www.forbes.com Reuters, 01.23.03, 5:12 AM ET

LONDON, Jan 23 (Reuters) - Saudi Arabia's willingness to raise oil output again early next month does not reflect OPEC policy, an OPEC official said on Thursday.

Saudi ambassador to the United States Prince Bandar bin Sultan said on Wednesday that Riyadh was willing to raise production again if oil prices do not ease soon.

The OPEC official at the group's headquarters in Vienna said: "This does not reflect OPEC's position. We have just raised output effective from February 1."

OPEC, of which Saudi Arabia is the biggest producing member, two weeks ago agreed to raise output by 1.5 million barrels a day (bpd) to contain oil price rises driven by a strike in Venezuela and fears of war in Iraq.

"Our government is ready to do more in the next two or three weeks if we see the price is not stabilizing and going down below $28," Bandar told a meeting of the U.S. Conference of Mayors in Washington.

Riyadh is worried that high oil prices will slow the economies of industrialized countries, reducing their purchases of oil.

"When our American friends catch cold, we catch pneumonia in our part of the world, so to help your economy is paramount to us," he said.

OPEC seeks to keep the price for a basket of its crude in a range between $22 to $28 per barrel. Prices have been above the top end of the range since December 16.

With most in OPEC already pumping at full capacity, only Saudi Arabia and the UAE would be capable of adding supply.

Saudi Arabia's new OPEC quota from February was set at 7.963 million bpd, but the kingdom is expected to be pumping between 8.5-9.0 million bpd in the next few weeks, industry sources said earlier this week.

Saudi Oil Minister Ali al-Naimi has made clear that Riyadh is capable if necessary of ramping up flows to 10 million bpd within weeks.

www.vheadline.com Posted: Thursday, January 23, 2003 - 2:33:56 AM By: Robert Rudnicki

Both the European Union and the Russian government have issued statements of support for the formation of the "Friends of Venezuela" group, made up of Brazil, Chile, Mexico, Portugal, Spain and the United States.

• The group is set to hold its first meeting in Washington tomorrow.

In the EU statement, issued under the Greek EU Presidency, support for the group's contribution was extended, as well as the hope it could achieve a peaceful, democratic, and constitutional solution to Venezuela's crisis through a process of elections.

The EU also urged the Venezuelan people to so pursue a solution assisted by the Organization of American States (OAS) and the "Friends of Venezuela" group.

The Russian Foreign Ministry said it was ready to work together with other nations and international organizations to help restore peace in Venezuela. "We are convinced that the quest for a solution to the problems of today's Venezuela should be conducted through respecting democracy and constitutionality and mutual observance of the principles of rejecting violence."

www.news24.com 23/01/2003 09:13  - (SA)  

Caracas, Venezuela - President Hugo Chavez announced on Wednesday that new foreign exchange controls would be imposed within five days to protect the bolivar currency from plummeting further amid a 52-day-old general strike that has crippled the economy.

Speaking during a military ceremony, Chavez did not elaborate on exactly what limits the government would impose on currency trade.

"We've made a decision that we didn't want to take," Chavez said. "But the situation is serious and there is a persistent speculative attack against the national currency."

The decision means that Venezuelans will be limited in the amount of foreign currencies they can buy per day. The decision is meant to stem a run on the bolivar, which has lost a quarter of its value this year.

Business leaders had widely expected and feared such a decision.

Earlier on Wednesday, the Central Bank had suspended foreign exchange trading altogether for five days - meaning that Venezuelan won't be allowed to buy any foreign currencies for that time. The move was seen as an attempt to protect the bolivar until the government announced the permanent controls.

Exchange controls will help protect the bolivar and the government's depleting foreign reserves. But it will hurt businesses that depend on dollars to pay for imported goods.

"This restriction is going to hurt businesses, which depend heavily on imports, especially industry," said Albis Munoz, vice president of the Fedecamaras business chamber.

Venezuela's economy largely relies on imports - about 50% of food is imported. Soft drink producers buy sugar abroad, newspapers import paper pulp and the automobile industry depends on foreign-made parts to keep assembly lines moving.

All of those materials would be harder to get as a result of the suspension and forthcoming restrictions on currency trading.

Ruling party member Rodrigo Cabezas, president of the legislature's finance committee, said earlier on Wednesday that any exchange controls would be "temporary" - until the nation's oil industry, weakened by the work stoppage, returns to normal. Total recovery for the industry could take several months, analysts have said.

The last time Venezuela imposed foreign exchange controls was in 1995 during an economic crisis that saw the collapse of 17 banks. The controls lasted almost two years.

Cabezas said a team of economists may fix a rate of 1 500 bolivars to the US dollar. The fixed rate could go into effect next week. Previous to Chavez's announcement, the government had allowed the bolivar to float.

The bolivar reached a record low of 1 853 to the dollar on Tuesday. It has lost 25% of the its value since the beginning of the year, after losing 46% of its value in 2002.

Traders said the Central Bank has been injecting up to $70m on a day to protect the currency. Venezuela's foreign reserves stood at $11.05bn Monday, down from about $12.5bn before the strike began. Venezuela also has about $2.9bn in a rainy day fund that absorbs excess oil revenue.

B usiness representatives said the establishment of exchange controls would further restrict industrial production, which is already down - or paralysed - due to the strike.

Ricardo Tinoco, a spokesperson for Ford Motor Company, said exchange controls, "depending on the complexity" of the system, could affect the company's access to car parts used to assemble cars at its plant in Valencia.

"It would limit how many parts we import and that, obviously, will dictate our production levels," said Tinoco.

Venezuelans have been coping with severe fuel and food shortages resulting from the strike, which has slashed oil production by more than two-thirds, and crippled an industry that provides 70% of export revenue and half of government income.

Oil production stands at about 714 000 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. - Sapa-AP

www.globeandmail.com By PATRICK MARKEY Reuters News Agency Thursday, January 23, 2003 – Page B12

CARACAS -- Venezuela yesterday suspended foreign exchange trading in a desperate bid to stem capital flight and a slide in the bolivar as the government battled an opposition-led strike that has drained its oil-reliant economy.

The Central Bank said it would close the foreign exchange market for five trading days and prepare temporary currency exchange and transfer curbs to fend off the impact of the shutdown aimed at forcing leftist President Hugo Chavez to resign and hold new elections.

The measures were announced just hours before the country's Supreme Court delivered a blow to the opposition campaign by suspending a non-binding Feb. 2 referendum they were planning to hold on the president's rule.

Venezuela's bolivar currency has tumbled more than 28 per cent against the U.S. dollar during the seven-week-old work stoppage and its international reserves have dipped since the crisis began. The strike has slashed oil output in the world's No. 5 petroleum exporter to a fraction of its normal levels.

Economists said foreign exchange controls would give the government some short-term breathing room, but the economy would suffer the longer the controls were maintained.

"This looks more like a knee-jerk reaction of theirs to the currency weakness," said Jose Cerritelli, a Bear Stearns Andean economist. "But in the long term, people look to escape the controls by taking their money out."

Finance Minister Tobias Nobrega said the government planned also to slash its 2003 budget by 10 per cent, or $2.2-billion (U.S.), extend a temporary bank debit tax through 2003 and continue with a domestic public debt swap to counter the economic damage of the strike.

The economic crunch has raised fears that Venezuela may default on its foreign debt later this year. But the Central Bank said the government would maintain the necessary operations to make those debt payments.

Mr. Chavez, a fiery populist who was elected in 1998 and survived a coup last April, has branded his foes as "terrorists" who are trying to topple him again through an economic coup and by draining hard currency from Venezuela. He has refused to quit and vows to defeat the strike.

Venezuela's Trade and Production Minister Ramon Rosales said the suspension of the exchange market aimed to halt what he called the "attack against our international reserves."

Venezuela's international reserves have fallen to $11.05-billion, a drop of 7.5 per cent so far this year. The government also has $2.85-billion in a rainy-day savings fund and insisted recently that hard currency levels were sufficient.

The bitter stalemate has raised international concern after the strike helped drive world oil prices to two-year highs. It has also disrupted domestic fuel and food supplies. But negotiations to break the deadlock have been stalled over the timing of possible elections. Former U.S. president and Nobel Peace Prize winner Jimmy Carter on Tuesday proposed to the government and the opposition a blueprint for elections that would also end the strike.

The currency trading shutdown is the latest government measure to combat the strike, now in its 52nd day. Many private businesses are still closed and the fuel shortages have forced Venezuelans to wait for hours outside gasoline pumps.

Mr. Chavez, who led a botched coup six years before his victory at the polls, has fought back, sending troops to seize control of oil installations and refineries and importing food and gasoline to offset shortages. In a first sign of a crack in the oil shutdown, some tanker pilots in the key western oil and shipping hub of Maracaibo went back to work this week.

www.tuscaloosanews.com By Sylvere and Martha Coussement January 23, 2003

We returned to Venezuela from the United States on New Year’s Day, and after a brief evaluation of this country’s conditions, we accelerated preparations to exit with our car into Brazil.

Venezuela has been locked in a general strike since Dec. 2, 2002, led by the opposition to President Hugo Chavez, and both sides have dug in their heels. Eighty percent of the country has joined (including the vital oil workers and managers) leaving shortages in all areas, including food, cooking gas and gasoline.

The not so subtle maneuvering of this country’s government to a Cuban style communist state by Chavez is the underlying reason for the opposition. Much civil unrest with huge demonstrations, not without violence, has been a daily occurrence.

The banks have announced their intent to join the strike for at least 48 hours (they have been open but four hours per day since the strike began). This has precipitated a rush on the banks with block-long lines. Although conditions have been barely tolerable (can you imagine no beer?), we think it will be more pleasant out of Venezuela.

Having succeeded in our accelerated program for this trip around South America (the most important being the rat-holing of 15 gallons of gasoline), and having put our sailboat, Orca, in the storage yard, we departed Puerto La Cruz on the Jan. 15. This put us two weeks ahead of our original plans, precipitated, of course, by the continued political and economic deterioration in this country.

The Venezuelan countryside proved quiet and with little traffic. Deciding to get our visas at the Brazilian Consulate in Puerto Ordaz was not wise, since we faced a four-hour wait at the bank to deposit the required fees. For security reasons, a number of institutions will not accept cash and require direct deposit to their accounts. Fortunately, the consul suggested the vice consul in Santa Helena (on the Brazilian border) for this operation where they accepted cash.

One never knows what the rule of day or region is going to be in Latin America. After a pleasant stay at the Villa Fairmont, we struck out for Brazil.

Across the equator

Boa Vista is a relatively new city created by the government to encourage colonization of the desolate northern part of Brazil. It is nicknamed the city of giants, since all of its roads are at least two-lane divided highways. Needless to say, there are no traffic jams.

The road to Manaus, on the Amazon river, was jointly described to us as “good" or “awful."

Well, it was both. The first and last thirds were indeed reasonable, while the middle portion was awful, full of large potholes when there was a roadway. Understand that this road was started in 1974 to connect the new city of Boa Vista with the rest of the country but was not completed until 1987.

A violent history was written during this time. The poison-/sarrow wielding Waimiri Indian tribe objected to the road through its ancestral lands and combated the Brazilian Army for many years, killing more than 200 soldiers. The Waimiri population high of 1,500 had dwindled down to fewer than 400 when a negotiated settlement was reached in 1986.

The drive through the reserve is quite memorable, with 125 kilometers of jungle where drivers are not allowed to get out of their vehicles. Crossing the reserve is allowed only from 6 a.m. to 6 p.m., and no photography is permitted.

We encountered a number of tribespeople on the road side, bare breasted et al. And, indeed, they are a handsome people, their lives little influenced by the encroachment of civilization.

Several of the men held bows with a number of arrows, and none of the expressions on their faces could be interpreted as friendly. Perhaps guarded, stern or angry would be better descriptions, but they certainly did not smile.

We have learned that we will be traveling down the Amazon on a barge. Apparently, the major traffic is passenger not auto, so if you wish to accompany your car, you do it on a barge on which your stateroom is your car.

And we used to say that the Hilton was camping out.

• Next week: A “luxury" Amazon river cruise or how to live out of your car with two dogs, a cat and a wife on the equator.