2003 was a year plagued with setbacks and failures for Washington, particularly in Latin America. The empire's economic and financial instability, its "war against terrorism" and the obvious breakdown of the neo-liberal model have each exposed gaps in its continental hegemony. Bogged down in Middle East policy, where it could not impose its Route Map or secure a peaceful future for Iraq; with an internal situation barely contained by the rhetoric of war and by permanently appealing to people's sense of fear – taking the population hostage in its imperial ambitions; with financial difficulties illustrated by the dollar's loss of credibility; - throughout 2003 the White House could only contemplate a series of failures in Latin America. These include the derailment of the World Trade Organisation (WTO) summit, the formation of a group led by Brazil who derailed the FTAA planned by Washington, the consolidation of Hugo Chávez's government and Néstor Kirchner's firm refusal to submit to the demands of the IMF. A weakened economy Every day, hundreds of pages are written about the Bush administration's problems in the Middle East. The difficulties facing its economy are much less evident, in particular its finances, despite the euphoria created by economic growth registered throughout the year. Some of these difficulties arose from the bursting of the speculative bubble, whose media exposure gave rise to some notorious scandals -such as that of the Halliburton company linked to vice-president Dick Cheney-, dragging millions of investors into ruin. Or the financial manipulation of mutual funds which was detrimental to a section of the 95 million people who trusted them with their pensions. However, beyond these specific cases, the US has accumulated a monumental current account deficit of over $500 thousand million. In view of the imperial policy, this deficit is a structural matter; the way its reduction has been tackled during Bush's leadership has been to devalue the dollar. "The major reason for the fall of the dollar is the massive and unsustainable current account deficit. With the dollar's lower value, the US makes its products more competitive on the international market and also reduces the rate of imports. The dollar must fall more than 5% in 2004 and continue falling in 2005", said Farid Abolfathi, director of the consultancy firm Global Insight when speaking to Folha de Sao Paulo on Sunday 21st December. But the solution to the deficit leads to even more serious problems: the flight of capital. In 2000, international investors bought $175 thousand million worth of US shares, whereas up to October 2003 only $15 thousand million worth were acquired. Ian Grummer, director of London's Mellon Financial bank signalled that "US investors are questioning the importance of having dollar-based assets" and are exponentially increasing the purchase of overseas assets. In effect, to October 2003, Americans bought only 1.5 billion worth of dollars in foreign shares, compared with $66 billion in 2002. The lack of confidence in the dollar is affecting the traditional allies of the superpower. Since the 11th Sept, Arab countries have withdrawn half of the $700 billion that they had invested in the US; the former ally Saudi Arabia is at the head of the stampede, having withdrawn some $200 billion. As things stand, alarm signals about the dollar have been well and truly installed on the international financial market and are already visible for all to see. Saudi Arabia and other countries of OPEC are exerting pressure for the value and trade of oil to take place in euros, not dollars. If this is successful (many say that it's not imminent, but only a question of time) it would lead to a dramatic change in the global economic landscape, sealing the end of US hegemony. Their own backyard in a mess This adverse global scenario for the US has been aggravated by the convergence of political and social processes throughout 2003 that mark a turning point in the relationship between Latin America and Washington. At the beginning of the year, the Venezuelan government faced a strong opposition offensive which threatened to bring it down; meanwhile the state oil company (PDVSA) was at the centre of the dispute, with a strike that was deemed irresolvable. But Chávez put up firm resistance and his government came out of it stronger. On January 1, Luiz Inácio Lula da Silva took the presidency in Brazil and on the 15th of the same month, Colonel Lucio Gutiérrez came to power in Ecuador. Both were the result of long-term social and political changes, although each president has since opted for a different path vis-à-vis Washington. In February a police strike broke out in Bolivia, forerunner of the state collapse which struck seven months later. In May, Carlos Menem, the continent's champion for neo-liberalism, had to withdraw from the second round in the election, faced with imminent defeat. The arrival of Kirchner in the Casa Rosada signified a 180 degree turn in Argentina's international policy, burying the neo-liberal policies of the previous decade. At the end of April, Paraguayans elected Nicanor Duarte as president, who from the first moment distanced himself from the model, committed to MERCOSUR and promised to fight certain endemic problems in the country such as corruption, thereby breaking with the style and international alignments of former governments. In June Brazil, India and South Africa signed a co- operation agreement, labelled G3, with the intention of strengthening relations between southern countries. August saw a breakdown in the relationship between the Ecuadorian indigenous movement – Pachakutik – and the Gutiérrez government, which had allied itself with the IMF and Washington. This can be considered the White House's only success of the year in its own backyard. In September the imperial strategy's greatest fiasco occurred: the WTO Summit in Cancun ended in failure for the United States and European Union when agreement could not be reached on agricultural trade. The other side of the coin was the resounding success for the anti-globalisation movement which organized big demonstrations in the Mexican resort. At the same time, it was a success for the recently created G20, the alliance of Third World countries in which Brazil and China played a key role. On October 17, an impressive uprising by the Bolivian people brought down the US's strongest ally in the region – Gonzalo Sánchez de Lozada. His successor Carlos Mesa marked his distance from the former leadership and showed his disposition to strengthen ties with his Brazilian and Argentinean neighbours, strengthening MERCOSUR. The diplomatic intervention of presidents Kirchner and Lula played an important role in the resolution of the Bolivian crisis. Over the same period, the two leaders signed the Buenos Aires Consensus – a strategic alliance between South America's two biggest countries, which aims to remodel the region and retard the signature of the FTAA under the conditions imposed by the US. The year also witnessed electoral defeats for the two South American governments closest to Washington. Álvaro Uribe was defeated in the October regional and municipal elections by the centre-left alliance "Polo Democrático" which was able to introduce a wedge between liberals and conservatives who traditionally share power in Colombia. At the beginning of December, Jorge Batlle also suffered a resounding defeat in the referendum to abolish the law permitting the state oil company to associate with foreign capital. FTAA or integration The set of changes influenced by Latin America's social movements and left-wing is redrawing the continent's political map. The new situation was visible at the Miami ministerial meeting in November, when Lula's proposals were accepted to "make an FTAA only in areas that are possible and leave the rest to be fought out within the World Trade Organisation" In fact, the FTAA that the US wanted is increasingly becoming an illusion. This is particularly the case after the December MERCOSUR summit which took place in Montevideo, where an agreement was reached between MERCOSUR and the Community of Andean Nations (CAN); the US is trying to reach bilateral agreements with several of those countries as a way of isolating Brazil. On the same lines, an agreement was also signed in Montevideo by the Argentinean and Bolivian governments to build a mutual gas pipeline which will be the principal gas provider in the south. As such, an alternative has been found to the project to export Bolivian gas to the US via Chile, which was the trigger of the Bolivian uprising in October. However in spite of this collection of failures and setbacks, US diplomacy is starting to readapt, recognising that it can't impose its will as it could in days gone by. Robert Zoellick, US Trade Representative, is doing this by accepting a "flexible FTAA". It's also a way of buying time – something which the Bush administration needs urgently in the run up to November 2004 elections. It seems clear that the more problems Washington has in the world, the more possibilities Latin American countries will have to secure their own space and to negotiate more advantageous relations with the super-power. This is the fight against the clock of Brazilian diplomacy, the most lucid in the region and one of the most skilful in the Third World, together with China. One should not however lose sight of the fact that in a situation like this, the superpower – like all empires in history – relies on two weapons which it uses with cunning; the eternal division between Latin American countries and the possibility of co- opting those it can't neutralise by other routes. In the next few months, we will see how the continental chess pieces move. It is notable that the Brazilian government – who could have buried the FTAA once and for all after the failure of Cancun – opted to give time to Washington's hawks, approving the FTAA even though it was a "light" version. At the moment in Latin America, not just two but three versions of integration are in competition with one another. That of the United States and its allies, who continue to vie for an FTAA made to measure for multinationals. That of Venezuela and Cuba who opt for a strictly Latin American integration, without US interference. Between the two, is the Brazilian proposal which wants an integration where the US has a predominant but not decisive role. This route – which for now most allies in the region favour – seems to be adapted to the requirements of the industrial bourgeoisie of Sao Paulo, who need the US market more than the regional or their own national market, in order to fulfil their potential growth. The Argentinean government appears to be unsure, although it's tending towards the Brazilian proposal. If this is consolidated, it could once more create an asymmetric integration, to the detriment of the weakest countries and the poorest regions. (Translated from Spanish by ALAI.)