www.forbes.com Reuters, 01.14.03, 2:17 PM ET

CARACAS, Venezuela, Jan 14 (Reuters) - Venezuela's bolivar currency <VEB=>, battered by the nation's political and economic turmoil, fell 3.2 percent against the dollar on Tuesday as an opposition strike against President Hugo Chavez extended into its seventh week.

The bolivar, which has shed about 13 percent of its value since the start of the year, fell 51.75 bolivars on Tuesday to 1,612.50 bolivars to the U.S. dollar, according to the Central Bank reference rate.

The interbank rate <VEB=><VEB2=> dipped to 1,637.50 bolivars, down 4 percent from 1,572.25 bolivars to the dollar on Monday.

"People are paying whatever price for dollars because they see the situation in the country getting worse and that the bolivar is going to go through the floor," one trader told Reuters.

Traders said the bolivar slipped on strong demand for dollars as people looked to the U.S. greenback for safehaven as the national strike erodes confidence in Venezuela's economic future.

The strike has nearly ground Venezuela's vital oil production and exports to halt. The oil industry accounts for about half of government revenues. The opposition shutdown began Dec. 2, and strikers have vowed to stay out until Chavez resigns.

Chavez, a former paratrooper elected in 1998, faces increasing opposition to his left-wing reforms from foes who accuse him of driving the oil-rich nation toward economic and political turmoil. The strike has cost Venezuela about $4 billion so far, officials said.

news.ft.com By Andy Webb-Vidal in Caracas Published: January 14 2003 18:49 | Last Updated: January 14 2003 18:49

Venezuela this year faces the most serious economic collapse in its history because of lost oil output and escalating political tension, bankers and analysts warned on Tuesday.

BSCH, the Spanish bank, said that it expects the economy to contract by 40 per cent in the first quarter and by at least 9 per cent this year. It described the situation as the "biggest [example of] wealth destruction in Venezuelan history".

The contraction could potentially be as deep as 30 per cent, BSCH added, given that for every month that passes without a political solution to reactivate the oil industry the economy will shrink by an additional two percentage points. There is no sign as yet of a settlement between President Hugo Chávez and opposition groups, in particular workers at Petróleos de Venezuela (PDVSA), the state oil company, now in their sixth week of a protest strike against the government.

Oil output in what was the world's fifth-largest exporter dropped from just over 3m b/d at the start of December. By Tuesday, government efforts to restart production with loyal personnel had produced 400,000 b/d, industry sources said.

Alí Rodríguez, the PDVSA chief, said this week that oil production would return to pre-strike levels by the end of February. Most oil industry observers say such a forecast is unrealistic, however. In the most optimistic of scenarios it will take two to four months from the day PDVSA employees return to work to ramp up output to 90 per cent of previous levels.

Bankers said Tobías Nóbrega, the finance minister, offered a more realistic official forecast when he said oil production would recover to 2.5m b/d at the end of April. A severe fiscal adjustment is likely to be accompanied by a sharp depreciation of the bolívar, which has already dropped by 16 per cent against the dollar since January 1.

This year's deep recession follows what preliminary figures suggest was a contraction of 9 per cent last year, a decline already being reflected in rising poverty and a deterioration in other key social indicators.

Datanálisis, a local research firm, estimates that after four years in government, Mr Chávez has presided over an 18 per cent economic contraction, while the percentage of families living in poverty has risen from 60 to 70 per cent.

www.tuscaloosanews.com By MONTE HAYES Associated Press Writer January 14, 2003

Lucio Gutierrez, a cashiered army colonel and former coup leader, didn't wait until he takes office Wednesday as Ecuador's new president to seek a showdown with what he calls a corrupt political establishment.

But his first forays, including a failed attempt to gain control of Congress, have left him bruised and looking inept.

Gutierrez has been forced to back down from a series of demands and threats, and to apologize publicly for declaring the country's ex-presidents should be in jail for their responsibility in "the national disaster."

In the days before he assumes power, Gutierrez has also been accused of an authoritarian streak, bringing comparisons to Venezuelan President Hugo Chavez, the former paratrooper and coup leader whose leftist rhetoric has divided Venezuela and led to growing political instability.

"I think they are different personalities but their political plans are not so different," said Benjamin Ortiz, head of a Quito think tank. "His goal is to accumulate political power and if he achieves it, it will be a beginning similar to that of Chavez, who began with popular referendums."

Gutierrez, frequently referred to simply as "the Colonel," thrust himself into the national spotlight three years ago when he led a group of disgruntled junior army officers and 5,000 Indian protesters in an uprising that drove the highly unpopular Jamil Mahuad from power amid the country's worst economic crisis in decades.

Gutierrez, 45, won an election runoff in November on pledges to bring an end to corruption.

He promised to reduce the number of lawmakers, eliminate political party influence over the court system and extradite bankers implicated in a 1999 collapse of the banking system. He plans to call popular referendums to achieve his reforms.

"I am going to govern the country. I am chief of state and those who prevent Ecuador from advancing, well, we'll do it over their heads," he said. "I will call the people to march and Lucio Gutierrez will be at the head. The country has to change, whatever the cost."

Gutierrez's woes began last week when he reacted angrily after he failed to negotiate an agreement with opposition parties that would have given him control of the 100-member Congress. Gutierrez's political coalition has only 17 seats.

He declared he would not take the oath of office in Congress but in front of "the people" in another forum. But when told the constitution required the oath be taken in Congress and that his vice president would be sworn in as president instead, Gutierrez backed down.

He then threatened not to accept the presidential banner from the Congress president, whose election he questioned as unconstitutional, before again backing down.

"He has no political experience and isn't familiar with constitutional norms, the mechanisms of negotiation," said Simon Pachano, a political scientist. "He is showing the authoritarian spirit of a military man. He is chief of the executive branch. He can't give orders to Congress."

Besides insulting the country's nine former presidents in a newspaper interview Sunday, Gutierrez took special aim at former President Leon Febres Cordero, who as head of the country's largest party, the Social Christians, is probably the most powerful political figure in Ecuador, except for the president. Gutierrez called him "one of the most destructive men in the country."

Responding in a a statement, Febres Cordero said "Gutierrez's declarations...demonstrate his lack of democratic spirit."

"Until now, Col. Gutierrez has been characterized by his contradictions, by his declarations and denials, which reveal a confused and disorienting personality."

Gutierrez also has worried Ecuadoreans with reported plans to force out the top 27 officers in the army, air force and navy so he can choose members of the joint military command from younger officers who served with him. News reports of the plan provoked a public protest from the military command.

"He has made mistakes with the generals, he has made mistakes with the ex-presidents, his reforms are unsustainable," Ortiz said. "He has spent a good part of his political capital before beginning to govern."

www.forbes.com Reuters, 01.14.03, 1:30 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez's government said Tuesday it would survive a six-week-old opposition strike -- which it dismissed as "fiction" -- and insisted it aimed to rule until the end of its term in 2007.

Vice President Jose Vicente Rangel told reporters the government had no intention of holding early elections demanded by organizers of the strike that has crippled oil output and shipments by the world's No. 5 petroleum exporter.

The uncompromising stance dimmed hopes for a quick negotiated settlement to Venezuela's economic and political crisis, which has jolted world oil markets and stirred efforts by the international community to try to mediate a solution.

Rangel said the government's objective was to rule until the end of the left-winger Chavez's term in early 2007, although he said the constitution allowed for a binding referendum on the presidential mandate after Aug. 19.

"We have no interest in Chavez leaving office," Rangel said in a briefing to foreign correspondents.

"In conditions of violence, it is very difficult for a country to hold elections," Rangel said, urging opponents to be patient and wait for the binding referendum after August.

The opposition, which has reinforced the strike that started on Dec. 2 with almost daily street protests, is demanding Chavez resign and call immediate elections. It has vowed to continue the shutdown until he does so.

"We are maintaining the civic strike," anti-Chavez union leader Manuel Cova told reporters.

In a bid to break the deadlock, the United States and other countries are moving to set up a "friendly nations" group to back efforts by the Organization of American States to broker an agreement on elections between Chavez and his foes. Prior to the strike, the United States imported about 13 percent of its oil from Venezuela.

The Venezuelan leader was due to discuss his country's crisis in New York Thursday with U.N. Secretary-General Kofi Annan after attending the inauguration in Quito Wednesday of Ecuador's new president, Lucio Gutierrez.

Rangel denied that the opposition strike, which has also closed many private businesses and caused shortages of gasoline and some food items, had created chaos in South America's biggest oil producer.

"I don't share this idea of chaos. The country is working," the vice president said. He described the general strike launched by foes as "fiction," saying its organizers were "obsessed" with the idea of trying to force Chavez from power.

But he condemned the oil industry disruption, which has cost the country $4 billion in lost revenue, as "sabotage" and "terrorism." The government has fired 2,000 striking state oil employees and is struggling to restore the industry to normal.

The Venezuela crisis has helped push oil prices to two-year highs of over $30 a barrel as the market frets over supplies at a time when the United States is preparing for a possible war in Iraq.

GOVERNMENT VOWS CRACKDOWN Chavez, a former paratrooper elected in 1998, six years after leading a coup attempt, and who survived a coup in April, accuses his foes of trying to destroy his self-styled "revolution" aimed at helping the poor. Most Venezuelans live in poverty despite the nation's oil wealth.

Opponents, who include business and union leaders, striking oil executives and dissident military officers, say Chavez is trying to install a Cuban-style communist system.

Rangel, repeating warnings by Chavez on the weekend, said the government would not let the strikers disrupt law and order or essential services such as education, banking, food supplies and transportation. "We are going to apply the law to the letter, without (declaring) a state of emergency," he said.

Chavez, who has purged the armed forces since April and now seems to have their backing, has sent troops to help restart strike-hit oil facilities. He has threatened to do the same with schools, banks and factories that refuse to operate.

Rangel poured cold water on opposition hopes to hold a nonbinding referendum on Chavez's rule on Feb 2.

The government has appealed to the Supreme Court against the referendum, which Rangel dismissed as "unconstitutional and "politically useless." He added the government would respect whatever decision the court reached on the issue.

Chavez has said he will not resign even if he massively loses the nonbinding February referendum.

Early Tuesday, troops in Caracas seized arms from the metropolitan police serving under anti-Chavez Mayor Alfredo Pena. Last October, the government took over the city force, but was ordered to return it to Pena by the Supreme Court.

Rangel defended the arms seizures, saying the police were responsible for shooting Chavez supporters in clashes involving pro- and anti-government demonstrators in recent months. The opposition blames armed government followers for the violence.

reuters.com Tue January 14, 2003 01:32 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez's government said on Tuesday it would survive a six-week-old opposition strike -- which it dismissed as "fiction" -- and insisted it aimed to rule until the end of its term in 2007.

Vice President Jose Vicente Rangel told reporters the government had no intention of holding early elections demanded by organizers of the strike that has crippled oil output and shipments by the world's No. 5 petroleum exporter.

The uncompromising stance dimmed hopes for a quick negotiated settlement to Venezuela's economic and political crisis, which has jolted world oil markets and stirred efforts by the international community to try to mediate a solution.

Rangel said the government's objective was to rule until the end of the left-winger Chavez's term in early 2007, although he said the constitution allowed for a binding referendum on the presidential mandate after Aug. 19.

"We have no interest in Chavez leaving office," Rangel said in a briefing to foreign correspondents.

"In conditions of violence, it is very difficult for a country to hold elections," Rangel said, urging opponents to be patient and wait for the binding referendum after August.

The opposition, which has reinforced the strike that started on Dec. 2 with almost daily street protests, is demanding Chavez resign and call immediate elections. It has vowed to continue the shutdown until he does so.

"We are maintaining the civic strike," anti-Chavez union leader Manuel Cova told reporters.

In a bid to break the deadlock, the United States and other countries are moving to set up a "friendly nations" group to back efforts by the Organization of American States to broker an agreement on elections between Chavez and his foes. Prior to the strike, the United States imported about 13 percent of its oil from Venezuela.

The Venezuelan leader was due to discuss his country's crisis in New York on Thursday with U.N. Secretary-General Kofi Annan after attending the inauguration in Quito on Wednesday of Ecuador's new president, Lucio Gutierrez.

Rangel denied that the opposition strike, which has also closed many private businesses and caused shortages of gasoline and some food items, had created chaos in South America's biggest oil producer.

"I don't share this idea of chaos. The country is working," the vice president said. He described the general strike launched by foes as "fiction," saying its organizers were "obsessed" with the idea of trying to force Chavez from power.

But he condemned the oil industry disruption, which has cost the country $4 billion in lost revenue, as "sabotage" and "terrorism." The government has fired 2,000 striking state oil employees and is struggling to restore the industry to normal.

The Venezuela crisis has helped push oil prices to two-year highs of over $30 a barrel as the market frets over supplies at a time when the United States is preparing for a possible war in Iraq.

GOVERNMENT VOWS CRACKDOWN

Chavez, a former paratrooper elected in 1998, six years after leading a coup attempt, and who survived a coup in April, accuses his foes of trying to destroy his self-styled "revolution" aimed at helping the poor. Most Venezuelans live in poverty despite the nation's oil wealth.

Opponents, who include business and union leaders, striking oil executives and dissident military officers, say Chavez is trying to install a Cuban-style communist system.

Rangel, repeating warnings by Chavez on the weekend, said the government would not let the strikers disrupt law and order or essential services such as education, banking, food supplies and transportation. "We are going to apply the law to the letter, without (declaring) a state of emergency," he said.

Chavez, who has purged the armed forces since April and now seems to have their backing, has sent troops to help restart strike-hit oil facilities. He has threatened to do the same with schools, banks and factories that refuse to operate.

Rangel poured cold water on opposition hopes to hold a nonbinding referendum on Chavez's rule on Feb 2.

The government has appealed to the Supreme Court against the referendum, which Rangel dismissed as "unconstitutional and "politically useless." He added the government would respect whatever decision the court reached on the issue.

Chavez has said he will not resign even if he massively loses the nonbinding February referendum.

Early on Tuesday, troops in Caracas seized arms from the metropolitan police serving under anti-Chavez Mayor Alfredo Pena. Last October, the government took over the city force, but was ordered to return it to Pena by the Supreme Court.

Rangel defended the arms seizures, saying the police were responsible for shooting Chavez supporters in clashes involving pro- and anti-government demonstrators in recent months. The opposition blames armed government followers for the violence.