www.nytimes.com January 11, 2003 By JAMES DAO and NEELA BANERJEE

ASHINGTON, Jan. 10 — The crisis in Venezuela is creating major new complications for the Bush administration's campaign to oust President Saddam Hussein of Iraq, causing oil shortages that would probably make a Persian Gulf war more costly to the economy than once anticipated, American officials and industry experts said.

The 40-day strike has virtually shut down Venezuela's oil industry, the fifth-largest in the world, and proven more difficult to resolve than the administration expected, the officials said.

Efforts to end the stalemate between President Hugo Chávez and his opponents have been hamstrung not only by the intransigence of both sides in Venezuela, but also mistrust toward American diplomats, the officials added.

Venezuela has for decades been one of the most dependable sources of petroleum for the United States, where industry analysts say the strike has already hurt some refineries and driven up the retail price of gasoline by at least a dime a gallon.

Those shortages will only worsen, and prices continue to rise, if the United States attacks Iraq, they predicted. That means that war in the Persian Gulf could prove more costly to the American economy than had been projected if the Venezuelan standoff is not ended soon.

For that reason the Bush administration has been debating plans to release oil from the Strategic Petroleum Reserve, which contains nearly 600 million gallons of crude. For now, though, the White House has decided to defer those plans, mainly to keep oil available in case of war in Iraq, administration officials said.

"A few months ago everybody thought that if we went to war in Iraq oil wouldn't be a major problem, because there was enough spare capacity to make up for lost Iraqi oil," said Larry Goldstein, president of the Petroleum Industry Research Foundation Inc., a research organization. "But no one then was contemplating lost Venezuelan oil."

"Now," he said, "we won't have enough spare capacity to take care of both those events."

The crisis could be compounded if President Chávez follows through on a proposal to split the government-owned oil company, Petróleos de Venezuela S.A., into two parts and restructure its central offices.

American officials say Mr. Chávez's true goal is to install political loyalists in place of the union leaders and senior managers at the oil company, known as PDVSA, who have joined the strike.

The result could be a more pliable but less efficient company that produces less oil than the roughly three million barrels a day that Venezuela produced before the strike, officials and experts said. That could leave the United States even more dependent on Middle Eastern oil, the experts said.

"Petróleos is one of the few state-owned oil companies in the OPEC group that approximates a normal integrated major oil company," said Leonidas P. Drollas, chief economist with the Center for Global Energy Studies in London. Echoing other industry analysts, Mr. Drollas added, "To break it up into anything sounds obviously politically motivated."

The Bush administration, acknowledging the growing danger from the Venezuelan strike, has stepped up its efforts to calm the oil markets, lobbying major oil exporters to increase production. At a meeting in Vienna this weekend, the Organization of the Petroleum Exporting Countries is expected to vote to increase production by 8.7 percent, or nearly two million barrels a day, officials said.

The United States is also working with Mexico, Brazil and the Organization of American States to cobble together a coalition of South American governments to broker a truce. Diplomats working on the crisis are worried that the O.A.S., which has spearheaded negotiations, lacks the influence to persuade Mr. Chávez to consider concessions.

That will be a topic of discussion when foreign ministers and heads of states from Latin American countries gather in Quito next week for the inauguration of Ecuador's new president.

But senior Venezuelan officials have already expressed suspicions about the administration's intentions.

"We trust that the United States will not take a stand that will divide this country into pro-Americans and anti-Americans," Venezuela's foreign minister, Roy Chaderton, said in an interview. "We want them to respect that this is a democratically elected government."

The Venezuelan Constitution allows for a recall vote halfway through a president's term, which in Mr. Chávez's case would be August. The opposition has said that is too late.

The Constitution could be amended by the national legislature to allow for earlier elections, but Mr. Chávez has rejected that idea. A third option would be a nonbinding referendum on Mr. Chávez's popularity in February. The opposition is proceeding with plans for one, but Mr. Chávez has challenged its constitutionality.

American officials say they do not care which electoral option is accepted, as long as an agreement is reached that ends the violent confrontations that have been occurring and allows renewed oil production.

"This is an incredibly important moment in Venezuelan history," a senior State Department official said. "Things are happening now that are going to affect Venezuela for decades: its energy relationship with the United States, the structure of PDVSA, the integrity and credibility of its democratic institutions — all of these things are at stake."

But many Latin American experts say the administration's efforts have been too little, too late. They contend that the Bush administration, distracted by Iraq, allowed Venezuela's problems to fester.

Others say the administration committed two blunders last year that have hurt its credibility with Mr. Chávez and other Latin American leaders: in April, by appearing to endorse an attempted coup against the Chávez government, and in December by briefly joining the opposition's call for early elections.

In addition, the State Department's Latin America desk has been leaderless through much of the strike. The last assistant secretary of state for Western Hemisphere affairs, Otto J. Reich, was reassigned in November after his temporary appointment expired. The White House intends to nominate Roger F. Noriega, the representative to the Organization of American States, to replace him.

"There is no one at the wheel here," asserted Moisés Naím, the Venezuelan who is the editor of Foreign Policy magazine.

Some oil analysts argue that the administration should have moved faster to stabilize the oil market. Those analysts, along with some members of Congress, have urged the administration to release oil from the Strategic Petroleum Reserve.

Even a relatively modest "loan" of 20 million to 30 million barrels to American refineries would stabilize prices and ease short-term disruptions, giving the OPEC countries time to ramp up production. It typically takes 30 to 45 days for Persian Gulf oil to reach the United States.

The impact of the Venezuelan crisis has been widely underestimated by officials and consumers, oil experts said. Venezuela once exported 2.7 million barrels a day, 1.5 million barrels of that going to Untied States, or about 14 percent of America's crude oil imports.

Now, Venezuela says it is producing about 600,000 barrels a day, though outside experts estimate the volume at less than 400,000 barrels.

That means that more than two million barrels a day of Venezuelan crude have been removed from the global market, making this the worst disruption in supply since the Persian Gulf war of 1991, experts said.

www.thoroughbredtimes.com Posted: 1/10/2003 9:41:00 PM ET

Thoroughbreds from Venezuela?s most important tracks are suffering a serious shortage of feed, which is jeopardizing the continuity of racing, following 38 days of social crisis and general strikes against President Hugo Chavez.

La Rinconada racecourse in Caracas, as well as Valencia and Santa Rita in Maracaibo, three of Venezuela?s most important racecourses and training centers, may be force to cancel racing if conditions do not improve shortly.

Many trainers are complaining they are not receiving their daily feed supplies, which could lead to the suspension of racing.

"There is no food to feed the horses; many trainers have canceled their regular gallops and a definitive [suspension of racing] is very possible unless the food arrrives shortly," said La Rinconada’s 2001 leading trainer Francisco D’Angelo whose stable has reached the state of emergency.—Michael Burns and Diego Mitagstein

www.guardian.co.uk Alex Bellos in Rio de Janeiro Saturday January 11, 2003 The Guardian

President Luis Inacio Lula da Silva and 30 of his cabinet colleagues began a two-day visit yesterday to some of Brazil's poorest areas.

It has been dubbed the president's Misery Tour and is aimed at showing ministers the extent of hardship in the country.

The political caravan is the new leader's first official trip since he took office last week and a symbolic gesture to show that his government's priority is to fight hunger and poverty.

He has given each of his ministers 15 days to come up with proposals to redress poverty, and has set up a new ministry specifically to combat hunger.

For Lula, as he is universally known, it is a journey back to his roots.

He was born and raised in the impoverished semi-arid north-east of the country.

The tour began yesterday in Irma Dulce, near the north-east city of Teresina, which is thought to be one of the biggest shantytowns in Latin America

Lula spoke to and mixed with a crowd of about 3,500 there.

The party then flew to Recife. Today the tour continues to impoverished areas in the state of Minas Gerais.

Lula introduced his ministers as "comrades" and said that they would work together to end poverty. "My job is not do promise but to do," he said.

The loudest cheer went to the culture minister, Gilberto Gil, who is also from the north-east and is one of Brazil's most successful pop stars.

Lula said he had seen a four-year-old child with an arm that was "thinner than my finger".

"This means malnutrition, and this is what we will fight against," he said.

"Don't think that I can change everything with a magic wand but let's work against this situation."

He walked for about 400 metres through the shantytown and visited the home of a 23-year-old woman with three children who lives on less than £10 a month. She asked him for working materials to help improve her home.

Last week Lula became the first working-class president in Brazilian history. His inauguration brought unprecedented crowds to the capital Brasilia and has created an exciting climate of political change.

The Misery Tour was originally aimed at remoter regions but the route was changed at the last minute when it was realised that the high cost of would go against the spirit of helping the poor.

Ana Toni, Brazil director of Action Aid, said Lula's decision to show his ministers the reality of Brazilian life was an important symbolic gesture.

"For the first time in Brazilian history the fight against poverty is a government priority and not an add-on policy."

"Ninety-nine per cent of middle-class Brazilians have never seen this type of poverty. Lula is giving his ministers a reality check."

news.independent.co.uk By Andrew Gumbel in Los Angeles 11 January 2003

The United States is preparing a major initiative aimed at defusing Venezuela's political crisis and ending an anti-government strike that has halted the energy exports of the world's fifth-largest oil producer. The Bush administration is expected to call on governments in Latin America, as well as the Organisation of American States, to negotiate an end to the crisis and map out a definitive strategy for dealing with Venezuela's President, Hugo Chavez.

The Washington Post says a new group, to be called the "Friends of Venezuela", will attempt to steer a middle path between President Chavez, who has so far resisted all calls to step down, and the opposition.

The Bush administration was badly stung last April when it enthusiastically backed an anti-Chavez coup, only to see the coup fail within 48 hours. It has been spurred into action now, diplomats say, because of concern about world oil supplies on the eve of a possible war against Iraq and a determination not to be upstaged by left-wing governments in Latin America which have proposed their own intervention strategy in Venezuela.

The loss of Venezuela oil exports, including 1.5 million barrels a day to the US, has already helped push world oil prices over $30 a barrel. A war in the Gulf is expected to cause a further rise, at least in the short term, and there may be longer-lasting supply problems if, say, Saddam Hussein sabotages Iraq's oilfields or attacks those of his neighbours in Kuwait and Saudi Arabia.

Washington appears to have been alarmed by an intervention proposal from new left-wing President of Brazil, Lula da Silva. He had suggested a regional crisis meeting next week in the Ecuadorean capital, Quito, where another left-wing populist, Lucio Gutierrez, has taken power. Both leaders have attracted suspicion in Washington, particularly in right-wing circles.

The "Friends of Venezuela" group would rather fold Brazil into a broader group that would include the US, Mexico, Chile and possibly Spain. The Friends of Venezuela will look at two proposals: a constitutional amendment opening the way for early elections in Venezuela, or a referendum on President Chavez's rule, which under present conditions could not be held before August.

www.heraldtribune.com By ADALID CABRERA LEMUZ Associated Press Writer

President Luiz Inacio Lula da Silva swore last year that if elected, he would bring his cabinet ministers face to face with the poverty that afflicts a third of all Brazilians. On Friday, he made good on that promise.

Mobbed by adoring crowds, Silva and 30 of his ministers walked down the narrow paths past the mud huts of the Irma Dulce shantytown, shaking hands and sharing hugs. Sweating in the intense heat, Silva promised residents he would work hard to ease their misery through government programs to end hunger and provide clean water.

"I cannot promise that all your problems will be solved from one day to the next," Silva told a crowd of about 5,000 residents of the favela, as shantytowns are known here. "But I do promise that a lot can and will be done."

Silva's visit was a powerful symbol to a country where the gap between rich and poor is among the widest in the world. It was the first time in recent memory that a sitting president visited a favela, and the scene was broadcast live on national television.

"Most of us voted for him because we have faith that he will be able to solve our problems," said Zilma Silva, who is not related to the president. "It is horrible to live in a country where so many people don't have anything to eat."

Silva, like most of the 30,000 people who live in the Irma Dulce favela, gets by on her husband's monthly wage of $66. She has no running water.

For Silva, who grew up in a Sao Paulo favela, it was something of a homecoming.

"I saw a four-year-old boy whose arms were thinner than my finger," Silva said. "This means he has nothing to eat and probably has learning difficulties because of a lack of vitamins. This is what we will change."

The former metal worker who rose to fame organizing strikes against the country's 1964-85 military regime became Brazil's first working class president after being elected in a landslide on Oct. 27. It was his fourth try.

The trip was originally designed to kick off Silva's "Zero Hunger" program, which seeks to eradicate hunger among the estimated 54 million Brazilians who live on a dollar a day or less.

The launch of the anti-hunger program was put off until February - a fact that did little to dampen the enthusiasm of the crowds that turned out to greet Silva.

Jose Graziano, who heads the program, said the visit demonstrated the government's determination to "improve the peoples' quality of life, no matter what it takes."

Graziano has said the government would spend about $1.5 billion on the program this year alone, and that the amount could grow with donations or loans from sources outside Brazil.