On January 15,1985, Brazil elected a new president, 74 year-old Tancredo Neves, a moderate career politician who had been one of the important leaders of the opposition to the military regime which took power in 1964. Tancredo died before assuming office, but the elected Vice-president elect, José Sarney, took over the Executive Office on March 15,1985, bringing to an end 21 years of military rule. Arguably, the transition in Brazil is the most important of the recent transitions in South America (Argentina, Uruguay, Peru, Ecuador, and Bolivia), given the country's size, population, and influence, and given the fact that Neves' election marked the demise of the most successful and long-lived bureaucratic-authoritarian regime in the region. As a result, the nature and implications of the Brazilian transition will have considerable significance for understanding the political reality of the region during the next several years.

Since the 1950s, the development strategy of Paraguay has relied on export-led growth. To accomplish this the government placed great emphasis on price and exchange rate stability, first achieved in the late 1950s. Counting on limited resources, the country attempted to attract foreign investment while its own investment programs were directed primarily toward increasing domestic infrastructure, with road construction as a top priority. The latter opened up the eastern frontier region and provided an alternative outlet to the sea via the Brazilian highway system. Historically, Paraguay has counted on the Paraná River and on Argentinian ports for its access to the Atlantic.

Since 1980 the maoist party known as Sendero Luminoso, the “Shining Path,” has been waging a guerrilla campaign against the civilian government of Peru. To the surprise of most observers, this group not only has survived but has expanded its scope of operations, kept the military on the defensive, and attracted a small but significant national following.

This limited success is puzzling because of the movement's small size, its lack of arms and its extreme radicalism, in a country with a diverse and substantial Left. Sendero Luminoso, calling itself the Communist Party of Peru, holds to an orthodox Maoist philosophy.

Prime Minister Brian Mulroney requested the opening of trade talks with the United States on September 26,1985. He did not use the words “free trade,” but that was the gist of the request. He explicitly rejected a common market or a customs union and implicitly dismissed the sectoral free-trade approach. The US administration responded positively and requested permission from the Congress to open negotiations. Negotiating teams have been appointed and discussions are taking place. All the actors noted that the negotiations will be difficult and may last several years. After more than a decade of avoiding the issue, Canada has acted. The context is complex because of growing US protectionism, including concern over certain imports from Canada, especially lumber. Fear of this protectionism was one reason for the Canadian decision. Another was concern about the future of Canada's economy. The Canadian economy has performed poorly for much of the past ten years.

Canadian Prime Minister Brian Mulroney is faced with a number of difficult choices concerning Canada's foreign policy in Central America. These choices are particularly problematic because their repercussions may have an important impact on Canada- US relations. On the one hand, the Prime Minister must heed public opinion in Canada which favors increased government concern about human rights and economic development in Central America. On the other hand, he must consider American security interests and not irritate or embarrass the United States and President Reagan in particular.

Canada's middle power status puts it in a difficult quandary, for it seeks to retain an independent role in Central America, while it finds its influence circumscribed by its proximity to the US superpower. Its ability to wield tangible authority is thus severely attenuated. Canada's asymmetrical relationship with the United States allows it a certain degree of latitude in formulating foreign policy but imposes important constraints as well.