www.nytimes.com By ERIC PFANNER, International Herald Tribune

VIENNA, Jan. 12 — The Organization of Petroleum Exporting Countries agreed today to increase its official production quota in an effort to ease concern over tight global supplies and keep a lid on rising prices.

In an emergency meeting here, called to address the effects of anti-government strikes in Venezuela that have cut off most of that country's oil production, members of the cartel agreed to raise their total output quota to 24.5 million barrels a day as of Feb. 1.

"OPEC is trying to send a very strong message that it is doing the utmost to ensure adequate supplies," said Abdullah bin Hamad al-Attiyah, the OPEC president and Qatari oil minister.

Though the new quota represents an increase of 6.5 percent from the 23 million level set only a month ago, industry analysts said the actual amount of new oil that enters the market may be smaller, meaning any downward effect on prices could be muted. That is because the sensitive politics of the cartel required that every member will get a proportionately higher share, even though Venezuela's production will remain only a fraction of its official quota until strike-damaged facilities are repaired.

The only way that OPEC, which pumps about one-third of the world's oil, will be able to make up for Venezuela's lost share in the short term is if other members produce above their set limits, analysts said. In December, total OPEC production fell short of the 23 million limit by several hundred thousand barrels.

OPEC had sought to stamp out quota cheating at its December meeting, when it raised the official quota from 21.7 million barrels per day. But since then, the strikes in Venezuela against the government of President Hugo Chávez, along with concerns about a possible war in Iraq, have pushed prices sharply higher on world markets, throwing a monkey-wrench into those plans. On Friday, Brent crude oil for February delivery traded at $29.68 a barrel.

"It's hard to put Humpty Dumpty back together again," Gary N. Ross, chief executive of the PIRA Energy Group, an international energy consultancy in New York, said in reference to the effort to clamp down on quota cheating.

Analysts said the increase in the overall quota suggests that OPEC members that can pump more oil — only Saudi Arabia and the United Arab Emirates have significant spare capacity — will do so to some extent, even if their individual quotas are rising only marginally. Saudi Arabia's official level, for instance, rises to 7.96 million barrels a day from 7.48 million, but analysts say it could produce as much as 10 million barrels.

"There is no shortage," said Ali al-Naimi, the Saudi oil minister. "We never allowed the shortage to take place. There is a significant shortage from Venezuela, but there is no shortage in the international market."

If the official outcome of the meeting was less important than the reality of what happens in the market, then why would OPEC ministers gather in frigid Vienna — blanketed in nearly a foot of snow — only one month after their last regular meeting?

Appearances matter a great deal, too. Industry analysts said Saudi Arabia, in particular, was eager to be seen as cooperative at a time when many American conservatives are raising questions about the Saudi commitment to fighting terrorism.

Unusually high oil prices are not in Saudi Arabia's interest, if they contribute to a slowdown in the global economy and lower demand for the country's oil reserves, the largest in the world.

"They are trying to paint OPEC in a good light," said Leonidas P. Drollas, chief economist with the Center for Global Energy Studies in London. "The Saudis are trying to ingratiate themselves a bit with the United States."

But OPEC also emphasized that the increase in quotas may be temporary. If Venezuelan production returns to pre-strike levels and a war with Iraq is averted, for instance, the cartel might otherwise be faced with a price-depressing oil glut just as seasonal demand wanes in spring.

"We will look very closely at the market and we will continue our consultation," Mr. Attiyah said.

The OPEC president said he had faced no pressure from the United States, the world's largest oil consumer, to do something about rising prices. But he hinted that the possibility of a war in Iraq had figured in OPEC's discussions.

"We take all the factors into consideration in determining whether there is a shortage in the market," he said.

Iraq, which is nominally an OPEC member but outside the group's quotas because its production is monitored by the United Nations, stepped in to fill some of the gaps left by the loss of Venezuelan output. Over the last few weeks it has been producing about two million barrels a day, Mr. Drollas said.

The increased output from Iraq and quota cheating by other OPEC members probably accounts for United States petroleum stockpiles being above predicted levels in the week ending Jan. 3, actually rising by one estimate and falling less than expected by another. Though total OPEC production fell slightly short of the 23 million quota, the relative adequacy of supply helped push down futures prices slightly last week.

Though OPEC insists that it has enough spare capacity to make up for all of the lost production from Venezuela, a war in Iraq could upset the fragile supply-demand balance.

In the event of a war, analysts say the International Energy Agency would probably release some oil from its strategic reserves, held by 26 member nations. And the United States could tap its own Strategic Petroleum Reserve, as President Bill Clinton did in 2000 when prices spiraled.

www.csmonitor.com By Lawrence E. Harrison

MEDFORD, MASS – Brazil's President Luiz Inácio da Silva - "Lula," as he is widely known - has made Brazil's gaping gulf between its few rich and many poor a focus of his new administration.

The United States should do the same. While not as vast as Brazil's, the gap between the rich and the poor in the US is too wide - the widest among all the rich democracies.

According to World Bank data, the poorest 10 percent of Brazil's population receives just 1 percent of the country's total income, while the richest 10 percent receives almost half. In the US, the poorest 10 percent receives 1.8 percent of total income, while the richest 10 percent gets almost a third.

In no other rich democracy does the poorest 10 percent receive less than 2 percent of the total. (The average for rich countries is 2.9 percent.)

Don't leap to the conclusion that this extreme inequity in US income distribution reflects the policies of the Bush administration. The data are for a Clinton boom year - 1997.

In fact, Census Bureau data show a steady erosion of income inequity since the 1970s.

The Census Bureau estimates that in 2001, about 33 million Americans - 11.7 percent of the population and disproportionately African-American and Hispanic - lived below the poverty line. For a family of four, that meant an income of less than $18,000 per year, or $4,500 per capita.

At this level of affluence, the persistence of poverty for tens of millions of Americans is a national disgrace.

A national consensus is needed aimed at ending poverty, consistent with the vision of the late Harvard political philosopher John Rawls. For Rawls, the good society was the society in which a principal goal was the well-being of those worst off.

Progress toward the goal of eliminating poverty can be achieved through, for example, steady increases in the minimum wage (Lula has proposed increases that would double the Brazilian minimum wage in four years), progressive tax reform, and more extensive and effective unionism for low-wage workers.

Some will argue that a high minimum wage, a true living wage, would reduce the competitiveness of American products.

The Harvard Business School's Michael Porter has the right answer in his book "The Competitive Advantage of Nations": "The primary economic goal of a nation is to produce a high and rising standard of living for its citizens ... cheap labor [is not a] meaningful definition of competitiveness ... the ability to compete despite paying higher wages would ... represent a far more desirable national target."

The US also needs an immigration policy that reduces the flow - legal and illegal - of the more than 1 million people who come to the US annually, as the Commission on Immigration Reform urged in 1995. That report has since been ignored by both Democratic and Republican administrations.

The stream of mostly uneducated and unskilled immigrants increasingly feeds the reservoir of the poor, drives down wages and benefits at the low end, and competes for public services with poor citizens, adding severe pressure on beleaguered state and local budgets.

The Democrats are looking for a message, a vision. The goal of ending poverty and the measures necessary to achieve it fit well with Democratic Party ideology. At the same time, the Republicans are committed to a compassionate conservatism that should also embrace the goal.

Here's an opportunity for a national consensus to end a national disgrace.

• Lawrence Harrison teaches at the Fletcher School of Law and Diplomacy at Tufts University. He is coeditor with Samuel Huntington of 'Culture Matters.'

www.forbes.com Reuters, 01.12.03, 3:49 PM ET

MEXICO CITY, Jan 12 (Reuters) - Latin American stock investors will monitor the U.S. economy and corporations as well as the world political stage next week, while investors in Argentina will watch to see if the government closes a badly needed aid deal with the International Monetary Fund. CHILE's bourse is expected to rise this week, though important reports on the state of the U.S. and local economies could be the deciding factor, analysts said. All eyes will be on the United States on Wednesday when the Federal Reserve issues the Beige Book summary of the health of the U.S. economy. "If the report is optimistic, it could push up the stocks. If not they could fall," said Cesar Perez, analyst with Celfin brokerage. Chile's top export market is the United States and the two countries reached a free trade agreement in December. Chile's market will also closely watch the first annual earnings reports of important U.S. companies which are due to start filing through this week, said Rodrigo Cristi, analyst with Alfa brokerage. On the domestic market the most important news of the week will be the Central Bank's release of the November economic activity index (IMACEC) and December trade balance on Friday. "The IMACEC will show us where the economy is going and also will provide data on imports and exports which will give an idea of the internal and external demand," Perez said. However, Cristi maintains the IMACEC is unlikely to influence trade in the first four days of the week and that U.S. company reports will weigh much more heavily. The IPSA blue-chip index <.IPSA> gained 0.02 percent on the week to finish on Friday at 1,030.20 points. With little local macroeconomic news scheduled for release next week, MEXICAN stock investors, who traded relatively few shares last week, are unlikely to bid stocks higher, and instead will probably remain cautious as they watch the U.S. economy and ongoing crises with Iraq and North Korea. "The market won't necessarily be more bullish next week, but there should be more volume," Prudential Apolo trader Pablo Miller said. Since before the holiday season the Mexican market has suffered from faltering volume, which has led to higher price volatility, because investors have been wary of making new bets in the face of world economic and political uncertainty. "It's the beginning of the year. You have to do something with the money that's been liquid since the end of last year," he said. Mexico's IPC benchmark stock index <.MXX> gained 0.36 percent to close at 6,353.03 on Friday after the central bank tightened its monetary policy in order to get a jump on its 2003 fight against inflation. For the week the IPC index added 1.59 percent. The central bank increased the amount of cash it holds back from the market, called the "short," to 550 million pesos from 475 million. "The increase in the short was taken well. It wasn't expected by everyone, so it definitely had an effect on the market," said Juan Carlos Flores, a broker at Mexico City's Vector brokerage. In BRAZIL, investors remain cautiously optimistic about the coming days after a strong run in the first two weeks of the month, backed by growing confidence in the new left-wing administration of President Luiz Inacio Lula da Silva. The Sao Paulo Stock Exchange's benchmark Bovespa <.BVSP> index closed on Friday at 12,243 points, up 8.7 percent since the start of the year. "The only factor holding us back is the threat of war abroad. I think locally we still have some space to rise, but it's going to depend a lot on foreign news," said Flavio Barros, a trader at Sao Paulo's Clickinvest brokerage. Investors hammered Brazil's stock market for most of last year, worried that Lula would bungle Brazil's economy, Latin America's largest, if elected. But since his landslide victory in October, markets have warmed up to the formal metalworker after he appointed a market-friendly economic team that has vowed to stick to conservative economic policies. "There's relative optimism. We like the speeches and we're going to want to see some action. But we also have to give them some time," Barros said. ARGENTINE stocks fell on Friday as investors took advantage of recent gains amid high expectations the government will soon close a short-term aid deal with the IMF. Leading stocks rose an average of 15 percent this week as an accord looked close. Traders said they expect the market to remain stable next week, without big gains, as investors await more news from the IMF. Shares slid 2.6 percent on Friday to close at 575.8 points on the benchmark Merval <.MERV> stock index. Traders said the profit taking ahead of the weekend was expected. "I still like what I'm seeing in the market despite this correction. My feeling is that the (IMF) agreement is closer than ever," said Nestor De Cesare, a trader at Allaria Ledesma y Compania brokerage. "Given this situation, expectations are that next week we'll see investors staying in the market and simply adjusting their portfolios," De Cesare said. An IMF mission arrived in Buenos Aires on Thursday to continue negotiations with the government on a deal expected to delay around $5 billion of debt coming due through June. Argentina needs the deal to buy it valuable time to end its worst ever recession. The IMF board is expected to make a decision about a short-term lending program by Jan. 17, the day Argentina must meet a $1 billion debt payment due to the fund or face another default that would cut off its last avenue to aid.

Lula reaches out to Brazil's poorest by Raymond Colitt in Recife Published: January 12 2003 20:33 | Last Updated: January 12 2003 20:33

Like a firefighter in a rescue operation, Luiz Inácio Lula da Silva leaned from a shanty over a 10ft drop into filth and mud and shouted "I'll get you out of there," to the occupant of the next hut, promising a new home.

The rickety construction on stilts risked collapse from the crowds of supporters that had flocked to see Brazil's newly elected president in Braslia Teimosa, a slum on the outskirts of Recife.

It was the second of three stops on a two-day "reality tour" on which Mr Lula da Silva took his cabinet through some of Brazil's poorest regions in the north-east. Himself a former shoeshine boy and lathe turner, Mr Lula da Silva said: "I want my ministers to look misery in the eye."

He is off to a quick start to try and fulfil his campaign promise of radical action to tackle Brazil's infamous social inequalities. The trip marks a new style of government in Latin America's largest country, in which not only the president but, he hopes, the entire government will be working more closely with the people.

Brazil has one of the world's most unequal income distributions. While regions in the country's south boast living conditions similar to those of Spain, between 10m and 30m of the 175m inhabitants live in conditions similar to those in sub-Saharan Africa. Pockets of misery are concentrated in the drought-stricken north-east and in city slums.

The mayor of Recife, also of Mr Lula da Silva's Workers' party (PT), seemed to have missed the point of the trip, sending in cleaning crews to pull out 10 tonnes of garbage before the distinguished guests arrived.

Still, there was no hiding the sub-human living conditions in Braslia Teimosa (Fearsome Braslia). There is no running water and latrines are little more than a hole in the floor. On particularly stormy days huts are washed out to sea.

Several of Mr Lula da Silva's ministers were deeply impressed. "I have seen this only in movies," said Celso Amorim, foreign minister, who had just returned from the comforts of being ambassador in London.

With teary eyes and a choking voice, Luiz Fernando Furlan, one of the few businessmen in government, admitted the experience would mark his tenure as industry and trade minister. "Without a doubt I'll be more socially aware. Look at their eyes. In all that misery, they are still hopeful."

Wherever he goes, Mr Lula da Silva is greeted with spontaneous celebration and requests for help. Geazi Belarmino da Silva was one of many in the crowd hoping to pass the president a letter. He would like to get back his job as a mailman, which he lost 12 years ago.

One of numerous signs hung from windows read: "Brazil is 1000 times bigger than its problems - congratulations Lula." Another read: "Lula you have been sent by God to save the poor. Now keep your promises - thank you!"

Mr Lula da Silva is walking a fine line between meeting demands and generating even higher expectations. Critics say his high-profile anti-poverty campaign is beginning to smack of populism. Yet, well aware that the post-election honeymoon could soon fade, he must show results to maintain the support he needs to implement much-needed and often controversial reforms.

Stern-faced and visibly tired from the first two intense weeks on the job, the former metalworker did not appear to be basking in his massive popularity at the weekend. "This is not about him, he is a humble person," said Mr Amorim.

While talking of a gradual social revolution to Brazil 's masses, Mr Lula da Silva's discourse of economic austerity has also encouraged Wall Street in recent days.

Travelling between "poverty hot spots" on the presidential aircraft, he detailed plans to address investors at the World Economic Forum this month. Deep budget cuts that could help meet International Monetary Fund targets were also on the agenda.

Pledging to grant property titles and expand housing resettlement projects for slum dwellers, Mr Lula da Silva asked the poor for patience. "I cannot promise you that tomorrow everything will be resolved. The government is like a baby. It takes nine months to be born and another 11 to walk."xref www.ft.com/Brazilpoll

news.ft.com By Raymond Colitt Published: January 12 2003 17:03 | Last Updated: January 12 2003 17:03

After several months of the threat of increased government intervention in Petrobras, Latin America's largest listed company in terms of sales, investors are beginning to shed their worst fears.

The left-wing government of Luiz Inácio Lula da Silva, who took office as president on January 1, last week began toning down its nationalist and interventionist pre-election rhetoric to suggest the state-controlled oil company would continue to be run along corporate lines.

José Eduardo Dutra, Petrobras' new president, said he would maintain the company's four-year $32bn investment plan, continue to seek private-sector participation and apply technical rather than political criteria in the company's public tenders.

"We will respect the strategic planning of the company," he said.

In his election campaign Mr Lula da Silva criticised Petrobras for "exporting Brazilian jobs" by contracting the construction of offshore oil platforms abroad.

Mr Dutra said "Petrobras would apply technical and commercial criteria" in tendering service contracts. "It's the government that practises industrial policy giving incentives or conditions for Brazilian companies to construct [platforms]." He suggested the government could aid domestic suppliers with preferential financing.

Dilma Roussef, energy minister, said fuel prices would no longer be set by Petrobras but by the government, but this would not affect its bottom line. "Petrobras needs to be profitable and efficient," she said.

The government was studying the use of taxes to mitigate the impact of currency fluctuations on fuel prices and inflation, Ms Roussef added.

Financial turmoil turned last year's fuel price liberalisation into one of the principal pressures on Brazil's recurring inflation.

The statements generated cautious optimism among several analysts.

"They reinforce our views that there should be no major pricing control risk [or] changes to the company's strategy of expanding production and diluting costs, thus improving profitability," said UBS Warburg in a report last week.

Jorge Alberto Campos, pricing manager at Texaco, said: "I don't think the government will back-track on liberalisation. The private sector is relatively relaxed about that issue."

Petrobras' share price bounced back more than 50 per cent from their pre-election low in October, albeit in part due to rising oil prices.

Yet many analysts remain sceptical and are waiting for policies to follow the government's initial market-friendly statements.

"The signals have been mixed and I am still very cautious," said Carlos de Leon, Latin America oil and gas analyst with Deutsche Bank in London.

The appointment of Mr Dutra, a senator from the president's Workers' Party, has disappointed investors who had hoped for more of a technocrat and less of a politician. He is a geologist and formerly worked for CVRD, the world's largest iron ore exporter.

The bottom line is that the government will continue to have the final word on Petrobras, says Alejandro Bertuol, oil analyst with Fitch.

"In spite of the infusion of corporate culture and the strengthening of its finances over the last two years, the company's link to sovereign risk remains very strong."