www.sfgate.com Friday, January 24, 2003

(01-24) 15:07 PST MEXICO CITY (AP) --

Mexican stocks closed lower Friday in line with U.S. declines as investors pulled out of the market ahead of expectations of an American attack on Iraq.

Mexico's key IPC index closed down 41.88 points or 0.7 percent to 6,012.56. Volume totaled a thin 45.6 million shares worth 585.2 million pesos.

The peso tapped a new historical closing low Friday on the war jitters. Mexico depends on U.S. consumers to purchase almost 90 percent of its exports. Attacks in the Middle East would likely further bruise the U.S. economy and consumer spending.

Equity decliners included brewer Grupo Modelo's C shares, which lost 2.5 percent to 23.78 pesos, and financial group BBVA-Bancomer's B shares, which dropped 1.6 percent to 8.11 pesos.

SAO PAULO, Brazil (AP) -- Brazil's main stocks index slumped to its lowest level since mid-December, as investors fled local equities on fears an American-led invasion of Iraq is drawing ever closer.

The Sao Paulo stock Exchange's leading Ibovespa index tumbled 3.3 percent to end at 10,783, its lowest close since Dec. 16.

The submission of a report on the state of Iraq's weaponry -- to be submitted by U.N. inspectors Monday -- could be a watershed moment in the standoff between Iraq and the United States.

Markets, worried that a war in Iraq could further feed risk aversion among equities investors, were anxious ahead of the report's release, traders said.

War in Iraq could also endanger Brazil's economy. The local currency has already depreciated significantly, falling Friday to its weakest level in more than a month. And an extended spike in crude prices could feed into inflation for net oil importers like Brazil.

Oil giant Petrobras, which could be hurt by the cost of importing more expensive crude, fell 4.9 percent to 45.11 reals.

Utilities Eletrobras and Eletropaulo also declined, shedding 5.9 percent and 3.4 percent to finish at 20.13 reals and 28.10 reals, respectively.

BUENOS AIRES, Argentina (AP) -- Argentine stocks closed down Friday, despite the decision by the International Monetary Fund's executive board to approve a debt rollover accord for the South American nation.

Thee IMF approved a deal that will roll over of some US$6.8 billion in debt payments the South American nation owes the international lender between January and August.

The deal could open the way to similar rollover accords for Argentina with the World Bank and the Inter-American Development Bank.

Analysts said the negative reaction of blue chips came because traders had already discounted the IMF accord at the turn of the year and were now looking to other themes.

In particular traders were concerned by the battle within the Peronist party over whether to hold a primary vote.

On Friday, a Peronist Congress organized by President Eduardo Duhalde decided to scrap the ballot, as the head of state wants.

But on Thursday, a federal judge ordered the Peronists to hold the primary, responding to a legal claim demanding primaries go ahead by Duhalde's party rival, former President Carlos Menem, who is seeking a third term in office.

The blue chip Merval Index closed down 10.34 points, or 1.81 percent, to 557.82 points. The broader General Index was down 355.95 points, or 1.31 percent, to 26,685.00 points. Volume was a modest ARS44.94 million.

Dragging the Merval down once again was energy giant Perez Companc. The share, which accounts for around one quarter of the market, was 4.16 percent lower at 2.30 pesos. The company continues to be negatively affected by the crisis in Venezuela, where the company produces much of its oil.

Carmaker Renault was one of the few blue chips heading higher. It closed up 1.61 percent to 1.26 pesos.

SANTIAGO, Chile (AP) -- Chilean share prices fell across the board Friday in response to the steep decline in U.S. share prices.

The blue-chip IPSA index ended down 1 percent at 993.97 points, from 1,003.95 points, and erasing all gains made in the three weeks of trading since the beginning of the year.

The narrower Inter-10 index of more liquid, internationally traded Chilean shares fell more steeply, dropping 1.4 percent to 100.26, setting the index back almost to where it stood Jan. 2. The broader-based IGPA index slipped to 4,985.22 from 5,000.97, backtracking 0.3 percent. Volume was low at 5.47 billion pesos.

Telecommunications company CTC lost 1.8 percent.

usinfo.state.gov 24 January 2003

(Recommends proposals offered by former President Carter) (1230)

The United States believes the only solution to the current crisis in Venezuela is a peaceful, constitutional, democratic and electoral process agreed to by both the government of Venezuelan President Hugo Chavez and the political opposition, says Secretary of State Colin Powell.

In January 24 remarks to a special session of the Organization of American States (OAS), Powell reiterated U.S. support for OAS Secretary General Cesar Gaviria's efforts to facilitate a dialogue to resolve the Venezuelan impasse. He encouraged the recently-formed "Group of Friends" -- consisting of the United States, Brazil, Mexico, Chile, Spain and Portugal -- to quickly reaffirm its support for Gaviria's efforts and to work for a constitutional solution to the Venezuelan crisis.

Given what he described as the "grave" and deteriorating situation in Venezuela, Powell suggested that "time is of the essence" in reaching an accord. He said that the two proposed resolutions to the crisis offered by former U.S. President Jimmy Carter "represent the best paths available to Venezuelans."

Under the terms of one proposal outlined by Carter, Venezuela's government and opposition would agree to a recall referendum -- consistent with the Venezuelan constitution -- to be held in August to determine if Chavez should leave office.

Under the alternative proposal, the two sides would agree to a constitutional amendment to permit early general elections in the summer.

Once the two sides have reached an agreement, Powell said, the Friends Group should establish a mechanism to ensure its full implementation.

"At the end of the day, it is the Venezuelans themselves who must find solutions to their problems," Powell concluded, adding: "it is my profound hope, and my confident belief, that the Secretary General's continued work, the Friends Group's sustained efforts, and President Carter's valuable contributions will help them do so."

Following is the text of Powell's remarks, as prepared for delivery:

(begin text)

U.S DEPARTMENT OF STATE Office of the Spokesman

FOR IMMEDIATE RELEASE January 24, 2003

REMARKS OF SECRETARY OF STATE COLIN L. POWELL TO THE SPECIAL SESSION OF THE ORGANIZATION OF AMERICAN STATES

Secretary General Gaviria, Assistant Secretary General Einaudi, Ministers and Permanent Representatives, distinguished guests.

I would like to thank Secretary General Gaviria for convening this meeting and, even more, for his tireless efforts to reach a peaceful and democratic way out of the current impasse in Venezuela.

Tragically, however, the situation in Venezuela grows worse by the day. Venezuelans of all stripes see their democracy and their hopes for prosperity growing ever weaker. All of us in the region and, indeed, in the international community, recognize that Venezuela's woes are our concern, too, lest they set back the march toward economic and political stability elsewhere in the hemisphere.

Colleagues, the situation is grave. We must help our Venezuelan friends find a way out of their current crisis.

We are here today to do just that.

We are here to underscore our strong support for the people of Venezuela and for the democracy they have cherished for over four decades.

Specifically, we are here to help the Venezuelan people find a democratic solution to their immediate problems.

The United States believes that the only way out of the crisis in Venezuela is through a peaceful, constitutional, democratic, and electoral process, one that the government and the opposition have both agreed to.

We also strongly believe that the dialogue led by Secretary General Gaviria remains the best opportunity for Venezuelans to achieve such a result.

We are not alone in our conviction. The entire membership of this body endorsed these principles when it passed Resolution 833, by consensus, last December.

It is by supporting these principles, and the Secretary General's determined efforts to secure an agreement based upon them, that we believe the Group of Friends can help. Indeed, I suggest we call the group the "Friends of the OAS Secretary General" to emphasize our commitment to helping the Secretary General in his mission to bring the two sides to a peaceful resolution of their differences.

I would like to thank President Lula of Brazil for his leadership in the creation of the Friends Group. We look forward to working with our colleagues in the Group from Brazil, Mexico, Chile, Spain, and Portugal.

The Friends of the OAS Secretary General initiative is firmly embedded within the OAS. The Inter-American Democratic Charter recognizes the central importance of democracy in our countries and gives the OAS a special role in its protection and promotion in our region.

Time is of the essence. To facilitate the process for reaching an accord, Secretary General Gaviria has detailed the points of agreement between the opposition and government.

Now, the Friends must act quickly to reaffirm the group's mandate to support the Secretary General and work for a "peaceful, constitutional, democratic, and electoral" solution to the current crisis in Venezuela.

We have two good proposals to work with, both tabled by former President Carter. Each offers an electoral way out of the present stalemate.

Under one proposal, the government and opposition would agree to a recall referendum, consistent with the constitutional provision for such a referendum, to be held this August.

Under the alternative proposal, the two sides would agree to a constitutional amendment to enable early general elections this summer.

The Carter proposals represent the best path available to Venezuelans. They provide the badly needed basis on which both sides can bridge their differences on the immediate issues. They offer a way out of the current impasse, and it is our job, as the Friends of the Secretary General Group, to urge both sides to agree to one of them.

Once the two sides have agreed to a political process, the Friends should establish a mechanism to monitor and ensure full implementation of the agreement.

The situation in Venezuela requires urgent action, and the Friends should send high-level representatives to Caracas as soon as possible, even as early as next week. This Friends delegation should act, under the guidance of Secretary General Gaviria, to press both sides to accept one of the proposals currently on the table.

Finally, we believe the Friends' OAS missions here in Washington and embassies in Venezuela should form working groups to enhance the Group's coordination and communication as our efforts move forward.

My friends, the Venezuelan people need to direct their political aspirations into constructive and democratic channels. President Chavez and the leaders of the opposition must understand that the current situation is untenable. An electoral process will allow the Venezuelan people to resolve their problems in an orderly, fair, and transparent manner. Without an electoral process, nobody wins; everyone loses.

It is important to end the current stalemate, but that step alone will not solve Venezuela's problems. Today's impasse arose from, and reflects, the deep divisions that remain in Venezuela. Even after the electoral process is underway, Venezuela's deeper problems will remain. Until those problems are addressed, Venezuelans will not be able to move confidently into a brighter future.

At the end of the day, it is the Venezuelans themselves who must find the solutions to their problems. It is my profound hope, and my confident belief, that the Secretary General's continued work, the Friends Group's sustained efforts, and President Carter's valuable contributions will help them do so.

(end text)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: usinfo.state.gov)

www.khilafah.com uploaded 24 Jan 2003

LONDON-BAGHDAD-MOSCOW: One of the most popular themes on the placards of anti-war demonstrators across the US and Europe is that the looming confrontation is primarily about oil.

US and British ministers dismiss such a charge as the stuff of conspiracy theorists, and instead argue that the Iraqi president, Saddam Hussein, has to be dealt with for one reason: the threat posed by weapons of mass destruction. And, yet, western powers have been fighting over Iraq's "black gold" for decades. Travelling through the country, it is immediately obvious why this is such a great prize in energy terms.

Around Mosul in the north, flares from oil wells can be seen at regular intervals in the otherwise empty grasslands; even in the centre of the country, in Baghdad, the skyline is lit by the al-Dohra oil refinery; and further south, in the desert scrubland round Basra, there is a huge concentration of wells.

Iraq has the second biggest known oil reserves in the world, after Saudi Arabia. But its facilities have been starved of investment over the last few decades, partly because of war and partly because of sanctions. The vast al-Dohra facility is a symbol of all that is wrong. In an advanced state of decay, rusting pipes link a series of large, sand-coloured storage tanks, almost every one of which is crudely patched with sheets of steel.

At present Iraq exports around 1.5m barrels a day but energy experts say this could be increased to 6m barrels within five years after reinvestment. The US needs access to new energy reserves. American industry and motorists are guzzling gasoline at a rate that easily outstrips the rest of the world while domestic reserves are running out at a time when demand is set to leap.

The US energy department frightened politicians with a study in 2001 known as the Cheney report after the former head of Halliburton oil services group, now US vice-president, who wrote it. He predicted that imported oil would need to rise from 10.4 million barrels a day at present to 16.7 million barrels a day by 2020.

The report spelled out the US dependence on a stable energy market and the need for a foreign policy that would protect America's energy supply." In a global energy marketplace, US energy and economic security are directly linked not only to our domestic and international energy supplies, but to those of our trading partners as well," it said. "A significant disruption in world oil supplies could adversely affect our economy and/or ability to promote foreign and economic policy objectives, regardless of the level of US dependence on oil imports."

George Bush, like Mr Cheney, is a former oil man, as are many of his close staff, so they need no lessons on how the energy world works. As politicians, they also know that their voters' commitment to cheap and available petrol for their car is seen as an inalienable right not far short of bearing arms.

Traditionally, America looked to Saudi Arabia and Venezuela for its crude supplies. But since the September 11 terrorist attacks, carried out in the main by Saudi nationals, the former important Middle East ally has been deemed unreliable while political turmoil in Venezuela has virtually halted exports to the US.

Washington has been wooing Russia and African nations to secure future supplies but there is nothing like the ultra-cheap-to-produce reserves in Iraq sitting just below the desert sands.

Professor Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam and a visiting professor at the London School of Economics, rejected the view that oil was the main driving force behind the current Iraq frenzy. "Its not all about oil. There are other factors such as US fears about weapons of mass destruction, revenge for earlier failures and the fact they believe Iraq has not behaved properly towards the US for 20 years," he said. "My own view is that an attack will lead to destruction of Iraqi oilfields as happened in Kuwait and there could be severe oil market problems in the short term. Longer-term, Russia and France have pre-emptive rights for deals done or money owned by Iraq but clearly the US will get in on the act [on redeveloping Iraqi oil fields]."

Paul Slater, who owned and ran a tanker fleet hired out to Shell and is a leading figure in the independent tanker owners association, is less certain. "I think oil is a major issue which cannot be left out of the equation although whether it is the major driver I don't know."

It is not just wild-eyed western peaceniks that believe oil is at the centre - or close to the centre - of the pending conflict. It is quite a commonly held view even in the conservative business world but few are willing to express such things publicly.

Fadel Gheit, a former Mobil chemical engineer and now an investment specialist with New York brokerage firm Fahnestock & Co, told 50 of the largest pension funds and financial investors in America before Christmas that the expected war was "all about oil" and that the global fight against terrorism was just "camouflage" to mask the real purpose.

Later he told the Guardian newspaper in London: "The Americans have nothing against the people of Iraq but our way of life is dependent on 20m barrels a day and half of it has to be imported. We are like a patient on oil dialysis. It's a matter of life and death. The smart people [in Washington] all know this but it's not generally advertised on the kind of shows that most people watch: MTV and soap operas."

Mr Gheit said a strike against Iraq has become vital in the eyes of Washington because politicians and security chiefs fear that Saudi Arabia, the traditional provider of US oil, is a political "powder keg" that is going to explode from within. "Of the 22m people in Saudi Arabia, half are under the age of 25 and half of them have no jobs.

Many want to see the end of the ruling royal family and whether it takes five months or five years, their days are numbered. If Saudi Arabia fell into the hands of Muslim fundamentalists and the exports were stopped, there is not enough spare oil anywhere else to make up the shortfall."

But Dr Charles Tripp, head of politics at the School of Oriental and African Studies, argues that the idea that oilfields need to be physically seized in order to be controlled is outdated. "Oil is a part of this," said Dr Tripp. "But it is as much to do with asserting American power."

Oil was key factor in the first Gulf war, along with protecting the sovereignty of a United Nations member. This time round "oil" is a word that politicians and officials in both Washington and London are almost afraid to speak, fearful of how it will play in the Arab world.

An independent working group part-sponsored by the Council on Foreign Relations has just handed over a report to Mr Bush entitled Guilding Principles for US Post-Conflict Policy in Iraq. It argues: "Iraqis have the capability to manage the future direction of their oil industry. A heavy American hand will only convince them, and the rest of the world, that the operation against Iraq was undertaken for imperialist, rather than disarmament reasons. It is in America's interest to discourage such misconceptions."

The international oil companies are already circling. The US and British accuse the Russians and the French, especially the French, of playing dangerous games with Iraq, keeping in with Baghdad in the hope of securing favourable oil contracts.

The French foreign ministry is infuriated by the suggestion. One French diplomat challenged journalists to look at what was really happening and insisted that they would find it was US companies that were making the running to secure a share of Iraqi oil.

Senior oil executives generally want to avoid talking publicly about the issue but privately they say its "rubbish" that they need Iraq so much that they would support a war. Mark Moody-Stuart, a director of Shell and its former chairman went further, telling the Guardian that a military strike would unhinge the Middle East and was therefore a "recipe for disaster."

So what do the people at the centre of the impending war think? "Our oil is the main reason America wants to attack Iraq," said Ali al-Rawi, head of the economics department at Baghdad University. "They want to control our oil and control price and production levels. They know the future oil resources for the world will continue to come from this area for many years."

Source:  The Guardian News Service

www.forbes.com Reuters, 01.24.03, 6:09 PM ET

CARACAS, Venezuela, Jan 24 (Reuters) - Venezuela's government on Friday swapped 191 billion bolivars or about $103 million in domestic public debt to extend their maturities and alleviate a fiscal crisis during an opposition strike, the Central Bank said.

Venezuelan Central Bank said the government exchanged National Public Debt notes maturing on Saturday in a voluntary operation for issue coming due between three and a half months and one year later.

About one trillion bolivars or $540 million in National Public Debt notes had been offered in the exchange.

Finance Minister Tobias Nobrega earlier this week announced the government would carry out domestic debt exchanges as part of a plan to counter the impact of the opposition strike against President Hugo Chavez.

Venezuela on Wednesday suspended currency exchange trading as it struggled to stem capital flight and the sharp slide in its bolivar currency amid economic and political uncertainty. The local currency closed Tuesday trading at 1,853 bolivars to the U.S. dollar.

abcnews.go.com The Associated Press BOGOTA, Colombia Jan. 24 —

An American writer and two hikers emerged smiling from the Colombian jungle Friday after nearly a week in the custody of right-wing paramilitaries, while leftist rebels kept captive two foreign journalists working for the Los Angeles Times.

Robert Young Pelton, a freelance writer and TV reporter, said he and his companions, Megan Smaker and Mark Wedeven, were not mistreated.

In a separate case, journalists and officials appealed to the National Liberation Army, known as the ELN, to release photographer Scott Dalton, 34, of Conroe, Texas; and reporter Ruth Morris, 35, a British citizen who was raised in the Los Angeles area.

Leftist rebels the avowed enemies of the paramilitaries kidnapped the freelance journalists on Tuesday in northeastern Colombia near the Venezuelan border.

"This is very serious," said Vice President Francisco Santos, a former journalist and himself once a hostage of drug traffickers. "We hope that the ELN will free them as soon as possible."

Pelton of Redondo Beach, Calif., Smaker of Brentwood, Calif., and Wedeven of Bremerton, Wash., were turned over to church officials in northern Colombia Thursday night after they emerged from the jungle-covered Darien Gap, which spans both countries.

They arrived by boat in the town of Carepa, in northern Colombia, on Friday and were expected to travel to Bogota, the capital, next.

The paramilitary United Self-Defense Forces of Colombia, or AUC, encountered the trio in a jungle-covered region along the Panamanian border on Sunday and removed them from the area when fighting broke out.

Pelton said he was not angry about being taken out of the war zone, although the paramilitary forces held them for a few days afterward.

"Even though we were not happy about being kidnapped or being kept away from our families and our jobs, they had a reason to do so," Pelton, author of a guidebook called "The World's Most Dangerous Places," told CNN. "After all, it is their country and their war."

Wedeven said he never felt that he and his fellow travelers were abducted.

"We were not kidnapped," Wedeven said. "During the time we were with the AUC we did not have any problems."

The State Department said Friday that the United States was trying to secure the release of the two journalists who were taken captive in Arauca state, one of Colombia's most violent regions.

"We are greatly concerned about their welfare," spokesman Richard Boucher said. "Our embassy officials in Bogota are working with the government of Colombia to ensure their safe return to the United States."

He said the State Department also had contacted the families of the two journalists.

Boucher said Colombia's government must stop the terrorism that comes from the various groups involved in the civil war.

The ELN and a larger rebel group are fighting right-wing paramilitaries and the government for control of Arauca's oil-rich plains.

The United States, which has given Colombia almost $2 billion in mostly military aid, recently deployed approximately 70 Green Berets to Arauca to train Colombian troops. Washington has rejected any direct combat role for the U.S. troops, but the rebels see their presence as an act of aggression.

Dozens of foreign and local journalists holding photos of Morris and Dalton gathered in Bogota's central plaza Friday to demand their release.

The International Press Alliance, an informal organization of foreign media in Bogota, issued a statement late Thursday also calling for their release.

Both Dalton and Morris are veteran journalists.

Dalton worked for The Associated Press for about nine years in Panama, Guatemala and Colombia. Last year, he left the AP to pursue video projects while freelancing for major newspapers.

Morris has previously written as a freelancer for the Los Angeles Times, Time magazine, the South Florida Sun-Sentinel and other publications.