the constitution by a simple majority vote in the 
Parliament.
  Brazil's economic fate will spell either relief or trouble for the 
rest of Latin America. If the Brazilian government can keep the economy 
from sliding further and can initiate major economic reforms, then as 
the situation stabilizes, international investors will return to 
Brazil, thus avoiding the dramatic consequences experienced by Asia and 
Russia.


                                COLOMBIA

  On June 21, the Colombian people voted in record numbers and elected 
Andres Pastrana as their new President. The large turnout of voters was 
seen as an expression of support for a peaceful resolution of the 
conflict which has engulfed all of Colombia for the past four decades.
  President Pastrana has taken over a country in which a guerrilla 
force of 20,000 armed solders has fought the government to a military 
standstill with neither side capable of securing a final battlefield 
victory. The guerrillas, who are financing their war effort largely 
from the narcotics trade, have grown stronger and inflicted serious 
defeats on the military in 1998. The Colombian army has been 
demoralized through its battlefield losses and is still regarded as ill 
equipped and ill-trained to continue to wage a prolonged war. U.S. 
assistance to the military, desperately needed, is restricted under a 
U.S. congressional mandate that allows aid to go only to units cleared 
of human rights violations. In addition to the guerrilla war in certain 
parts of the country the government has ceased to function and law and 
order has long since disappeared. The rise of paramilitary armies, 
which have waged an indiscriminate war against the civilian population 
in the name of fighting the guerrillas, and who also draw financial 
support from an involvement in the drug trade, have injected a new 
level of violence which can not seem to be controlled by the 
government.
  Even before taking office, President-elect Pastrana, attempted to 
fulfill this principle campaign pledge of bringing an end to the 38 
years of internal guerrilla war by meeting secretly with the leader of 
the largest guerrilla group, the FARC were they discussed the 
possibilities for peace. Upon taking office on August 7, 1998, 
President Pastrana announced that peace talks with the guerrillas would 
begin in November and that, as a preclude to those talks, he 
was embarking on a bold plan to turn a large swath of central Colombia 
into a temporary ``demilitarized zone'' in which peace talks with the 
two main guerrilla groups could commence.

  To that end, on October 15, President Pastrana announced that some 
4,000 Colombian soldiers would begin withdrawing from the ``zones'' 
which would be totally demilitarized by November 7. The 
demilitarization of these ``zones'' would last until February, 
depending upon the success of the talks. This plan has been both hailed 
as a bold gamble, which could lead to a substantial amount of good-will 
among the guerrilla leadership, as well as criticized as a guerrilla 
trick which would only serve to allow the guerrillas to use the 
``zones'' and the time to rearm and retrain their forces for a major 
military push next year. And, while fighting within the ``zones'' will 
apparently cease, there is no general nationwide cease-fire which is 
expected to result in the guerrilla and Colombian military units 
continuing to battle in other parts of the nation even as this long 
peace process continues forward.
  Internal reaction to President Pastrana's plan has been one of 
cautious optimism among the populace. Except for inside the ``zones'', 
which had been subject to considerable guerrilla influence anyway and 
where the population is nervous about living under de facto guerrilla 
control, the move is seen as a necessary gambit to test the intentions 
of the guerrillas to seek peace. Even the military, which has expressed 
its doubts, now realizes that it, too, can use the time to concentrate 
forces in other parts of the country or to rearm and retain their 
forces in the event these talks break down and fighting escalates.
  U.S. reaction to the plan has been mixed. President Pastrana must be 
given the benefit of the doubt and supported in his attempts to carry 
out his mandate of peace in the manner he believes is best. However, 
concern has been expressed over his plan's impact on the counter 
narcotics program within the country. The Pastrana government insists 
that very little antinarcotics activity has been carried out by the 
police in the ``zones.'' However, there has been a substantial amount 
of drug activity reported in those areas. Some in the United States 
have warned the Colombians not to allow the ``zones'' or the peace 
talks to interfere with the anti-drug campaign.
  The peace talks are set to begin in early November. The U.S., and all 
of Latin America, will be watching the progress of these discussions 
very closely as well as the activities of the guerrilla forces outside 
the ``zones.''


                               VENEZUELA

  Venezuela, suffering a severe economic crisis due to a crippling drop 
in world oil prices, faces perhaps its most severe political test since 
the attempted military coup of 1992, when it will hold legislative 
elections in Early November and a presidential election early in 
December. These elections represent a turning point for Venezuela, but 
this turning point contrasts sharply with that of Brazil. For the 
United States, the outcome could cause significant trouble since over 
50 percent of our oil imports come from Venezuela.
  Ironically, the 1992 coup leader, retired Lt. Col. Hugo Chavez, who 
was pardoned by current President, Caldera after spending two years in 
prison, is posed to win the December 6th Presidential elections. it is 
reported that he may have some ties to leftist guerrillas in Colombia 
as well as in his own country; and he has at various times vowed to 
``deep fry the heads'' of his opponents. Even more problematic, he has, 
on occasion, vowed to cut off most of the nation's financial and 
trading relationships with other countries, including its lucrative oil 
industry contracts. Recently, as the election nears and his lead has 
slipped a bit and the United States grows more nervous, he has tried to 
soften his rhetoric by promising to maintain Venezuela's thriving, 
partially privatized oil industry. But critics are not impressed, 
especially when they consider his group of advisers: a group of 
extremists of both the left and the right.
  Also worrisome is the fact that the military is divided over his 
candidacy. Many of the junior officers down to the rank and file see 
him as much of the country's poor see him: as a new generation 
politician. But the higher ranking officers regard him as the middle 
and upper classes of society see him: as a self-infatuated egoist bent 
on nationalizing what is left of Venezuela's economy and upsetting the 
country's tenuous social cohesion, regardless of whether or not he 
really wants to help the poor and root out the notorious corruption of 
Venezuelan politics.
  The traditional parties, viewed from within a large part of 
Venezuelan society as extremely corrupt and discredited, are given 
little chance of defeating Chavez. The chances of the many other 
independent candidates for president (including a former beauty queen) 
of winning are almost non-existent. So far, the two major political 
parties, the AD and COPEI, as well as some of the smaller parties, have 
focused on the legislative and gubernatorial elections as a way to 
secure a power base.
  This year the government separated the legislative and local 
elections from the presidential election so that they might, by virtue 
of a lower turnout and their very panicked and thus motivated base, 
hold onto power in the national legislature and at the regional and 
local level. It is too early to tell whether they

[[Page E2250]]

will achieve this, but if they do it could well set the country up for 
a showdown between a victorious Chavez and all the rest of the 
country's governmental system.
  U.S. observers see only one possible option: that after the November 
elections, all independent candidates for president will coalesce 
around one candidate, perhaps, the pro-business and pro-reform 
successful former governor, Henrique Salas Romer. He is currently 
second in the polls, but still not within striking distance. Moreover, 
this scenario is not without danger: if the lower classes perceive that 
the middle and upper classes are cooperating to defeat their candidate 
that may energize even more dedicated voters for Chavez and increase 
their resolve to turn out on election day. Worse, if Chavez loses after 
leading in the polls for so long and by so much, he has already said he 
will blame fraud and order his ``troops'' into the streets. Chavez has 
already accused the head of the army of plotting to deny the election 
to Chavez which in Chavez's words could ``provoke civil war.'' This 
could set off a period of violent instability throughout the country.


                                PARAGUAY

  On May 10, Paraguay held only its second democratic election for 
President since the end of the 35-year dictatorship of General Alfredo 
Stroessner. The election of Raul Cubas Grau represented the first 
civilian leader to succeed another as Paraguay's President. But the 
Administration of President Cubas, barely three months old, faces a 
potential constitutional crisis which threatens the struggling 
democracy. This crisis has been precipitated by the role of the real 
beneficiary of Paraguay's recent elections--former General Lino Oviedo.
  In April 1996, after a brewing internal feud between then-President 
Juan Carlos Wasmosy and General Lino Ovieda, head of the Paraguayan 
armed forces, Ovieda was fired. Not willing to go quietly, General 
Ovieda retired to his barracks and staged what was described as a 
modest coup attempt against President Wasmosy, calling for the 
President to step down. However, the situation was considered serious 
enough that representatives of Paraguay's neighboring counties and the 
Secretary General of the OAS felt it necessary to intervene to convince 
General Ovieda to end his rebellion. As a result of the intervention, a 
compromise was reached in which General Ovieda would end his coup and 
retire, and would then be given the portfolio of Minister of Defense. 
Ovieda agreed and the rebellion ended. However, in the ensuing period, 
public opposition arose against the deal, and the General, leading 
President Wasmosy to void the agreement. General Ovieda left the 
capital vowing to run for President.
  In 1997, in preparation for the upcoming elections, a split developed 
within the ruling Colorado political party, which had governed Paraguay 
for more than 50 years. The debate pitted sitting President Juan Carlos 
Wasmosy and his choice of a successor, Luis Argana, against the 
resurgent former General, Ovieda, who had formed his own party within 
the Colorado organization. In September of 1997, in a surprise which 
shocked everyone observing Paraguay, General Ovieda won the Colorado 
party nomination for President. He nominated Raul Cubas as his 
candidate for Vice-President and embarked on an ambitious and skillful 
campaign.
  In December of 1997, President Wasmosy, not wishing to turn control 
of the government over to his arch enemy, General Ovieda, had Ovieda 
arrested on charges of sedition related to the 1996 attempted coup. In 
February, 1998, a Wasmosy-appointed military tribunal convicted Ovieda 
and sentenced him to ten years in prison. In mid-April the Supreme 
Court upheld the tribunal's sentence which automatically nullified 
Ovieda's candidacy and threw the Presidential campaign into disarray. 
The Colorado party then elevated Raul Cubas to be the Presidential 
candidate and appointed Luis Argana as Vice Presidential candidate. On 
May 10, Raul Cubas was elected President of Paraguay, but the vote was 
seen more as a vote for Ovieda than for Cubas.
  After his election, Cubas indicated that one of the first things he 
would do would be to free ex-general Ovieda from jail. In reaction, the 
parliament passed a law limiting presidential pardons by stating that a 
prisoner had to serve at least half of his sentence before being 
granted a pardon.
  Shortly after taking office on August 15, and despite the new law, 
President Cubas announced that he was commuting Ovieda's ten-year 
prison sentence and would release him from jail. This action has set 
off a chain reaction of events which has threatened the very foundation 
of Paraguay's politics and its democracy. Immediately after his 
decision to commute the sentence, a group of opposition lawmakers in 
the Parliament petitioned the Supreme Court to overrule the pardon and 
to order Ovieda back to prison. In addition, several lawmakers began 
searching for a way to have President Cubas impeached. And, several 
members of Cubas' cabinet, including the President's brother, the 
Commerce Minister, resigned in protest.
  The Supreme Court is currently trying to decide whether to hear the 
petition to overrule the Presidential pardon. However, it is reported 
that Ovieda has threatened reprisals against anyone trying to uphold 
the Parliament's petition and is preparing to defend himself against 
any attempts to do so. It is unclear whether President Cubas would 
uphold the laws of the state and would permit the re-arrest of Ovieda 
should the Supreme Court rule that way. It is also reported that 
President Cubas may be threatening the four Supreme Court Justices who 
have not yet attained what would be considered lifetime tenure on the 
Court with those appointments.
  This crisis between the executive, the legislature and the court has 
shaken the foundation of Paraguay's government and could set the stage 
for a possible military action if the issue is not resolved peacefully. 
It is incumbent upon the actors in this crisis to resolve their 
differences so that democracy is preserved, that the separation of 
powers among the three branches of government is upheld and that the 
rule of law prevails.

                          ____________________