www.cnn.com Wednesday, January 22, 2003 Posted: 10:05 AM EST (1505 GMT)

CARACAS, Venezuela (AP) -- Rivals in Venezuela's bitter political standoff studied proposals made by former President Jimmy Carter to end the dispute that has dramatically cut oil production in the world' s No. 5 exporting country.

The Nobel Peace Prize laureate proposed two plans Tuesday. The first entails elections and the end to a 51-day-old national strike. The second proposal calls for both sides to prepare for a binding referendum on President Hugo Chavez's presidency in August, the midpoint of his six-year term.

Both supporters and foes of Chavez expressed doubt their opponents would respect a democratic solution to the bitter stalemate.

"As democrats we move along an electoral and peaceful path. They aren't democrats and they don't believe in this possibility," said strike leader Carlos Ortega, president of country's largest labor union.

Juan Barreto, a ruling party member, expressed doubt opposition leaders have "the capacity and patience to move forth" with the proposals.

The first plan would amend Venezuela's constitution to shorten presidential and legislative terms of office and stage early elections.

It calls for the opposition to end the strike and for the government, which has a congressional majority, to move quickly on changing the constitution. Amending the constitution requires the approval of congress and a popular referendum.

Carter said that if both sides agreed on the amendment proposal, there "would be no delays" in implementing it because international mediators would "guarantee the integrity of the agreement."

A so-called "Group of Friends of Venezuela," a forum of six countries including the United States, Mexico, Brazil, Chile, Spain and Portugal, has been formed to help end the standoff. Diplomats involved in the initiative will hold their first meeting at the Organization of American States in Washington on Friday.

'Nobody imagined the strike would last for 50 days'

The proposals, added Carter, have taken into account the basic demands of both sides but "difficult details" will have to be worked out in negotiations.

Members of a women's opposition protest shout slogans against the president in Caracas on Tuesday.

Before leaving Venezuela Tuesday, Carter was optimistic opponents would make concessions in order to end the political impasse and ongoing work stoppage.

"Nobody imagined the strike would last for 50 days and no one wants it to last for 70 or 100 days," he said.

The government has acknowledged the strike has reduced oil production and cost $4 billion so far.

Oil provides 70 percent of export earnings and a third of Venezuela's $100 billion gross domestic product. Output stands at about 660,000 barrels a day, compared to 3 million before the strike, according to strike leaders. The government claims production is at least 800,000 barrels a day.

A key point is the fate of workers at Venezuela's state owned oil monopoly. Some 30,000 of 40,000 workers are striking. Chavez has fired more than 1,000.

Carter said his proposal would have strikers return to work but allow the government to prosecute anyone accused of sabotaging the industry. Chavez accuses "fascist, coup-plotting" oil executives of using sabotage to prevent the government from jump-starting the oil industry.

Arguing that Venezuelans cannot wait until August to cast ballots given the deepening crisis and political upheaval, opposition leaders called the strike on Dec. 2 to force Chavez from power.

Chavez was elected in 1998 and re-elected in 2000 on promises to help the country's poor majority, but he has failed to remedy the nation's economic ills.

Political unrest has contributed to 17 percent unemployment, 30 percent inflation and a weakening currency, which reached a record low of 1,853 to the dollar Tuesday.

www.bangkokpost.com

Nobel Peace Prize winner Jimmy Carter on Tuesday presented to Venezuelan President Hugo Chavez and his foes a plan for elections that seeks to end a crippling opposition strike in the world's fifth-largest oil exporter.

The blueprint unveiled by the former US president offered two options: one for an amendment to Venezuela's constitution that would trigger early elections and the other for a national referendum on Mr Chavez's rule on Aug 19.

Both options, which were received by government and opposition negotiators on Tuesday, foresee the lifting of the seven-week-old strike launched by opposition leaders to press the left-wing leader to resign and hold early elections.

The gruelling shutdown has slashed output and exports by South America's biggest oil producer, pushing the oil-reliant economy deeper into recession.

The bolivar currency tumbled 5.1% against the US dollar on Tuesday. Moody's Investors Service cut Venezuela's foreign currency debt ratings, sinking the country deeper into junk bond territory because of uncertainty over the strike.

A government source said the administration and Central Bank had approved a temporary closure of the foreign exchange market, as they studied exchange restrictions to stem capital flight.

The bolivar has shed more than 24% of its value against the dollar since the start of the year. But the source, who asked not to be named, said a devaluation was not being planned for the moment.

The 51-day-old oil industry strike showed signs of weakening on Tuesday when some oil tanker pilots in western Lake Maracaibo went back to work. Nevertheless, strike leaders said they were continuing the shutdown, which has pushed up world oil prices to two-year highs of more than $34 a barrel.

Mr Chavez, a populist who led an unsuccessful coup attempt in 1992, was first elected to the presidency in 1998 and survived a brief coup last year, has refused to resign and says he will try to break the strike.

Opposition leaders said they hoped Mr Carter's proposal, backed by international pressure, would give fresh impetus to faltering negotiations on ways to end the crisis, which is threatening to bankrupt Venezuela's oil-reliant economy.

``President Carter's weight and authority, combined with the international situation, could force the government to sit down and talk,'' opposition negotiator Alejandro Armas said.

More than two months of peace negotiations, brokered by the Organisation of American States Secretary-General Cesar Gaviria, have so far failed to produce a deal on elections, increasing uncertainty about Venezuela's economic and political future.

Raising fears of social unrest, the strike has led to shortages of petrol, cooking gas and some food items.

Mr Carter, who has made a career of trying to resolve world conflicts, travelled to Caracas to throw his weight behind international efforts to end the Venezuelan crisis. ``Both sides now want to reach an agreement to end the impasse,'' Mr Carter said before flying home.

One of the two options he presented proposes an amendment to the constitution that would allow the holding of early elections. Such an amendment must be proposed by 15% of the electorate and be approved in a national referendum.

The other option is for the country to wait until Aug 19, halfway through Mr Chavez's term, when the constitution allows for a binding referendum on the president's mandate, which is due to end in early 2007.

Mr Chavez told reporters after meeting Mr Carter he was willing to accept a constitutional amendment. ``I don't reject any of these possibilities, but the opposition must comply with the constitution,'' he said.

Mr Carter said both sides would have to agree on one of his alternatives.

www.forbes.com Reuters, 01.22.03, 12:34 PM ET

CARACAS, Venezuela, Jan 22 (Reuters) - Finance Minister Tobias Nobrega on Wednesday said the government plans a 10 percent cut in its 2003 budget as it seeks to counter an opposition strike bleeding its oil-reliant economy.

The budget cut would be equal to about 4 trillion bolivars, or $2.2 billion.

Nobrega said the government would continue with an internal public debt swap and restructuring program to smooth out debt commitments in the world's No. 5 oil exporter. In November, Venezuela swapped about $2 billion in debt to ease a crunch in its primary payments and servicing.

The minister said the government also plans to extend an existing temporary bank debit tax, introduced last May to help cover fiscal needs. Nobrega said the tax would continue but at a lower rate.

The strike, started by opposition leaders seeking to force leftist president Hugo Chavez from office, has slashed oil output. Oil provides about half of all government revenue.

The Venezuelan economy contracted sharply last year after Chavez survived a brief coup. ($1 = 1,853 bolivars).

www.forbes.com Reuters, 01.22.03, 12:12 PM ET

CARACAS, Venezuela, Jan 22 (Reuters) - The following are statements by officials, economists and analysts reacting to a move on Wednesday by Venezuela's central bank to close the foreign exchange market for five trading days.

The closure is seen as an attempt by the government to stem capital flight during a crippling seven-week-old opposition strike against President Hugo Chavez.

ARMANDO LEON, ONE OF THE DIRECTORS ON THE BOARD OF THE VENEZUELAN CENTRAL BANK: "This is a decision taken by a collegiate group, which I obey and respect but do not share because I believe there were other ways to solve the crisis, such as fiscal and monetary measures.

"I don't agree with exchange restrictions because history has shown in this country that they don't bring benefits and the costs are very high."

RAMON ROSALES, MINISTER OF PRODUCTION AND TRADE: "The aim of this measure is to preserve our (international) reserves, which are the only guarantee of Venezuela's recovery after this oil sabotage (the opposition strike).

"The dollar had taken off ... we had to stop this."

JOSE CERRITELLI, BEAR STERNS, ANDEAN DEBT STRATEGIST: "It doesn't look like they have full foreign exchange controls ready. This looks more like a knee-jerk reaction of theirs to the currency weakness.

"In the functioning of the economy, this is another arm tied behind the back. Now the private sector no longer has a market exchange rate to guide it for transactions. The private sector is further handicapped in doing business.

"In its first impact, it's not so negative. It gives seniority to foreign debt holders. It provides some hope that at least for a short term, capital flight is curbed.

"Although foreign exchange controls initially slow capital flight, eventually people learn to circumvent them and you have a black market that makes it profitable to engage in capital flight. In the long term, people look to escape the controls by taking their money out."

CARLOS FERNANDEZ, PRESIDENT OF THE FEDECAMARAS PRIVATE BUSINESS ASSOCIATION AND A LEADER OF THE OPPOSITION STRIKE: "This is going to affect the operation of most industries. Remember that in the food sector, almost 60 percent of raw material inputs are imported. It's also going to have a heavy effect on the health sector.

"These currency measures will only increase the impact of the strike because they create more uncertainty and limit the ability to buy raw materials.

"With this move, the whole economy will fall into a kind of paralysis. The economy is being held hostage to the political situation."

ROGER SCHER, FITCH RATINGS, HEAD OF LATIN AMERICAN SOVEREIGN RATINGS: "This was to be expected. Capital controls from a sovereign ratings perspective are not a good thing in the long term. But when you are in crisis and you are trying to shore up the foreign exchange position for debt service and other immediate needs, then it can be helpful."

FRANCISCO RODRIGUEZ, HEAD OF THE ECONOMIC AND FINANCIAL ADVISORY OFFICE OF THE NATIONAL ASSEMBLY: "This measure reveals the state of desperation that the government finds itself in as a result of the fiscal crisis and the scarcity of foreign exchange caused by the oil strike.

"This is a short-term measure that will do nothing to restore macro-economic balance, but on the contrary will lead to a dangerous instability.

"From the economic point of view, there were other solutions not requiring exchange controls. The level of reserves had not reached critical levels. This measure could be motivated by not only economic but also political considerations."

www.creditman.biz   Jan 22 2003 The number of manufacturers operating below capacity has risen to a 20 year high, fuelled by a relentless two-year decline in orders and output.

The CBI's Quarterly Industrial Trends survey, published today (Wednesday), also shows manufacturers' confidence dropping further as weak global demand threatens to keep the sector mired in recession.

Seventy-four per cent of firms are now working below capacity, the highest percentage recorded since January 1983. This follows two consecutive surveys where 67 per cent of companies operated under capacity.

The survey says 31 per cent of firms saw a fall in total orders in the four months to January, while 22 per cent saw a rise. The balance of minus nine per cent follows the minus 16 per cent recorded in the October survey, and marks the eighth consecutive quarter of declining demand.

Output also fell and firms no longer expect any noticeable rise in either orders or output over the next four months. This follows three consecutive quarters in which expectations for rising demand and production were disappointed.

Conditions in overseas markets have continued to deteriorate. Export orders fell at the fastest rate for a year while the decline in export prices accelerated to the fastest rate since July 2000. As a result, export optimism for the year ahead fell for the second consecutive quarter.

Overall optimism also fell, with 30 per cent of firms less optimistic about the business situation than four months ago, and eleven per cent more optimistic. The balance of minus 19 per cent matches the figure recorded in October and compares with plus four per cent in July.

Employment fell further than expected, with no sign of respite over the next four months. The CBI predicts 42,000 manufacturing job losses in the first quarter of 2003.

Firms plan to cut investment in buildings, plant and machinery at a significant rate over the next 12 months. Projections for spending on innovation are flat, but encouragingly, plans for training expenditure are holding up surprisingly well.

The employer's organisation chose not to call for an immediate cut in interest rates because of the uncertain effects of housing market developments and the government's tax-and-spending policy on inflation. But it urged the Bank of England to remain vigilant and act swiftly if the economy deteriorates further.

Ian McCafferty, CBI Chief Economist, said: "Large sections of UK factories are standing idle. Figures show the number of manufacturers working below capacity has risen to a 20-year high, causing firms to plan further cuts in investment and jobs. With little let-up in the two-year decline in orders and output, the overall picture will concern manufacturers.

"External demand shows no sign of a pick-up and the German economy is worsening. Rising oil prices have been exacerbated by problems in Venezuela and uncertainties in the Middle East. April's rise in National Insurance contributions will be a blow to firms that are already under the cosh. This promises to be another challenging year for manufacturers."

Prices fell further than expected last quarter for the third consecutive survey, and firms expect a further, albeit more modest, decline next quarter. Manufacturers have now been subject to serious price deflation for four years.