www.guardian.co.uk Sue Branford Monday January 13, 2003 The Guardian

Will the international financial community give Lula a chance? There is no doubt that Brazil's new left-leaning president is passionately committed to social reform.

As he repeatedly said in his electoral campaign, it is a national scandal that 9m families are going hungry in this vast country, almost the size of the United States. The Workers' Party would love to turn its back on neo-liberalism, as free market economics is called in Latin America, and introduce expansionist policies with an emphasis on economic growth, full employment and wealth redistribution.

Nothing would please it more than to develop the domestic market of 175m people, which has been stagnant for years because the poor have lacked the jobs and the income to be good consumers.

Yet the new government faces a predicament. Under the outgoing administration headed by Fernando Henrique Cardoso, Brazil adopted the familiar package of IMF policies: cuts in state spending, privatisation of state companies, deregulation, and so on.

At first the policies seemed to be working. Foreign investment poured in, growing eightfold between 1995 and 2000, but it did not deliver the promised high rates of economic growth. The abundance of dollars led to an appreciation in the value of the local currency, the real. With exports priced out of the market, Brazil began to suffer heavy trade deficits which the government had to cover by borrowing heavily at home and abroad.

Throughout the 1990s the country was hit by a series of external shocks. Each time government was able to restore confidence only by raising interest rates, which further depressed the economy and made it more expensive to service the internal and foreign debts. In August last year it seemed that Brazil would follow its neighbour Argentina into default but the IMF, fearful of the international repercussions, came up with its largest loan to date, of $30bn.

This loan, most of which is yet to be disbursed, is creating problems for the new government. Among its strict conditions, the IMF is demanding a budget surplus of at least 3.75% this year. If the government agrees, it can wave goodbye to reactivating the economy this year and shatter the hopes of millions of poor Brazilians. As financier George Soros has pointed out, the power of the "market" to determine Brazil's economic policy amounts to a serious infringement of the country's democratic rights.

Even though he confesses that the state of the economy is extremely serious, Lula believes there is a way out of the conundrum. He says that on the macroeconomic front Brazil must respect existing budget constraints for one or two difficult transitional years. Rather than spending more, the government will have to make progress by rooting out corruption and reallocating existing resources.

After consulting military chiefs, Lula has cancelled an order for military aircraft and said the armed forces will play a greater role in tackling social problems such as distribution of food to starving families, rather than preparing for anunlikely war with a neighbour. As his first act in office, the transport minister has frozen highway construction to allow time to review the transport needs of the poorer sectors.

Along with the economic caution, Lula has been radical on the social front. The environment minister, Marina da Silva, who was born into a family of poor rubber-tappers deep in the Amazon forest, has brought many of Brazil's most active environmentalists into her ministry and is preparing new policies for many controversial issues, including the Amazon rain forest.

The education minister, Cristovam Buarque, is a respected leftwing intellectual who is promising a radical overhaul of the country's education system, currently heavily skewed in favour of middle class children. The minister of agrarian reform, Miguel Rossetto, is an ally of the militant landless peasant movement, the MST, and is promising far-reaching agrarian reform.

Can the strategy work? On the plus side are the government's high level of legitimacy, given the enthusiastic backing of the population, and a slight easing of the external constraints because of the better than expected trade surplus, $13bn in 2002. On the down side is Brazil's heavy dependence on foreign money.

Although the markets have reacted calmly to Lula's first fortnight in office, few expect this to last. If the government's radical social reforms begin to alarm foreign creditors, millions of dollars could again start haemorrhaging out of the country. Lula will be faced with the stark choice that he wishes to avoid: back-pedal on the reforms and disappoint millions of poor Brazilians, or impose capital controls and provoke the ire of foreign creditors.

Lula's conciliatory approach deserves a chance. Latin America is seething with discontent after 20 years of free market economic policies that have failed to deliver prosperity or social reform. If Lula fails, Latin America faces a bleak and violent future.

· Sue Branford has co-authored Politics Transformed: Lula and the Workers' Party in Brazil, to be published this month by Latin America Bureau, London

www.washingtonpost.com Reuters Monday, January 13, 2003; Page A16

CARACAS, Venezuela, Jan. 12 -- Venezuelan troops fired tear gas today to disperse tens of thousands of protesters as President Hugo Chavez ordered a crackdown against a six-week-old opposition strike that is bleeding the economy.

Chavez warned opponents he would not let them disrupt schools, banks or food supplies with the strike, which has already crippled shipments by the world's No. 5 oil exporter.

"They want to break us economically. They are not going to do it. I swear it by God and my mother," Chavez said during his weekly television and radio show.

During his broadcast, Chavez signed a decree creating a special government commission to combat a tax rebellion announced by opposition leaders. By urging Venezuelans not to pay taxes, the strikers hope to cut government revenue already drained by the oil strike.

The president, elected in 1998, said the strike was costing the country tens of millions of dollars a day. Chavez, who has already fired 2,000 striking state oil employees, repeated threats to send troops to take over private factories and warehouses if they hoarded food supplies.

He also threatened to revoke the broadcasting licenses of private TV stations that criticize his rule. He described their hostile programming as "worse than an atomic bomb."

www.inq7.net Posted: 8:59 AM (Manila Time) | Jan. 13, 2003 Agence France-Presse

CHICAGO - The death penalty is either formally banned or has fallen out of use in 111 countries out of 195, and those using capital punishment are increasingly reluctant to do so, according to Amnesty International. Some 40 countries have dropped the death penalty in the past 20 years, added the London-based rights group, which opposes it. Data from the World Coalition against the Death Penalty indicates some 76 countries have totally abolished the death penalty, 14 others abolished it for civil crimes only and 21 have abolished it in practice.

In Europe, Russia retains the death penalty for civil offenses though it signed a protocol in 1996 promising to eliminate it in order to secure membership in the Council of Europe.

But faced with the Russian Parliament's reluctance to approve the legislation, President Boris Yeltsin issued a moratorium on judicial executions in 1996.

On August 3, 2002 Turkey abolished the death penalty for civil crimes only, but maintained it for exceptional crimes such as those under military law or crimes committed in exceptional circumstances.

In Latin America, Cuba stands out as the only country that uses capital punishment. Other countries have entirely abolished it or, like Mexico, only maintain it for treason in time of war or for the assassination of a president.

Guatemala has suspended all executions while waiting for the legislature to vote a bill introduced last July to abolish the death penalty.

The last official executions in Latin America took place in 1985 in Chile and Peru in 1979. Venezuela, the fist abolitionist country in South America, has not executed anyone since 1863.

However 84 countries still maintain capital punishment.

China is by far the country that executes the most but no official data or statistics exist on the subject.

The US stands out since it reinstated capital punishment in 1976. Since then more than 800 people have been executed and at least 3,500 people are on death row.

Recent executions have taken place in Iran, Saudi Arabia, Sierra Leone, Taiwan and Rwanda.

www.thescotsman.co.uk

BILL JAMIESON AND JOHN BOWKER MEMBERS of the OPEC oil cartel agreed yesterday to boost their oil production target by 6.5 per cent to 24.5 million barrels per day to prevent oil prices soaring out of control and plunging the world into recession.

The Organisation of Petroleum Exporting Countries announced the increase at an emergency meeting in Vienna yesterday, in the hope of calming fears of a supply crunch caused by the continuing strike in Venezuela and looming war in the Middle East. The increase will take effect on 1 February. The Venezuela strike, launched early last month by political opponents seeking to oust President Hugo Chavez, has slashed the country’s exports by about two million barrels per day. Venezuela is normally OPEC’s third largest producer and a major oil supplier to the US.

OPEC’s president, Abdullah bin Hamad Al Attiyah, is trying to send a very strong message that it will do its utmost to stabilise demand and supply. OPEC pumps about one-third of the world’s crude supplies, which total 79 million barrels per day.

Leading cartel producer Saudi Arabia, in control of most of the world’s spare capacity, said it was already pumping more to fill the two million barrels-per-day hole in markets. Riyadh is trying to prevent oil prices soaring to heights that might harm already fragile world economic growth.

US oil prices recently rose above $33 per barrel for the first time in two years. It was valued at $31.58 on Friday.

With no end in sight to the Venezuela strike, Ali Rodriguez, president of state Petroleos de Venezuela, blamed sabotage at oil fields and refineries for the prevention of a swift return to production.

MEANWHILE, North Sea oil and gas giant BP is expected to announce early this week that some of its underperforming assets will be put up for sale.

The move will kickstart a radical review of the firm’s core business, as promised to investors by chief executive John Browne following three production growth forecast downgrades in as many months. A BP spokeswoman said details would be revealed at the group’s official strategy review on 11 February.

She confirmed that the energy giant was looking to streamline its exploration and production business, which accounts for 80 per cent of operating profits. And she added that "the sooner we know how that will happen, the better".

Assets to be put up for sale are expected to come from the North Sea and the US as well as South America. BP said it would be reviewing the sector after November’s growth forecast downgrade.

www.themoscowtimes.com, Jan. 13, 2003. Page 6 By Dmitry Zhdannikov Reuters

The powerful head of state pipeline monopoly Transneft, Semyon Vainshtok, is under mounting pressure from private oil companies, which believe he is not expanding capacity fast enough to match surging production.

Analysts said Friday that the position of Vainshtok, who turned Transneft into a power in the land from an obedient arm of private business after his appointment in 1999, was still safe due to Kremlin support and an impressive financial record.

Transneft's ability to further expand its massive pipeline system in 2003, when new export routes are needed as never before to ship booming output, could be decisive for Vainshtok's future.

"His position is still incredibly strong. He is one of the most effective managers in the business. His key task now is to quickly match demand from the oil firms for new export routes," said Steven Dashevsky from Aton brokerage.

"The demand for new routes is higher than ever. And if Transneft fails to build them quickly, forcing oil firms to curb output growth, Vainshtok could face problems," said Valery Nesterov from Troika Dialog.

Vainshtok, 55, a former employee of Russia's largest oil firm LUKoil, literally stormed the world's biggest pipeline firm in 1999, when after a battle between influential Kremlin groups he sent in police to throw out his predecessor. Despite having no experience in the pipeline business, Vainshtok managed in less than three years to build two major pipelines and a port at Primorsk.

These were the first oil infrastructure projects to be completed since the collapse of the Soviet Union.

Under Vainshtok, a previously timid Transneft started to flex its muscles. In 2001, the firm abruptly halted oil exports of LUKoil, after receiving a complaint backed by a court ruling from a shareholder with a tiny stake in LUKoil.

But private majors were willing to accommodate Vainshtok's behavior as long as he was building new routes.

"The situation is getting tougher for Vainshtok. ... The monopoly is not being flexible enough and is not expanding the system as quickly as they want," said Nesterov.

The first serious sign of discontent surfaced in late 2002, when the four biggest private oil majors took an unprecedented decision to join forces to build a huge Arctic export port at Murmansk on the Barents Sea. They invited Transneft but Vainshtok said he was not convinced by the plan and preferred a Pacific route.

This week five majors have asked the state to persuade Transneft to reopen a pipeline to the Latvian port of Ventspils and cut oil shipments from neighboring Kazakhstan. The move follows a call from OPEC for Russia to increase supplies together with the cartel to take the heat out of prices driven higher by fears of war in Iraq and a long-running oil strike in Venezuela.

"Oil firms do not want to tolerate losses anymore by seeing Transneft artificially cutting their exports," Nesterov said.

Transneft has slashed oil shipments to Ventspils to zero from around 350,000 bpd at the beginning of 2002, saying oil firms preferred other routes to reach world markets.

Market players say the move is instead designed to put pressure on the port's owners to sell Transneft a stake in the terminal, once the biggest outlet for Russia's crude on its way to northern Europe, at a bargain basement price.

Ventspils is the only easy option for Russia to quickly boost exports -- currently running at 4 million bpd. Other pipelines are pumping at capacity and Russia faces bottlenecks in its main oil ports with total output at a 10-year high of 8 million bpd.

"Oil firms are simply saying that in difficult years, such as 2003, Transneft should put their interests first," Vladislav Metnyov from TIB Bank said.

However, he added that power rested with the Kremlin, which has the last say on whether the monopoly takes more crude from Kazakhstan or cuts supplies to Latvia.

Nesterov said if the government decides to approve this year Transneft's plan to expand Primorsk and build a huge pipeline to the Pacific it would be the best proof yet it still is fully confident in Vainshtok.