europe.cnn.com Overnight: Grenade thrown at Algerian ambassador's home Friday, January 10, 2003 Posted: 1751 GMT

CARACAS, Venezuela (AP) -- Opponents of President Hugo Chavez blamed the embattled leader for attacks on opposition-led marches but vowed to take to the streets again Friday.

"It's the leader of the country who is provoking this violence," said Carlos Ortega, president of the Confederation of Venezuelan Workers, the nation's largest trade union.

Bank workers on strike for a second day were marching in Caracas on Friday. Street protests were planned in 11 other cities. The demonstrations are part of a nationwide strike that shut thousands of businesses and brought Venezuela's vital oil industry -- a top U.S. supplier and once the world's fifth-largest exporter -- to a virtual halt.

The Central Bank suspended dollar auctions for a second day Friday after the bolivar currency dropped to a record low of 1,593 to the dollar Thursday -- 5 percent weaker than Wednesday and down 12 percent since the start of the year.

Analysts speculated Chavez's government may have to devalue the bolivar to balance its budget. Most government income is in dollars and a weaker bolivar would increase its domestic spending power.

Unknown assailants tossed a grenade at the residence of Algerian Ambassador Momhammed Khelladi on Thursday night, embassy official Abdela Asis Yafri confirmed Friday. No one was injured and there were no arrests.

The explosion damaged walls of the entrance and two cars. Algeria has offered to send technicians to help jump-start Venezuela's oil industry.

Chavistas attack, prevent opposition rallies

On Thursday, government supporters attacked anti-Chavez marches in Caracas and outside oil facilities around the country, the latest incidents of political violence in this crisis-stricken South American country of 24 million.

A Chavez supporter joins in a Thursday rally outside a gasoline distribution center in Guatire.

"Chavistas," as the president's backers are called, attacked a rally outside a refinery in Cardon, 270 miles (435 kilometers) east of Caracas, wounding a 40-year-old worker and a 28-year-old demonstrator, said Luis Arends, a civil defense worker.

In Caracas, gunfire erupted at an opposition rally. No one was hurt, and the rally resumed. There were no arrests.

Chavez supporters armed with machetes and sticks also prevented a demonstration at an oil facility in central Carabobo state, Globovision television reported. A minor clash occurred at a plant in Barinas state.

Chavez opponents claim the president's fiery rhetoric incites violent reactions from his most radical backers.

Chavez, a leftist former paratroop commander who was elected in 1998 and re-elected two years later, blames the opposition-aligned news media, which he accuses of campaigning for his overthrow.

In January 2002, four supporters of Chavez' ruling party were slain in western Zulia state. Nineteen died last year on April 11, when rival marches clashed in downtown Caracas. The bloodshed spurred a coup and Chavez' brief ouster. Loyalists in the military returned him to power on April 14.

Three more citizens were killed, presumably by a lone gunman, at an opposition rallying point on December 6 and two government supporters died of gunshot wounds at a street march last Friday.

Most bank workers support strike, stay home

Spokesmen at three of Venezuela's largest banks -- Banco de Venezuela, Banco Provincial and Banesco -- said 80 percent of the country's nearly 60,000 bank employees stayed home Thursday.

The bank strike forced many supermarkets to close because shoppers were unable to pay with credit cards or debit cards, said Nelson Da Gama, president of the National Association of Supermarkets.

A nonbinding referendum on Chavez's rule is scheduled for February 2. Chavez insists the constitution only requires him to respect a possible recall referendum in August, the midpoint of his six-year term.

Strike organizers -- including leaders of the nation's largest trade union, its business chamber and the state-run oil company -- claim their protest is as strong as ever. Many factories, industrial parks and supermarkets remained closed.

But there were signs many are tiring of the strike. There was more traffic on streets and sidewalks and in shops, restaurants and markets.

Efforts by Chavez to jump-start operations at Petroleos de Venezuela S.A., the state oil company, have been partially successful.

Crude output is estimated at about 400,000 barrels a day, compared with the pre-strike level of 3 million barrels. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Energy Minister Rafael Ramirez claimed the company will produce 1.5 million barrels a day by next week and will reach full capacity next month. Dissident oil workers doubt production can reach those levels so soon.

www.abc.net.au Posted: Sat, 11 Jan 2003 8:24 AEDT

Venezuela to boost diplomatic security after grenade attack The Venezuelan Government is promising to increase security for diplomats after a grenade attack on the Algerian embassy and bomb threats against other diplomatic posts, including Australia. Caracas is becoming an increasingly dangerous place as Venezuela slides towards civil war on the back of a six-week-old general strike.

Overnight, the Government of President Hugo Chavez promised to increased security after a grenade exploded in the grounds of the Algerian Embassy.

Algeria is one of the nations that is sending workers to try and break the strike which has crippled oil production.

The Australian Embassy was forced to close temporarily this week after it received a bomb threat.

Three other diplomatic posts were also threatened.

Meanwhile, the Washington Post has reported that the United States will unveil a new plan to try and resolve the dispute in the next week.

The strike has cut oil supplies to the US and raised world crude oil prices.

www.abc.net.au Posted: Sat, 11 Jan 2003 8:24 AEDT

Venezuela to boost diplomatic security after grenade attack The Venezuelan Government is promising to increase security for diplomats after a grenade attack on the Algerian embassy and bomb threats against other diplomatic posts, including Australia. Caracas is becoming an increasingly dangerous place as Venezuela slides towards civil war on the back of a six-week-old general strike.

Overnight, the Government of President Hugo Chavez promised to increased security after a grenade exploded in the grounds of the Algerian Embassy.

Algeria is one of the nations that is sending workers to try and break the strike which has crippled oil production.

The Australian Embassy was forced to close temporarily this week after it received a bomb threat.

Three other diplomatic posts were also threatened.

Meanwhile, the Washington Post has reported that the United States will unveil a new plan to try and resolve the dispute in the next week.

The strike has cut oil supplies to the US and raised world crude oil prices.

www.tuscaloosanews.com By ALEXANDRA OLSON Associated Press Writer January 10, 2003

Six weeks into an opposition strike, Venezuela's economy is in shambles. Oil exports are down to a trickle. Gasoline lines are long. Venezuela is losing $70 million a day.

And Hugo Chavez is still president, confounding a coalition of labor and business leaders who declared a general strike Dec. 2 to demand a nonbinding referendum on his rule. Many believed economic and political pressure would force him to agree to a vote - or even resign - by Christmas.

But Chavez has the backing of Venezuela's military - armed forces purged of dissidents after a brief April coup. General after general has declared loyalty to the constitution and to a democratically elected government.

Chavez also is stubborn in a crisis where other leaders might feel threatened. After oil production was paralyzed, eliminating the source of half of government revenue and 80 percent of export earnings, he fired 1,000 people from the state-owned oil monopoly and vowed to tighten government control over the company.

The president's opponents are equally stubborn, staging dozens of street marches, calling for a tax boycott and staging a two-day bank strike this week. While thousands of businesses have opened, giant national and multinational firms are closed.

"Nobody, including me, thought this could last six weeks," said Luis Vicente Leon, director of Venezuela's most prestigious polling firm, Datanalisis. "Chavez can win. That is a possibility."

A growing civic movement demanding accountable democracy and an end to violence is part of what keeps the strike alive. The movement cites Article 350 of Venezuela's constitution, which permits citizens not to recognize a government that infringes on human and democratic rights. Ironically, analysts say Chavez included the article to justify his own 1992 coup attempt.

Holding on to power will cost Chavez. The government is considering cutting the 2003 budget by at least 10 percent. Unemployment is at 17 percent and inflation is at 30 percent.

"At this point, it's impossible to avoid an economic crisis of huge dimensions," Leon said. "Chavez has simply decided to deal with that crisis. He seems to be willing to see the economy collapse to stay in power."

Chavez won presidential elections in 1998 and was overwhelmingly re-elected to a six-year term in 2000 on an anti-poverty, anti-corruption platform.

Under Chavez, Venezuela's economy has plunged into deep recession. In the meantime, he has occasionally run roughshod over democratic institutions, including Congress and the Supreme Court.

On the streets, his so-called "Bolivarian circles" - neighborhood groups that are sometimes armed - protect the presidential palace and patrol oil fields abandoned by striking workers.

In November, organizers had to fight their way through circle members to deliver 2 million signatures demanding the referendum.

The National Elections Council agreed to hold the vote Feb. 2. Chavez says he'll ignore the results and that his opponents can wait for a possible recall referendum halfway into his term, or next August, as permitted by the constitution.

Opponents fear he'll figure out a way to postpone that vote.

Nowhere has the battle been fiercer than in the oil industry.

Many oil executives left their offices intact, thinking they'd be back in a week, maybe two. Chavez ordered troops to lock them out and says a long-term restructuring plan will restore full production.

Strike leaders insist the plan is farfetched. It's not easy to replace 30,000 trained personnel, they note.

"Who is going to assign budgets? Who is going to coordinate finances? Who is going to control foreign operations?" demanded Edgar Paredes, who was fired as president of the company's petrochemicals unit. "Without clear and precise answers to these and other relevant questions, the proposal is illusory and irresponsible."

Chavez is forging ahead with help from the military.

Troops are guarding oil installations and service stations. They seized striking oil tankers and commandeered gasoline trucks. Army Commander Gen. Julio Garcia Montoya delivered a blistering condemnation of the strike and professed his loyalty to the government.

A recent opposition march on military headquarters in Caracas ended in chaos after military police fired tear gas and rubber bullets at protesters who tried to break through security lines. Chavez supporters attacked the march with bottles, rocks and fireworks. Gunfire rang out, and two Chavez sympathizers died. Amid the commotion, opposition lawmaker Julio Borges pleaded with a soldier.

"The country can't go through this everyday. Think about it," Borges said, tapping his head with his finger.

The soldier grinned and replied, "Right, let's ban marches."

www.forbes.com Reuters, 01.10.03, 4:23 PM ET

(Press release provided by the rating agency) NEW YORK, Jan 10 - Standard & Poor's Ratings Services today lowered its ratings on the US$3.6 billion and Eur200 million senior unsecured notes of PDVSA Finance Ltd., a wholly owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), to 'B-' from 'BB' (see list). The notes remain on CreditWatch, where they were placed Dec. 12, 2003.

The rating action reflects the heightened risk of default due to the ongoing strike that has crippled the oil industry in Venezuela and PDVSA Finance's ability to service its debt. The current rating on the notes reflects the funded liquidity account available to protect investors at least through the company's next debt service payment on Feb. 16, 2003. While the liquidity account, which is fully funded for the amount of this payment and under control of the New York Fiscal Agent, is available to cover that payment and structural enhancements are still in place to prevent sovereign or corporate interference with that payment, both the ability to generate and export oil and PDVSA's willingness to allow much needed export revenues to be trapped offshore have been severely affected by the strikes.

Standard & Poor's is concerned with the ability and willingness of PDVSA Finance to make subsequent debt service payments as long as PDVSA's operations remain hampered by its striking workers. After the February payment, PDVSA Finance's next debt service payment is in May 2003. While PDVSA Finance has indicated that is has adequate funds in its collection account for the February payment, these funds are not restricted and could be distributed to PDVSA assuming that various covenants are not breached. PDVSA Finance currently is in compliance with all covenants, however, there is still the risk of an eventual event of default due to a covenant violation, including one triggered by the company's low export volumes.

If the liquidity account is used to make the February payment and PDVSA Finance does not replenish the account within seven days, an event of default will be triggered. Investors have the option at that time of declaring an acceleration of the notes. If an acceleration event is declared, 100% of all collection deposited into the offshore account will be used to pay bondholders. If, however, funds in the liquidity account are not used to make the February debt service payment, then a payment default in May would be unlikely as the liquidity account would remain funded.

Standard & Poor's also is concerned about PDVSA's ability to restore its operations, which could result in diminished coverage ratios and strained liquidity for PDVSA Finance. Standard & Poor's believes that restoring PDVSA's production could require several months and substantial investment, but precise estimates are difficult at this time given the operational disarray at PDVSA.

Standard & Poor's notes that the May 2003 debt service payment could be serviced with only approximately five to six days of exports based on prestrike volumes (approximately 1.6 million barrels per day) and prices (approximately US$23.00 per barrel) of exports to the U.S. (80% of which must flow through the PDVSA Finance collection accounts). High political uncertainty in Venezuela and ramp-up requirements make it difficult to assess whether there will be even the partial resumption of meaningful export volumes by April, which would be required to provide enough cash flow to service the notes. Standard & Poor's also believes that PDVSA and the sovereign's sharply weakened financial condition has raised the likelihood that even once exports begin to resume, there may be cash flow diversion from the structured arrangements (this risk is exacerbated by the fact that most of the export volume will initially go to Citgo Petroeum Corp., the U.S. refiner and marketer that is 100% controlled by PDVSA, who purchased approximately 25% of prestrike U.S. export volumes).

To speak to an analyst directly regarding PDVSA Finance, please contact Nancy Gigante Chu, Structured Finance Ratings - Latin America, New York, (1) 212-438-2429; regarding PDVSA, contact Bruce Schwartz, Corporate Ratings, New York, (1) 212-438-7809; and regarding the rating action on the Bolivarian Republic of Venezuela, contact Richard Francis, Sovereign Ratings, New York, (1) 212-438-7348. RATINGS LOWERED AND REMAINING ON CREDITWATCH PDVSA Finance Ltd. Class Rating To From A 6.45% notes due 2004 B-/Watch Neg BB/Watch Neg B 6.65% notes due 2006 B-/Watch Neg BB/Watch Neg C 6.80% notes due 2008 B-/Watch Neg BB/Watch Neg D 7.40% notes due 2016 B-/Watch Neg BB/Watch Neg E 7.50% notes due 2028 B-/Watch Neg BB/Watch Neg F 8.75% notes due 2004 B-/Watch Neg BB/Watch Neg G 6.25% notes due 2006 B-/Watch Neg BB/Watch Neg H 9.40% notes due 2007 B-/Watch Neg BB/Watch Neg I 9.75% notes due 2010 B-/Watch Neg BB/Watch Neg J 9.95% notes due 2020 B-/Watch Neg BB/Watch Neg K 8.50% notes due 2012 B-/Watch Neg BB/Watch Neg

Copyright 2003, Reuters News Service