By GINGER THOMPSON

CARACAS, Venezuela, Jan. 4 — Venezuela's foreign minister said today that the government regretted the violence that erupted Friday during a march against President Hugo Chávez, and acknowledged that the monthlong strike aimed at forcing Mr. Chávez out of office had taken a serious toll on the nation's economy. Advertisement

But the minister, Roy Chaderton, accused strike leaders — particularly executives at the state-owned oil company — of shutting down the heart of this nation's economy in an effort to overthrow the government. He also insisted that Mr. Chávez would not give in to opposition calls for early elections.

"Democracy cannot be subject to the rises and falls in the polls," Mr. Chaderton said, referring to Mr. Chávez's declining approval ratings. "So, just because today is a bad day is not a reason to call for immediate elections and to pressure with violence, to paralyze a country, and strangle the economy just to force out a president."

"It is true that this government has made many mistakes," the minister said. "But errors in a democracy are paid in elections, within the norms of the Constitution."

On Friday, a protest by Mr. Chávez's opponents turned into a street fight that lasted most of the day. Tens of thousands of opposition demonstrators marched toward a military base to demand the release of a dissident general who was a leader of a failed coup last spring and urge the military to support the strike.

Supporters of Mr. Chávez confronted the marchers, and a fight ensued. Later, shots rang out.

Newspaper reports said two men, one 22 and the other 24, were killed and five other people were wounded by the gunfire. Dozens of others suffered injuries from rocks thrown by the battling protesters and from rubber bullets and tear gas fired by national guard troops.

The streets of the capital returned to calm today, and an estimated 20,000 supporters of Mr. Chávez turned out to demonstrate their support for the government.

Mr. Chaderton said Mr. Chávez was trying to prevent a repeat of a coup attempt last April, when the Venezuelan president was forced by the military to leave office for 48 hours after a violent protest outside the presidential compound.

He suggested that the opposition, frustrated that it had not been able to force Mr. Chávez out of power, had begun provoking violence as a way to turn up the pressure on him. But Mr. Chaderton said this effort, like last year's coup attempt, would fail.

"Despite the problems, the country is moving forward except for the oil industry, which has been hit the hardest," he said. "But the country is going forward. The stores are open. People are going to work."

Venezuelan Leader Says He'll Weather Strike by Opponents  (December 16, 2002)

Brazil will pay off debts, he pledges BY KEVIN G. HALL     SAO PAULO, Brazil - A day after being elected president of Latin America's largest democracy, Luiz Inácio Lula da Silva sounded a conciliatory tone toward financial markets and asked Brazilians not to expect too much too soon.

  ''As we said in the campaign, our government will honor contracts established by the government. We will not lose control of inflation and . . . we will maintain . . . a position of fiscal responsibility,'' da Silva, the first Brazilian president to be elected from a leftist party, said Monday.

  Da Silva plainly was trying to reassure Brazilians and foreigners that Brazil would be safe in his hands, despite his history as a union radical and leftist political leader. Brazil has been driven to the brink of a financial crisis by investors pulling their money out of the country, at least in part because of fears that da Silva would win the election and overturn existing economic policy.

  On Monday, da Silva outlined his goals for the next four years, saying he had a clear mandate to create a new economic and social model for Brazil. But he also warned his countrymen about expecting dramatic changes after he takes office Jan. 1. Budget cuts in his first year will make it hard, he said, to spend more on social programs.

  ''The hard road facing Brazil demands austerity in the use of public funds,'' da Silva said, pledging creative use of existing monies and saying he would tap state development banks to start as many job-creation programs as he could.

  DEBTS WILL BE PAID OFF

  Da Silva stressed that he would honor all debt-repayment commitments made by President Fernando Henrique Cardoso and promised he would not tolerate inflation. Brazil had runaway inflation in the 1980s and early 1990s, until the Cardoso era.

  Aides had said da Silva wanted to review the $30 billion loan agreement that was extended earlier this year by the International Monetary Fund to shore up Brazil's economy. On the campaign trail, da Silva frequently blasted the IMF and other multilateral institutions such as the World Bank and the Inter-American Development Bank.

  But on Monday he called on those institutions to help Brazil with its economic crisis.

  ''Brazil will do its part to get past this crisis, but it is essential that beyond support [for the government], the multilateral organizations . . . reestablish financing for [Brazilian] companies and international commerce,'' da Silva said.

  Brazil's currency, the real, traded steadily Monday as investors waited for news of da Silva's economic team. Aides have leaked several market-calming items, including a promise to create an autonomous central bank that would largely remove politics from monetary policy. Da Silva meets with Cardoso today, and afterward is scheduled to announce his transition team. Investors hope it will give a clear idea of his economic team and outlook.

  Da Silva received congratulatory calls from world leaders Monday, including Cuban dictator Fidel Castro and President Bush. Despite criticism of the United States during the campaign, da Silva spokesman Andre Singer said Monday that bilateral relations with the U.S. would remain strong.

  U.S. RELATIONS

  ''We want to have the best relationship possible with the United States. It's a very important country and, besides that, the United States is our most important commercial partner, so we want to keep that relationship,'' Singer said. ``But what we are going to do is negotiate hard in defense of our interests as the United States has done all the time.''

  Da Silva also said he was creating a special secretariat for social emergencies that would have combating hunger as its mission, and that hunger would be a benchmark for measuring his success in office.

Nation's First Vote for Leftist Could Set Back Plan for Hemispheric Free-Trade Zone By Scott Wilson   SAO PAULO, Brazil, Oct. 27 -- Luiz Inacio Lula da Silva, a former union leader who never attended college, won a landslide victory today in a Brazilian presidential election that reflected the disenchantment sweeping much of Latin America after a decade of free-market reforms that have failed to deliver promised prosperity.

Lula, as the gray-bearded socialist is known, defeated his centrist opponent, Jose Serra, a former government minister, by a huge margin. With 95 percent of the vote counted, Lula had 61.5 percent, compared with 38.5 percent for Serra, after a day when millions of Brazilians cast ballots before massing along busy boulevards across the country for evening celebrations. Few voting problems were reported. Serra conceded the election to Lula in a congratulatory phone call tonight.

Lula's victory marks the first time a leftist has been elected president of Latin America's most populous country, and is the clearest demonstration to date of the growing backlash against globalization in this part of the world. His election could mean trouble for the economic reforms backed by the United States -- in particular, a hemisphere-wide free-trade zone -- that represent the Bush administration's most important policy initiatives in Latin America.

While voting in this city's middle-class suburb of Sao Bernardo, Lula appeared to speak to the millions of Brazilians who have endorsed his pledge to move the world's eighth-largest economy away from the "Washington consensus" followed by his predecessor and toward what he has called a "new economic model" for this traditionally conservative country.

"I want to dedicate this election to the suffering poor of our beloved Brazil," Lula told hundreds of chanting, cheering supporters who had gathered at the polling place.

"The result of this election shows that from Jan. 1, we will be responsible for 170 million Brazilians, and we will have to govern with all of Brazilian society to build a more fair, more brotherly and more united country," Lula said in a victory speech tonight before hundreds of supporters in a downtown hotel and tens of thousands more gathered along Paulista Avenue, who watched on closed-circuit television screens. "We are showing the international community a lesson in democracy."

Today's election also marked a milestone in Brazil's democracy, which emerged 17 years ago with the collapse of a repressive military dictatorship. Lula made his name as an opponent of that regime, and his apparent broad-based victory could end the political monopoly that a small, economically powerful elite has enjoyed for much of this century.

Lula, who turned 57 today, spent much of the afternoon awaiting election returns with family and friends in his apartment in Sao Bernardo. Groups of supporters gathered throughout the day on the avenue outside, waving flags bearing the red star of his Workers' Party and celebrating what polls have suggested would be a resounding victory after three previous runs for the presidency.

Raised by a single mother, Lula began earning money for his family on the streets of this city at age 7, and started his first regular job in a laundry service five years later. At 17, he was a metal worker at one of the factories that encircle this city of 17.7 million people, eventually rising to head the 100,000-member metal workers union that gave him a perch in Brazil's politics.

At the time, Brazil's military dictatorship was waging a "dirty war" against student leaders and union organizers in a bid to maintain power. In 1964, the military toppled the country's last leftist leader, President Joao Goulart, after he rose to office from the vice presidency following the resignation of his predecessor. He was never elected president.

Brazil's Workers' Party emerged in 1979, largely at Lula's urging, as a vehicle to speed along the dictatorship's collapse. That eventually occurred six years later, and Lula was elected to Congress the next year with more votes than any other candidate in the country. He made his first run for president three years later, narrowly losing to Fernando Collor de Mello, who resigned in 1992 after being impeached on corruption charges.

But it wasn't until this year, as Brazil suffered through a fourth year of economic stagnation, that Lula's populist message finally resonated beyond the labor unions, landless peasants and urban poor who have long been his political base. Promising a sharp change of tack from President Fernando Henrique Cardoso's eight-year experiment with free-trade agreements and free-market reforms, Lula has outlined a populist agenda that calls for new spending on social programs and promises millions of new jobs.

At the same time, Lula, who begins his four-year term on Jan. 1, has been trying to appease jittery international markets that have reacted sharply to his probable election. Brazil's national currency, the real, has lost 40 percent of its value against the dollar this year and Brazilian bonds have plummeted. Lula, who has backed away from previous threats to default on Brazil's $260 billion public debt, has called the market reaction "economic terrorism."

Lula, who opposes both U.S. military aid to Colombia and the embargo on Cuba, has suggested in recent days that he will chart a more moderate course. He intends to name a conservative economist to run Brazil's Central Bank, his aides have suggested in recent days, and he has pledged to abide by the terms of a recent $30 billion International Monetary Fund emergency loan approved in part to keep Brazil from following neighboring Argentina into economic meltdown.

But he has not backed away from his steadfast opposition to the Free Trade Area of the Americas, at least as it is currently conceived. New U.S. steel tariffs and agriculture subsidies have dimmed prospects for the hemisphere-wide free-trade zone, a Bush administration priority, and Lula's opposition to it enjoys large support within Brazil's business community and disillusioned middle class.

"The rich have gotten richer, the poor have gotten poorer," said Sidney Marcos, 41, after casting his vote for Lula at the Mario Martins de Almeida Public School in Sao Bernardo. Marcos runs a business that helps people and companies negotiate Brazil's confusing bureaucracy, a popular service across Latin America.

"I voted for him to change, to see if we can actually do it," he said. "I have more hope than faith that we can."

With its small, comfortable homes and a car in each gated garage, Sao Bernardo owes its middle-class stability to the powerful union movement that Lula helped lead throughout the 1970s and 1980s. Many of its residents work in the auto industry, and the annual raises guaranteed in union contracts made them comfortable, but also helped send Brazil's inflation soaring until Cardoso's arrival.

Now, though, Cardoso's early success seems a distant memory to people like Perpetua Rosa Nogueira Terencio, a 74-year-old housewife.

"I always voted for him," said Nogueira, small and gray-haired with a cross hanging from her neck. "But life is too expensive now, and the salaries here are poor. This is what's most important -- to increase wages. And this is something we can do."

By Carlos A. DeJuana  

SAO PAULO, Brazil -- Much has changed for Brazil's Metron since it began making taxi meters 18 years ago in a gritty, industrial neighborhood of Sao Paulo.

Seizing on the technological boom of the mid-1990s, Metron has transformed itself into Brazil's top home computer seller with cheap but sturdy alternatives to foreign-made PCs. Sales grew five-fold between 1995 and 2001 to $150 million, and the company now ships desktop computers to Europe.

If leftist Luiz Inacio Lula da Silva, who is expected to win a landslide victory in Sunday's second-round vote for Brazil's presidency, lives up to his promise to help the country's stunted industrial sector, companies like Metron may thrive.

Lula and his centrist rival Jose Serra have both pledged to strengthen local industry, especially exporters, through incentives such as tax breaks which they hope will allow them to make due on promises to create jobs and revive the stagnant economy.

Brazil is the world's ninth-largest economy with major industries including autos, textiles, paper and pulp and aviation but it accounts for only 2.2 percent of world economic output and less than 1 percent of global trade.

Long shunned for its association with government meddling and favoritism, Brazil's industrial policy has become a key issue during this election race, especially for small- and medium-sized companies.

"A multinational doesn't have the same problems as Metron in a financial crisis like this one," said Clovis Valerio Ferreira, Metron's director of operations.

Driven by worries that a leftist government could mismanage the economy, investors have hammered Brazil's financial markets in the months leading up to the election, making it harder for companies to get credit and quashing demand for consumer goods.

"The government should help local companies with financing so that they can compete on the same conditions as multinational corporations," Ferreira said.

The pro-industry platform finds a receptive ear among voters disgruntled by rising unemployment, closing factories and the increase of foreign capital in Brazilian business.

It also conjures up fond memories of Brazil's so-called economic miracle" of the late 1960s and early 1970s, when the country's economy grew an average of 10.9 percent a year, fueled in part by heavy spending in state industry.

KILLING BUSINESS?

Over the last decade Brazil has progressively opened its borders to foreign trade, privatizing state-run enterprises and embracing multinational companies that want to make and sell their products here.

But critics say outgoing President Fernando Henrique Cardoso has left local industry to falter during his eight years in office as he tried to steady a chronically volatile economy.

Interest rates are some of the world's highest, which means consumption is lackluster and corporate credit is expensive.

"The other day I was speaking to an industrialist who said '(The government) killed Brazilian business,"' said Luiz Gonzaga Belluzzo, an economist at the University of Campinas and an economic advisor to Lula's Workers' Party.

Lula, a veteran leftist and former metalworker about 30 points ahead of Serra in opinion polls, has been relentless about the need to bolster domestic industry.

For example, he has promised to ensure state-owned oil giant Petroleo Brasileiro (Petrobras) builds two new oil platforms on Brazilian soil and has repeatedly lambasted Cardoso for allowing it to hire out a Singapore-based firm to build the first rig.

"If those platforms were built in Brazil, they would generate close to 25,000 jobs for three years," Lula told TV viewers in his political ads.

Serra promises tax breaks to industry and exporters and wants to create a government ministry to focus on promoting foreign trade.

The presidential front-runner also promises increased corporate financing, tax breaks for exporters and plans to create an "Extraordinary Department for Foreign Trade," with a direct line to the president.

TROUBLE AHEAD?

But economists have questioned whether Lula or Serra will be able to finance tax cuts and other incentives given the government's tight fiscal situation.

"The biggest error in both candidates' platform is assuming that we had money to do this and it just didn't happen because of a lack of political will," said Fabio Akira, an economist at J.P. Morgan in Sao Paulo.

Economists have traditionally scorned too much government intervention in the economy as it tends to generate artificial forces that inevitably disrupt the markets.

Local companies protected by high import tariffs, for example, have little reason to improve efficiency and productivity. And consumers lose by getting stuck with low-quality, expensive goods.

No matter who wins Sunday's presidential runoff, economists say the government is likely take a much more active role in running Brazil's economy -- so much so that some have dubbed future policies as protectionist.

"There is the perception that we will certainly have a little more protectionism," said Carlos Firetti, head of research at BBVA Securities in Sao Paulo. "Whether that's bad or not is going to depend on its extent."

PETROLEUMWORLD Caracas, Jan 4

Caracas, Venezuela, January 2, 2003

Mr. Yves Engler Vice President Communications for the Concordia Student Union

Dear Mr. Engler,

We have read your December 15th article on Venezuela, published by Petroleumworld.com. We believe it does not adequately reflect the critical political and economic situation we are facing in Venezuela. Actually, we feel you are misinterpreting what is happening here.

What you call "a general strike" is really "civil disobedience". It is allowed by the Venezuelan Constitution under Article 350. Chavez practically wrote that article into the Constitution in 1999.

Popular discontent in Venezuela is rooted in the tradition of Thoreau, Ghandi, and Martin Luther King. Perhaps, we could even go back to Antigone, in ancient Greece. What really matters is that "the strike" is sending a clear message : the Venezuelan people simply got tired of empty promises, bullish language, and bad government by the person who, as you point out in your article, was elected by a vast majority in 1998. Let us not forget that Chavez came into power after unsuccessfully trying to overthrow the government, twice, in 1992. That government had also been elected by a majority of the people but Chavez claimed it had lost legitimacy. This is exactly what is happening to him, now. He has squandered the largest political capital ever awarded to a Venezuelan. His campaign promises to fight corruption, reduce poverty, and rekindle economic growth became hollow words. He was only interested in political control. He rewrote the constitution and proceeded to gain absolute control of the Congress, the Supreme Court, the office of the Attorney General, and other authorities which, under the constitution, should be independent. The fact is, he has done away with all "checks and balances", which is not exactly democratic. Is it so difficult to understand why opposition against him has grown from a trickle in 1999 into a tidal wave of popular protests that have led to the kind of "civil disobedience" never before seen in our country?

We do not want to tire you with details. However, please look at the facts. A partial list would include the following :

(a) in the four years since Chavez came to power, the economy has been wrecked, capital flight has increased, private investment has significantly diminished, and unemployment has grown. You can get the figures from the Central Bank of Venezuela. A key indicator to watch is per capita GDP. True, it had been coming down in previous years but under Chavez, it has taken a nosedive. As a result, poverty has dramatically increased (do read the Study on Poverty by the Universidad Católica Andrés Bello in Caracas). Central Bank figures show that for the first nine months of 2002, total real GDP came down by 6.2%. Estimates for the year as a whole range from - 8% to - 9%;

(b) despite record-high petroleum prices, the government has posted a fiscal deficit every year since 1999. Fiscal mismanagement has increased to a level never seen before. As a result, domestic national debt has ballooned (it tripled since 1999);

(c) the unemployment rate has increased to 16% but, in addition, 52% of the labor force belongs to what is euphemistically called "the informal economy", meaning, no insurance, no labor law benefits, no training, no medical assistance. Picture what this means for international competitiveness in an age of globalization;

(d) it is not true that one million students have enrolled in primary school under Chavez and, yes, minimum wages have been increased but then every previous government in Venezuela had done the same. This has become common political practice in our country.

(e) inflation did subside for a while but only because the currency was artificially "anchored" (pegged) to a foreign-exchange "band". When that system collapsed in February of last year, the currency was allowed to float. It experienced an 84% depreciation, in just ten months. Inflation jumped to 31% for the year. The market has lost faith in fiscal and monetary policies; thus, devaluation will continue if Chavez stays.

(f) land distribution under Chavez is a myth but private farmers are being scared away by land-confiscation threats. As a result, agricultural production is down.

Need we continue? You should get the facts and figures that will allow you to make a more comprehensive appraisal of economic and social reality in Venezuela.

Finally, the oil industry.

The Venezuelan oil industry is paralyzed. On December 15 you wrote : "though the strike seems to be withering, in the key oil industry disruption continues." On December 30, 2002, total crude production was down to 150,000 barrels (compared to 3.1 million barrels per day in late November). Exports are down to a trickle and what little is being shipped is coming out of storage. Yet government sources claim that "oil operations are practically back to normal". Gasoline is being imported from Brazil at extremely high prices. Such imports are basically intended to get media attention abroad. The few service stations which are still open are getting gasoline of very poor quality, usually mixed with water. Hundreds of vehicles are already stranded as a result. But, do come to Venezuela, drive around, stand in line at a service station, talk to the people. Most Venezuelans in line will tell you that "this is the price we have to pay" to recover our national dignity.

It will take weeks to repair the damage already done to the efficiency and morale of the oil industry. But, it may get worse. Look at what is happening : (a) PDVSA?s President Alí Rodríguez (a former guerrilla fighter in the 1960?s) has fired the top 90 managers of the Corporation but workers have not flocked back to work; (b) already, 23 oil-industry accidents have been reported in the past 29 days because the people being used by the government to man operations simply are not qualified; (c) army personnel with limited experience are being appointed to top administrative positions in the industry; (d) the large refineries are down to the minimum level necessary to avoid collapse; (e) force-majeure has been invoked by PDVSA on oil export contracts.

As a result of "civil disobedience" in the oil industry, fiscal income from oil will be sharply reduced. Thus, the fiscal deficit in 2003 will be larger and extremely difficult to manage. Since 2001, Venezuela has lost access to international capital markets and the Government can no longer tap domestic debt markets. The foreign-exchange implications are no less ominous. Notwithstanding the fact that exchange markets virtually shut down in December, total foreign exchange reserves dropped US$ 1.2 billion during the past 30 days. The government last week forced PDVSA to draw down (again) on the savings which the oil industry had accumulated at the special Investment Fund (FIEM). This is intended to finance the payment of PDVSA dividends to the Government, in violation of Fund rules and its spirit. PDVSA managers and workers are protesting against political interference, loss of corporate autonomy, and violation of trust. Remember that all PDVSA appointments made by the Chavez Administration have been based not on merit or experience but on political affiliation "to the revolution". Come to Caracas and check it out.

Will "civil disobedience" lead Venezuela to early elections? In your article you wrote : "according to the constitution, to remove Chavez, the opposition needs only to wait until August, half way through his term when a binding referendum can be held." True. But, at what cost? And, whatever happened to "listening to the voice of the people"? This used to be one of Chavez? favorite expressions, back in 1999. The "problem" is that, now, about 75% of the people want him out. So, instead of lending an ear, he takes refuge in the Constitution.

Have you sat through one of Chavez? four-to-five-hour weekly speeches? His rhetoric is impressive but defiant and conflict-prone. To Chavez, anyone who disagrees is a "traitor"; anyone daring to dissent simply "wants to overthrow the government"; anyone who is not for him is clearly a member of the "corrupt oligarchy". Yes, he was democratically elected in 1998. However, his government has lost legitimacy. It is time to go back to the people.

We wish you a happy new year. We hope we too can have a good year in Venezuela. Meaning, without Chavez. Without him, we can and will rebuild this country.

Sincerely,

Mauricio García Araujo Irene García de García

cc. The Editor, Petroleumworld.com

E-mail addresses : Mauricio García Araujo : mga23@telcel.net.ve Irene García de García : meganet@iamnet.com