Recent events in Colombia, Peru, Panama, and El Salvador indicate that organized political violence in Latin America is not monopolized by insurgents. Further, the current wave of violence in some countries demonstrates the failure of political elites to develop institutions capable of channeling and controlling new demands for political participation that have resulted from economic and demographic changes. Chronic insurgency in some countries reflects government incompetence, lack of legitimacy, or inability to obtain the necessary political support. The control of political offices and State decisionmaking power by traditional political parties has resulted in immobility and rigidity. This rigidity has prevented most governments from keeping pace with profound social change and the rapid mobilization of new groups into politics. In addition, flawed economic policies and political instability are compounded by capital flight. Latin American governments realize that the investment climate must improve before their economies can improve. Political violence is likely to increase in the region as long as the political and economic problems faced by the majority of citizens remain unresolved. Extremists on both sides of the political spectrum are well aware that terrorism offers the potential for gaining political concessions that cannot be attained by traditional means. Consideration is given to the role of the underground economy in Latin American societies, the impact of U.S. aid, and links between insurgent groups in the region and European and Middle Eastern terrorist organizations.