Saturday, January 11   Francisco Toro caracaschronicles.blogspot.com

Today I came closer than ever to succumbing to complete despondency, just complete hopelessness about the crisis here. The impasse is total right now, and it's very difficult for me to visualize any way out. On the one hand, as Gaviria keeps saying, the only possible solution to the crisis is through negotiations, through give-and-take. On the other hand, Hugo Chávez will not, cannot, and doesn't know how to negotiate. Everyone can see that escalation is mad at this point, just mindlessly destructive and stupid. But escalation is all we seem to get.

Gaviria's speech two nights ago was powerful and wise. He said Venezuela might find an "outcome" that's not negotiated, i.e. the government might crush the opposition outright, or the opposition might overthrow the government against its will. But those wouldn't be solutions, they would be outcomes. They wouldn't address the underlying causes of the crisis, and they could leave the country unstable for years to come.

The status quo is obviously unstable, way too unstable to hold much longer. The opposition may not be able to stop the country cold, but they can disrupt life enough to make it ungovernable. And the government clearly retains enough supporters that they can't be wished into nothingness: if Chávez was shoved out of power in a way his supporters don't accept as legitimate they could set the country alight. So outcomes are cheap, there are lots of possible outcomes. But a solution to the crisis, a solution that leaves the country peaceful and democratic and minimally functional...that's something else entirely. One can only be found through negotiation, through bargaining and give-and-take between the sides.

Now, it's sad but true that not everyone in the opposition wants a negotiated solution. There's a violent fringe that would clearly prefer a right wing coup. But I think there's a critical mass of opposition opinion that would support a negotiated agreement, if one was on offer. Moderate voices would probably rise to the occassion and reach a deal if they could. The opposition crazies could be marginalized through debate.

That's because, in the opposition, there is a debate in the first place. The opposition is a notedly diverse bunch, made up of a variety of voices all vying for power and influence. Thankfully, they've deviced a process for processing those differences around a table. The problem is that there is no comparable debate on the government's side, because there is no comparable variety of opinions. There's no such thing as "a critical mass of government opinion" because "government opinion" is exactly the same thing as Hugo Chávez's opinion. And you can't marginalize the government's crazies because the only voice that matters in the government is that of the crazy-in-chief.

The autocratic, cult-of-personality underpinnings of the chavista movement are so marked that only the president's opinion matters. Hugo Chávez has made a political career out of equating negotiation with selling out, compromise with treason, and accomodation with surrender. Every time he speaks, he makes a mockery of the hopes of those who think it might be possible to work out an agreement with him.

It's hard to know how to write about Chávez's style of oratory. For those of you who've heard him any description is superfluous; for those of you who haven't any description is insufficient. Picture the most charismatic southern preacher you've ever seen, and square it. Behind a podium, Hugo Chávez is a man possessed. He doesn't speak, he shouts into a microphone in a kind of ecstatic fit. He can keep it up for hours and hours at a stretch. In four years he's fine-tuned his fire-breathing style of oratory. As his face contorts and the bombastic nonsense spews out in thicker and thicker densities, it's impossible not to wonder about the man's mental health. And as his ecstatic supporters get worked up into a hero-worshipping frenzy, it's impossible not to wonder about theirs.

The soundbytes that make it into the following day's newspapers vary, though usually they focus on the most over-the-top remark of the speech. Picking it out is not always easy, there are so many candidates. Real jewels get relegated to the inside pages by truly grotesque nuggets of megalomanic gobbledygook. For instance, yesterday he described Venezuela's four major private TV channels as "the four horsemen of the apocalypse." But the remark - incredibly incendiary though it was - was upstaged by his even more sinister threats to order a military take-over of Venezuela's entire food industry.

On the other hand, some of the most destructive, near-psychotic stuff he says doesn't even make the news anymore simply because he's repeated it so often. Nobody cares that he labelled the oil industry's managers a cabal of coup-plotting terrorist saboteurs again yesterday: it's the Nth time he's said it this week. There's a strong element of pathos to the nonsense marathons: nobody really takes him that seriously. After all, if he literally thought the PDVSA managers were really terrorist, might not one expect him to put them in jail? So it's fluff, and people recognize it as fluff, but it still irritates. Today it was a threat to takeover all the nation's private schools to break the strike, tomorrow it will be some other fantastically unworkable bit of neomarxist intelectual onanism. The specifics don't really matter that much, because none of these mad schemes are even remotely practicable. Nobody really takes them that seriously.

Now, it's an open question whether the president intentionally sets out to inflame the crisis with statements like that or whether they're just an accidental byproduct of the fits of psychopathological raving that TV cameras seem to send him into. But what nobody can question is the poisonous streak this kind of talk infuses into the nation's political atmosphere. The torrent of bile that pours out of the president's mouth everytime he gets near a microphone could be the single biggest obstacle to a negotiated solution in Venezuela today. Columnists here have said it a million times in a million different ways: it's impossible to reach a negotiated agreement with someone who slanders you as a treasonous coup-plotting terrorist every chance he gets.

The president's rhetoric suggests a man lost in his own private reality, totally unable to interact with the world around him in even a minimally reasonable way, and prey to truly bizarre delusions of grandeur. He really does seem to think he's starring in some sort of epic, world historical struggle between good and evil. The consistent use of military analogies, military rhetoric, "grand battles," "decisive struggles," and such suggest anything but a man who's seriously working towards a negotiated agreement.

At this point, even if he did have some secret plan to settle in the end, he's worked up his followers into such a millenarian frenzy it's impossible for me to see how he could send them home by now. It can't happen.

So you can understand my despondency: negotiating an agreement is the only way to find a peaceful, democratic solution to the crisis, but one of the parties to the conflict is working as hard as he can every single day to make sure negotiations can't succeed. Ergo, there cannot be a peaceful, democratic solution to this crisis. It's a dire, dark, depressing realization. The deadlock continues indeffinitely into the future while more and more businesses fail, more and more people lose their jobs, and the nation continues its steady, seemingly irreversible descent into total chaos. It's grim, it's really grim.

www.washingtonpost.com Sunday, January 12, 2003; Page H02

Still on the Hot Seat Remember those corporate scandals? They seemed to fade from the spotlight, especially after the Securities and Exchange Commission and several major investment banks, including Credit Suisse First Boston, J.P. Morgan Chase and Goldman Sachs, agreed to multimillion-dollar fines. But some probing and enforcing is still going on: Investigators are looking at not just famous analysts such as Henry Blodget but also their bosses. The U.S. Sentencing Commission voted to impose stiffer penalties on white-collar criminals who bilk large numbers of investors. And the SEC may require company lawyers to quit and inform the SEC if a client fails to stop illegal activity the lawyers have identified.

Oil Price Maneuverings With Venezuela's oil production reduced by a strike and political unrest, and war with Iraq in full loom, the United States stepped up efforts to increase world supply and bring down prices that hovered above $30 per barrel. The United States is lobbying OPEC countries to boost production, which the organization's ministers say is in the works. That dropped crude prices, but only temporarily. And after seeking to avoid involvement in the Venezuela conflict, U.S. diplomats have put together a group of intermediaries that will try to mediate between Venezuela's government and opposition forces.

More Jobs Disappear It was a grim week on the job front. Pittsburgh-based Alcoa announced layoffs of 8,000, on the heels of 10,000 cuts last year. America Online, the Virginia-based division of AOL Time Warner, said it would aggressively slash costs and workers this year, though it did not specify how many of the unit's 18,000 employees would be shown the door. (Also, the parent company plans to take a $10 billion charge against earnings.) At AT&T, the number will be 3,500. At the end of the week, the Labor Department surprised analysts by announcing that 101,000 jobs were lost in December, due largely to less-than-expected holiday hiring.

Those Annoying Calls The Federal Trade Commission has been working on a plan to stop some of those unsolicited sales pitches: a national do-not-call list that would let consumers put in their own phone numbers. If a telemarketing firm called a number on the list, it could be fined as much as $11,000. FTC Chairman Timothy J. Muris wants $16 million from Congress to start get the program; eventually it will be subsidized by the telemarketers. But Rep. W.J. "Billy" Tauzin (R-La.) held up a stop sign, saying he wanted his Energy and Commerce Committee to review it. Tauzin now says he's on board, but it's uncertain just where the money will come from.

Bio-Food Fight The United States is considering hauling the European Union before the World Trade Organization over the EU nations' refusal to accept genetically modified food. U.S. Trade Representative Robert B. Zoellick said the suit would seek to overturn a four-year EU ban on gene-altered plants such as corn and soybeans. The comments spurred speculation of further deterioration of trade relations between the two sides. U.S. farmers and agricultural companies favor WTO action.

www.alertnet.org Jan 2003 00:00 By Niala Boodhoo and Nadim Ladki

WASHINGTON/BAGHDAD (Reuters) - Details of a U.S.- Iraqi skirmish in cyberspace, in which Baghdad blocked U.S. e-mails aimed at key figures, emerged on Saturday after Washington ordered more troops to the Gulf for a possible war.

U.S. defence officials said the military had begun an e-mail campaign urging military and civilian leaders in Iraq to turn against President Saddam Hussein and reveal the location of any chemical, biological or nuclear weapons.

News of the cyber-campaign, part of a psychological war mounted by elite U.S. Special Operations, came as U.N. weapons inspectors flew by helicopter to scour more sites in Iraq in search of weapons of mass destruction.

The inspectors have urged the United States to provide more specific intelligence to help pinpoint any banned Iraqi weapons before they give a January 27 report on two months of searches.

Officials have said U.S. President George W. Bush has yet to decide on any invasion of Iraq over the alleged banned weapons, but Defense Secretary Donald Rumsfeld ordered nearly 35,000 more troops on Friday to the Gulf as part of a build-up aiming to more than double the 60,000 U.S. troops now in the region.

In the campaign on the Internet, the e-mails in Arabic urge Iraqis not to follow orders to use chemical, biological or nuclear weapons, to identify where they are located by signals or render the weapons ineffective.

The state-controlled e-mail service is available only to a small number of Iraqis, mainly government officials, senior public servants, academics and scientists. Iraqis began to receive the e-mails last week, visitors there said.

Iraqi authorities have blocked the e-mail service access in an apparent attempt to stop the messages from spreading inside the country, visitors said.

HELICOPTER SEARCHES

Iraq denies it has any banned weapons programmes. Washington says it does and that if Iraq continues to deceive, it would be in "material breach" of U.N. Security Council resolutions and that could mean war.

Mohamed ElBaradei, head of the U.N. nuclear watchdog, and his colleague Hans Blix, chief of the U.N. Monitoring, Verification and Inspection Commission (UNMOVIC), told the U.N. Security Council on Thursday there were no "smoking guns" to prove Iraq had banned weapons.

Top officials in Europe have spoken out against a rush to war on the basis of inconclusive weapons inspections.

"Without proof, it would be very difficult to start a war," European Union foreign policy coordinator Javier Solana said.

The U.N. arms inspectors flew by helicopter to an oil facility west of Baghdad on Saturday, the second aerial inspection since they resumed work in Iraq on November 27.

They also searched seven other sites, their visits including a trip to a university in the town of Tikrit, birthplace of Saddam and 200 km (125 miles) north of Baghdad.

On the diplomatic front, Turkish Prime Minister Abdullah Gul arrived in Saudi Arabia on Saturday for talks on the Iraq crisis. Before heading for Riyadh, Gul told reporters in Ankara:

"We are a country in the region and one of the countries that will suffer the most (in case of a war)," he said. "It's to our interest if the crisis ends up without a war. To be able to achieve this, every country in the region has a responsibility, but the greatest responsibility belongs to Iraq."

Saudi Arabia and Turkey have publicly opposed a war against Iraq and both have so far declined to grant Washington permission to use bases on their territory for military strikes.

In Algeria, Iraqi Deputy Prime Minister Tareq Aziz held talks with President Abdelaziz Bouteflika as part of a drive to drum up Arab support for Baghdad.

BRITISH TASK FORCE

U.S. ground forces ordered to deploy so far are substantially short of the more than 250,000 sent to the region for the 1991 Gulf War but the current shift could grow more rapidly in January and February.

Britain is also mobilising its forces alongside the Americans despite grave doubts within Prime Minister Tony Blair's Labour party.

The flagship of Britain's navy, the aircraft carrier Ark Royal, set sail on Saturday at the head of the largest UK amphibious task force deployed since the 1982 Falklands War.

The 16-ship flotilla is officially sailing for long-planned naval exercises in the Far East, but British officials say they have upgraded the force in case it is needed in Iraq.

In Vienna, OPEC producers prepared for emergency talks on Sunday that will decide how far to open the oil taps to prevent a price shock as war looms in Iraq.

www.washingtonpost.com By Stephen Friedman Sunday, January 12, 2003; Page B07

Last week the president announced a comprehensive plan to strengthen America's economy by raising our potential for long-run growth while providing near-term lift. It is a robust plan and, judging from the favorable response it is receiving from many economists and business leaders, it's what our economy and markets need at this time.

The economy has survived extraordinary shocks in the past few years: a dramatic market decline beginning in March 2000, followed by a recession, the Sept. 11, 2001, attacks and disclosures of confidence-shaking abuses by some corporate leaders. Yet thanks to the economy's resilience and to sound policies of the administration, growth has resumed, although not with the momentum we need.

Most private forecasters expect business investment to improve this year, and with it the job creation needed to reduce unemployment. The consensus is that we will have a rising rate of GDP growth over the course of 2003, and strong growth in 2004.

Still, we face serious challenges. Many who want to work cannot find a job. Many employers lack the confidence to invest, expand and create new employment opportunities. Concerns about future terrorist attacks, the possibility of war and rising oil prices brought about by disruptions such as those in Venezuela could undermine public and business confidence. If the recovery in business investment is delayed or anemic, the economy's ability to generate new jobs will be hampered. If families, feeling the wealth reduction of recent years, shift to a more cautious stance, they will pull back on spending.

That's why the president's plan is timely and essential. My Wall Street experience taught me to measure potential risks as well as likely returns, and this plan provides the economy with the growth insurance it needs at this time. It asks Congress to speed up the future tax relief promised to Americans in 2001 by accelerating marginal rate reductions; and it includes additional relief for middle-income families by reducing the marriage penalty, increasing the child tax credit (and accelerating payment of the increased amount) and expanding the amount of income taxed at the lowest -- 10 percent -- rate. Thus, for example, a family of four with earnings of $40,000 per year will be able to keep about $1,100 more of its money.

Upon passage, the Treasury Department will make withholding changes, so Americans immediately will be able to keep more of their paychecks. For the past two years, the household sector has held up while business investment slumped. The president's measures will help ensure that the household sector stays strong and will help families replenish savings. Also, small-business owners taxed on a "flow through" basis will keep more of their profits to reinvest, expand and create jobs.

The president's plan would also abolish the double taxation of dividends. Under current law, an investor's after-tax return from a dividend shrinks to as little as 40 cents for each pretax dollar earned by the paying corporation. As a matter of principle, the president believes it is unfair to tax earnings twice, a principle most Americans surely agree with. But abolishing the double taxation of dividend income is also good policy, for three other reasons.

First, it would eliminate what economists and scholars across the spectrum have for decades considered to be a distorting element in corporate finance. The United States is one of only three of the 30 Organization for Economic Cooperation and Development nations that offer no relief from this double tax. Double taxation of dividends creates a bias toward corporate borrowing, because the interest on debt is tax deductible, whereas dividends are at present neither deductible nor exempt from tax at the recipient level. Sound management and market forces -- not the tax code -- should govern decisions on whether to raise debt vs. equity capital and whether to retain earnings, buy back stock or pay dividends.

Second, this reform would make the fundamental financial health of firms more transparent. In the '90s there was a great deal of pressure to book manufactured earnings, and this hurt investor confidence. If a company pays regular dividends, investors will have checks in their hands and can be confident that profits are real.

Reaction from business people I talked with this last week indicates that the president's proposal could also lead many companies to start paying dividends or increase their existing dividend payouts if they don't have compelling uses for all their retained earnings. This would be a boon to the economy and to the more than half of all American households that own stock, directly or through pension plans. Investors can decide whether to spend this additional money or choose among the most attractive investment opportunities. Senior citizens, who receive half of all dividend income, will be important beneficiaries of this reform.

In fact, abolishing the double taxation of dividends will help all Americans -- not just stockholders -- and that's the third and most important reason it is good policy. To the extent that money paid out in dividends isn't spent on consumption, it doesn't get put under a mattress. It gets invested someplace. Over time, this reform will lead to a better allocation of capital, as money flows to the places where it will have the highest return. That leads to greater capital stock -- an economist's term that really means workers will get better technology and tools to do their jobs -- resulting in higher productivity and higher income for working families.

By putting more money in people's hands and providing more incentives for work and entrepreneurship -- while making the tax code fairer -- the president's plan will encourage consumer spending and business investment, boost confidence in our markets and promote job creation.

The writer is assistant to the president for economic policy and director of the National Economic Council.

www.sfgate.com CHRISTOPHER TOOTHAKER, Associated Press Writer Saturday, January 11, 2003

(01-11) 17:01 PST CARACAS, Venezuela (AP) --

President Hugo Chavez vowed Saturday he will not be driven from office by an opposition strike and threatened to fire or jail teachers joining the work stoppage.

Meanwhile, Chavez supporters blocked the route of a planned opposition march through the streets of Maracay, the military's nerve center 42 miles from Caracas, to demand Chavez resign and call fresh elections.

After opposition protesters changed the route and continued marching, police used tear gas to prevent the rival groups from clashing. Police also formed a blockade in Venezuela's Caribbean island of Margarita to separate pro- and anti-Chavez marchers.

The strike, which began Dec. 2, has paralyzed the world's fifth-largest oil exporter, causing fuel shortages and costing Venezuela $70 million a day in desperately needed government income.

"Defeat is prohibited," Chavez told a rally of thousands of supporters at a Caracas stadium. "We are going to triumph."

Chavez, who warned businesses hoarding food on Friday that he might send troops to seize basic foodstuffs, promised he also would not allow schools to stay closed.

"The schools will be managed and directed by the people," he said.

Accusing strike organizers of closing public and private schools, leaving millions of students without classes, Chavez warned that teachers and school directors joining the strike will be fired or even jailed.

Leaders of the Democratic Coordinator opposition movement promised to expand the strike to drive Chavez from office if he sends troops against private businessmen.

"If they touch a media outlet, a private company, or a political leader we will expand the strike by incorporating other sectors," opposition leader Timoteo Zambrano said. "We are ready to retaliate."

But "Chavistas," as the president's backers are called, rallied in Caracas' La Vega neighborhood, one of the capital city's poorest areas, to support his efforts to end the food and fuel shortages.

Planned anti-Chavez rallies in Toronto and London failed to materialize Saturday, but about 200 Chavez foes demonstrated outside the White House, calling on him to resign.

Carlos Fernandez, head of Venezuela's leading business chamber, said many schools closed because of low attendance. He insisted most parents were not sending their kids to school in support of the strike.

Venezuela's opposition launched the strike last month to pressure Chavez, who was elected in 1998 and re-elected two years later, to resign and call elections if he loses a nonbinding referendum on his rule.

The opposition accuses Chavez of attempting to install a Cuban-style communist regime and overriding public institutions such as Supreme Court. They claim he is turning this oil-rich South American nation of 24 million into an economic wasteland.

The country's $100 billion economy shrank an estimated 8 percent in 2002, largely due to constant political instability. Inflation has surpassed 30 percent while unemployment reaches 17 percent.

Chavez has tried to jump-start oil production, which has been drastically reduced by the strike. He has fired 1,000 employees from the state oil monopoly Petroleos de Venezuela S.A., where at least 30,000 of 40,000 workers are off the job.

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. Venezuela still is exporting more than it is producing because stockpiles remain.

In Washington, the White House has talked with members of the Organization of American States on ways to end the strike. OAS secretary general Cesar Gaviria is mediating negotiations between Venezuela's political rivals.

Carlos Ortega, president of the Confederation of Venezuelan Workers, the nation's largest trade union, and opposition leader Zambrano prepared to travel to the United States on Saturday to inform the international community of the situation in Venezuela.

The two opposition leaders plan to meet with U.S. State Department representatives and U.N. Secretary-General Kofi Annan.